Comcast Consultant: TWC Merger Could Lead to Mobile Wireless Offering

By Josh Long

**Editor’s Note: Please click here for a recap of the biggest channel-impacting mergers in Q1 2014.**

Comcast Corp.’s $45.2 billion acquisition of Time Warner Cable Inc. could pave the way for the nation’s largest cable company to deliver mobile wireless services, an economic consultant told the Federal Communications Commission this week.

In detailing the advantages of the merger in Comcast’s public interest filing with the FCC, Mark Israel of the economic consulting firm Compass Lexecon said Comcast and Time Warner Cable (TWC) customers would benefit from an expanded Wi-Fi offering, which could become “part of a strategy to use the combined firm’s grid of Wi-Fi hotspots as a launching point for a national “Wi-Fi first’ mobile wireless service.”

The public interest statement was filed with the FCC on Tuesday, the same day a new subscription publication founded by a former Wall Street Journal writer reported similar plans.

Philadelphia-based Comcast had no comment, but a source familiar with the matter said the company evaluates many wireless technologies, but nothing is imminent.

In a declaration filed with the FCC that declared the megamerger would benefit the public, Israel raised the prospect that Comcast would offer mobile wireless service using Wi-Fi and wholesale network access from other providers.

“In addition to directly benefiting existing customers, to the extent that the transaction enables the combined firm to achieve a high-quality, broad-based, tightly integrated Wi-Fi network, it may facilitate entry into the mobile wireless industry at some point in the future, thus increasing compettion in the industry,” he wrote. ” I understand that such entry likely would be based on a network that combines Wi-Fi infrastructure with a Mobile Virtual Network Operator (MVNO) option.”

Wi-Fi a Priority

Comcast already has MVNO relationships with Sprint and Verizon Wireless that would enable the company to deliver its own branded mobile-phone service. But the broadband giant has been focused on Wi-Fi expansion, offering Xfinity customers high-speed access outdoors (in such public locations as sporting venues and beaches) and to small businesses, such as in waiting rooms and restaurants.

The central feature of Comcast’s Wi-Fi initiative is neighborhood access that enables guests in homes who are Xfinity customers to access a separate Wi-Fi signal, relieving the homeowner of the need to share his password. The Wi-Fi offering is included with existing Xfinity service.

Comcast said it boasts the nation’s largest Wi-Fi network, and on Wednesday, the Internet giant announced exceeding 1 million Wi-Fi hotspots. According to Israel, Comcast has far more Wi-Fi hotspots (725,000 in 2013) than TWC (30,000).

“The transaction increases the profitability of a Wi-Fi-plus-MVNO product – and thus the possibility that it will be introduced,” Israel, an executive vice president with Compass Lexecon in Washington, D.C., wrote in his declaration filed with the FCC. “The transaction will expand the combined firm’s Wi-Fi base, reducing dependance on the more expensive MVNO option.”

On Tuesday, The Information (founded last year by former WSJ reporter Jessica Lessin) reported that Comcast “was considering a mobile phone service, which would rely on a combination of Wi-Fi and leased capacity on cellular networks.”

The news left Yankee Group analyst Rich Karpinski wondering in prepared comments whether Comcast is actually serious about launching mobile wireless service or seeking to curry favor with regulators who are overseeing the pending merger.

Comcast is certainly no stranger to the wireless space. It was part of a joint venture that held billions of dollars in spectrum. The JV, SpectrumCo, sold, $3.6 billion in nationwide AWS licenses to Verizon Wireless (VzW). As part of that transaction, Comcast and VzW entered into a pact that authorized Comcast to sell mobile-phone service and VzW to market home digital phone, Internet and TV services. The relationship is ongoing.

Senate Hearing on Merger

On Capitol Hill Wednesday, Comcast and TWC appeared before the Senate Judiciary Committee to tout the merger.

Comcast has highlighted the fact that it doesn’t compete in the same areas as TWC so consumers won’t be deprived of fewer choices.

Skeptics of the merger, including Sen. Al Franken (D-Minn.), worry the combined company will wield too much power in the broadband market. Franken noted that Comcast is the nation’s largest ISP (20.7 million high-speed Internet customers) and TWC is No. 3 (11.6 million broadband customers).  

“There’s no doubt that Comcast is a huge, influential corporation, and I understand that there are over 100 lobbyists making the case for this deal to members of Congress and our staffs,” Franken said Wednesday during the congressional hearing. “But I’ve also heard from over 100,000 consumers who oppose this deal, and I think their voices need to be heard too.” 

The FCC is reviewing the merger to determine whether it is in the public interest, while the U.S. Department of Justice is vetting the agreement for potential antitrust concerns.