Comcast/Charter Wireless Team-Up Points to Merger, 5th National Wireless Carrier?

Comcast and Charter Communications' testing some wireless collaboration is likely unwelcome news in the wireless industry, experts told us. The team-up could open the door to potentially a fifth facilities-based wireless carrier joining the market -- either cable ISPs collectively, or by providing wholesale service to a smaller wireless operator, said technology consultant Ira Brodsky of Datacomm Research. In a note to investors, New Street Research analyst Jonathan Chaplin said, "A new entrant with deep pockets and ... a near national fiber footprint is obviously not good for wireless carriers in an already competitive market."

Comcast and Charter said their "operational cooperation" announced Monday includes exploration of common operating and billing platforms, technical standards harmonization and device logistics. They said the teaming is for one year and doesn't restrict either from developing or delivering wireless services through use of the Verizon mobile virtual network operator agreements they individually have. Charter CEO Tom Rutledge said working with Comcast can speed up its own wireless rollout and "enable us to provide more competition and drive costs down for consumers at a similar national scale as current wireless operators."

"It would have been crazy for the two companies not to pursue the wireless business together," MoffettNathanson wrote. It said the deal language -- by precluding either company from unilaterally buying a wireless operator or being acquired by one -- points to the fact there was no chance of Charter being bought, despite speculation otherwise. Buying a company of Charter's size "was and is a complete non-starter, and Charter knew precisely this when they agreed to the prohibition with Comcast," it said, saying precluding an acquisition is common sense since neither company wants to be adjacent in wireline but competing in wireless through a buy of T-Mobile or Sprint.

BTIG Research Walt Piecyk wrote that the arrangement could presage their buying an existing wireless operator or some Dish Network spectrum for a wireless network atop the growing fiber networks. By securing a right of refusal if Verizon wanted to buy Charter, the team-up may preserve Comcast's ability to buy it instead, he said.

The deal "should demonstrate that Cable is serious about the wireless opportunity" and potentially presage a Comcast/Charter merger, New Street's Chaplin said. The collaboration also gives the two companies "a way to test the regulatory waters" of a possible merger, he said.

Charter and Comcast pursuing wireless offerings comes as 5G could add multiple magnitudes of capacity to existing wireless networks, letting an AT&T or Verizon leapfrog cable companies, Brodsky said. "If I was a cable company, I'd be very concerned about that." He said cable ISPs might look at offering millimeter wave service as a way to pre-empt wireless carriers or wholesale access to areas where wireless carriers don't have landline coverage.

Carnegie Mellon engineering and public policy professor Jon Peha said other cable ISPs surely are watching Comcast and Charter closely. He said a successful wireless rollout by them could spur others to follow and perhaps look to also join forces, exploiting their infrastructure advantages.