Is Now the Time for Smaller Cable Operators to Enter the Wireless Market?

DENVER (August 11, 2021)—National wireless operators including Verizon and T-Mobile are setting their sights on the lucrative home broadband market, aiming to take market share from incumbent cable providers. Advances in wireless technologies and the flood of newly available spectrum are enabling national providers to enter the broadband market with a fixed wireless access (FWA) solution. 

Large cable companies such as Comcast and Charter have prepared for the pending threat by launching mobile virtual network operator (MVNO) businesses in recent years. For smaller cable companies operating in mid-tier markets, entering the wireless market now before competitive FWA alternatives arrive may be a prudent strategy, according to a new report from CoBank’s Knowledge Exchange. 

“Smaller cable operators have been watching from the sidelines, but now could be time for some of them to go wireless given their vulnerability to fixed wireless competition,” said Jeff Johnston, lead communications economist with CoBank. “However, launching a wireless service is no small task and smaller cable operators should consider several factors, including the competitive landscape and how to lower wholesale costs and address scale.” 

The fixed wireless access threat to the cable providers is still in its infancy, but large operators are not taking any chances. Altice USA, Charter and Comcast have each launched their own wireless smartphone services, which they bundle with their cable broadband services. The strategy is primarily intended to prevent their broadband customers from switching to a FWA service. But it’s also a response to evolving video consumption trends, as more consumers want to seamlessly consume video in and out of the home.

Results to date indicate the cable giants’ multiple system operator (MSO) strategy is paying off. Over the last 12 months, cable operators’ wireless sales represented approximately 30% of the total wireless industry phone net additions. And in recent months, each of the cable MSOs reached major milestones in growth, revenue or churn rate improvements. 

Should Regional & Rural Cable Providers Follow Suit? 

Whether smaller cable operators should follow the path of the larger companies and enter the wireless market with a MVNO strategy is dependent on several factors. Key among them are the competitive environment, the ability to scale and technical capabilities.  

For most small rural operators, it’s unlikely that a postpaid MVNO makes sense. The issue in rural America is more about connecting people with at least one operator, and less about a vibrant and competitive market that warrants defensive moves by the incumbents. 

However, for some larger regional operators, the decision is more complex. Cable operators in tier two and three markets are particularly vulnerable to the threat of FWA network overbuilds. National wireless operators tend to have excess network capacity in these markets. And not surprising, this is where they are deploying FWA networks to grow their business. 

Launching an MVNO is a major undertaking and many factors come into play. Lack of scale for smaller operators is an issue which can lead to an unsustainable cost structure. Prospective MVNOs need creative business models to manage costs and generate new sources of revenue. 

A creative strategy that includes a buying consortium to reduce MVNO network costs and building Citizens Broadband Radio Service (CBRS) networks to generate wholesale revenue should be explored. Other important factors to consider include cell site/network handoffs, handset testing and certification and overall network operations.

Watch a video synopsis and read the report, Is Now the Time for Smaller Cable Operators to Enter the Wireless Market? 

About CoBank
CoBank is a $158 billion cooperative bank serving vital industries across rural America. The bank provides loans, leases, export financing and other financial services to agribusinesses and rural power, water and communications providers in all 50 states. The bank also provides wholesale loans and other financial services to affiliated Farm Credit associations serving more than 75,000 farmers, ranchers and other rural borrowers in 23 states around the country.

CoBank is a member of the Farm Credit System, a nationwide network of banks and retail lending associations chartered to support the borrowing needs of U.S. agriculture, rural infrastructure and rural communities. Headquartered outside Denver, Colorado, CoBank serves customers from regional banking centers across the U.S. and maintains an international representative office in Singapore.