CMCSA Comcast Corporation

By Ryan Knutson and Shalini Ramachandran 

The two biggest cable companies said this week they will soon start selling wireless service but they will be entering a competitive market with handcuffs.

The CEOs at Comcast Corp. and Charter Communications Inc. both discussed plans to begin reselling Verizon Wireless service as early as next year. But the Verizon contract only allows the companies to sell cellphone service as part of a bundle, not as a stand-alone product, according to people familiar with the agreement.

That means consumers won't be able to switch to Comcast or Charter for cellular service without also buying either cable television or home internet, too.

Comcast CEO Brian Roberts said Tuesday its primary objective in offering wireless service is to discourage people from switching or dropping their cable connection. Mr. Roberts said 70% to 80% of Comcast customers buy a bundle, such as internet and TV, and by offering cellphones "we can sell them more products."

"We believe there will be a big payback with reduced churn, with more stickiness, with better satisfaction," he said Tuesday at a Goldman Sachs investor conference.

Comcast, along with other cable companies, obtained rights to resell Verizon Wireless service in 2011, as part of a broader $3.6 billion spectrum deal. Charter inherited the agreement earlier this year after completing a deal to buy Time Warner Cable and Bright House Networks.

The deal was struck at a time when most cellular plans were still centered on voice and text messages, not data. So the wholesale prices the cable companies pay for data might not align well with today's competitive market.

"I am not worried," Verizon finance chief Fran Shammo said at the conference Thursday. "If we were to walk in a room today we'd do the exact same agreement."

Mr. Shammo said that such wholesale agreements are "extremely profitable" because the company doesn't have to deal with retail and marketing costs to get the connections.

Still, Charter and Comcast pass tens of millions of households, and the companies could offer a bundle of internet and cellphone service that is cheap enough to appeal to the growing number of cord-cutters. And cable companies could reduce the amount they pay to Verizon by shifting wireless traffic to the millions of Wi-Fi hot spots installed around the country.

Cable operators have emphasized that they will deploy even more secondary Wi-Fi hot spots inside customers' homes and business to bolster a potential mobile service. They have also noted that they are far more interested in hawking wireless as an attractive add-on to their existing bundle of services than as a stand-alone product.

Offering wireless service could also help cable companies fend off future competition. AT&T Inc. is preparing to launch a streaming version of its DirecTV service and has started bundling its wireless plans with traditional DirecTV.

Wireless carriers are also working on next-generation network technology, known as 5G, that could be fast enough to allow customers to buy all their high speed internet -- including inside the home -- from a cellphone carrier.

"5G fixed wireless would be a competitor to cable or any broadband connection," Mr. Shammo said. Verizon is planning market trials in 2017.

Write to Ryan Knutson at ryan.knutson@wsj.com and Shalini Ramachandran at shalini.ramachandran@wsj.com

(END) Dow Jones Newswires

September 22, 2016 17:38 ET (21:38 GMT)

Comcast (NASDAQ:CMCSA)
Historical Stock Chart
From Mar 2024 to Apr 2024

Comcast (NASDAQ:CMCSA)
Historical Stock Chart
From Apr 2023 to Apr 2024