By Keith Tamboer
On Comcast’s third quarter earnings call, the #1 U.S. cable operator confirmed what we learned from Verizon last week – Comcast has exercised the MVNO agreement, paving the way for the company to offer wireless service.
On the surface, adding wireless services to its product portfolio would seem to make sense for Comcast. Wireless service provides another avenue for Comcast to monetize the consumption of content and allows the MSO to further exploit its large Wi-Fi footprint that currently includes 11.7 million hotspots.
But, adding another wireless service provider to a crowded, highly competitive market place where penetration already exceeds 100% seems like a formula to accelerate already declining service prices and compress margins. So is wireless a good move for Comcast?
To answer that question, look at where Comcast is growing. The company has posted impressive revenue results in business services – including high speed broadband, Ethernet, and VPN - over the past few years. Comcast’s revenue from business services is nearing an annual run rate of $5 billion with Y/Y growth consistently around 20%. The cable operator derives more than 70% of its business revenue from small businesses but recently established a division targeting Fortune 1000 companies who typically do business with telco incumbents like AT&T and Verizon. Comcast claims it already has managed services deals with twenty large enterprise customers.
In the increasingly competitive market for business services, AT&T and Verizon have invested in IoT capabilities to differentiate themselves from other communications services providers. Both companies recognize the significant opportunity to realize profitable business growth that leverages their unique mobile and fixed assets. As prices for traditional postpaid services continues to decline and the cost to acquire new postpaid customers increases, the focus on IoT and the favorable economics of adding millions of connections with low cost of service has sharpened.
As Comcast begins what it calls “testing and learning” with wireless, the company would be wise to focus on building out IoT capabilities and developing a partner network of IoT solution providers. Many IoT applications – including fixed asset tracking, digital signage, security and surveillance, and energy management – would fit nicely into Comcast’s wheelhouse by leveraging existing network assets along with new mobile capabilities. Comcast has the advantage of being a preferred communications service provider in small business, a relatively underpenetrated customer segment within IoT.
While Comcast evaluates market opportunities for mobile services, perhaps it would be wiser instead to focus on connecting things and leave it to the incumbents to continue to slug it out in the market for traditional postpaid wireless services.