Comcast to Launch Wireless Service by Mid-2017--2nd Update

By Shalini Ramachandran and Ryan Knutson 

Comcast Corp. Chief Executive Brian Roberts said Tuesday the cable giant is aiming to launch a wireless service by mid-2017, creating a new line of business that could help the company better retain cable customers in a fiercely competitive pay-TV market.

Speaking at a Goldman Sachs investor conference, Mr. Roberts said the product will take advantage of Comcast's 15 million Wi-Fi hot spots and use airwaves leased from Verizon Communications Inc.

Comcast has a deal with Verizon dating back to 2011 that allows the cable company to sell wireless service using the telecom carrier's network at set terms and pricing.

Mr. Roberts said because Comcast is essentially renting Verizon's network, "we won't have to make the kind of investment" needed otherwise, such as cell towers and other infrastructure.

"We believe there will be a big payback with reduced churn, more stickiness and better satisfaction," Mr. Roberts said.

Comcast will market the wireless service inside its footprint, to existing and potential Comcast cable customers, as opposed to nationwide. The company is interested in up-selling customers to a bigger bundle of services, Mr. Roberts said.

Comcast declined to offer any further details about the service, including pricing and which phones will be supported.

Comcast, like all U.S. cable companies, is increasingly leaning on its broadband business as the overall pay-TV business stagnates and consumers cut the cord or trade down to discounted packages. In search of new revenue streams, the cable giant has been seriously weighing its wireless options for at least a year, engaging in discussions with Verizon and testing potential services.

But it will be stepping into a competitive U.S. wireless market, which has four national players who already have more than 100% penetration in the U.S. -- meaning there are more active cellphones in use than people in the U.S. As a result, wireless revenue growth is slowing and carriers are locked in a price war over a finite amount of existing subscribers.

Comcast could reduce its infrastructure costs by integrating its Wi-Fi network so that calls and data could be routed through its Wi-Fi hot spots instead of cell towers, whenever possible. New Street Research analyst Jonathan Chaplin said a cable company could "easily steer more than 75% of data traffic to Wi-Fi."

"We believe this will mark a turning point for the U.S. communications landscape," said Mr. Chaplin, who is bullish on cable's prospects to steal away some market share from wireless incumbents. He estimated that the wireless business could be worth at least $6 a share of upside for Comcast's stock, translating into over $14 billion of market value.

Comcast's ability to bundle wireless service with cable TV and home broadband will also give it other advantages not easily matched by wireless carriers. T-Mobile and Sprint Corp. don't have home broadband or TV offers. Verizon has Fios high-speed internet service, but its footprint is relatively small and the carrier has avoided aggressively bundling Fios with wireless. AT&T Inc. acquired DirecTV last year, giving it a huge foothold in video, but AT&T's home internet speeds are relatively slow in much of its footprint because of a continued reliance on copper wires.

For Verizon, Comcast's entry into wireless brings rewards as well as potential risks. If Comcast is able to steal customers from any of its three rivals, then Verizon wins by getting incremental revenue. Even if customers switch from Verizon to Comcast, Verizon is still able to make money off those connections.

One risk is that Comcast could get more ambitious, and that the initial offer is just the first step in a bigger plan to compete. Comcast is currently participating in a government auction of wireless airwaves, which could be used to build a network.

Also at the Tuesday conference, Mr. Roberts introduced Comcast's newly integrated Netflix experience on its next-generation X1 set-top box and guide. He said that working through that deal brought the two companies, who have often fought bitterly, "a lot closer."

Comcast is in discussions with several other video streaming providers to integrate their services into the X1 box, Mr. Roberts said.

Write to Shalini Ramachandran at [e-mail] and Ryan Knutson at [e-mail]

(END) Dow Jones Newswires

September 20, 2016 16:01 ET (20:01 GMT)

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