A neutral host Dish could unite the cablecos against Verizon and AT&T

A couple of years ago, Verizon was widely expected to seek a cable acquisition, to extend its wireline and quad play reach, and to neutralize at least one rival threatening to challenge it across 5G and fixed-line services. However, in autumn 2017, then-CEO Lowell McAdam said he had “moved on” from the idea of a merger with a company like Comcast, and would instead focus M&A strategy on media, content, and building its own fiber and spectrum reserves. This may yet be a decision Verizon comes to regret.

The cablecos are manoeuvring themselves for a major assault on the connectivity, content and media markets, including wireless services, in the USA. Charter and Comcast, the two largest, may have launched their mobile offerings courtesy of an MVNO arrangement with Verizon, but they are open about their plans to become increasingly self-sufficient in wireless. They have several key assets which will enable them to undermine the telcos in indoor, city and enterprise markets – where much of the growth potential and high value services of the 5G era will reside.

They already have extensive WiFi homespots and hotspots, backhauled by their own cables – the activities of Free Mobile in France and others have shown how a new entrant can slash the cost of supporting cellular data usage if most of that data is offloaded to captive WiFi. Those fixed lines provide fast, modern backhaul and fronthaul for their own networks, or to rent to MNOs or trade for cheaper MVNO fees.

They enable cablecos to build localized small cell networks which are targeted only where there is real demand for service – no need to roll out wide area coverage, or ‘build and they shall come’, since that will he supported by the MVNO deal. So a series of WiFi/cellular small cell clusters, backhauled by their own lines, can be rolled out in shared spectrum as a low cost way to address enterprise, home and city use cases, especially in the underserved indoor environments. And as they move towards 5G, some are intending to buy licensed spectrum too (or already did in the 600 MHz auction).

Verizon is hitting back against the threat of becoming just a wide area umbrella network for many higher value localised platforms, with its expansion into 5G fixed wireless access (FWA). This could be a way to expand beyond its limited fiber territory and compete with cablecos for home, enterprise and multiplay deals,  leveraging its nationally recognized wireless brands and its relationships with device makers and other partners.

So far, the cablecos are unfazed, at least when it comes to the home market where Verizon is first launching its 5G offerings (the enterprise dynamics will be different, pitching cablecos’ superior indoor economics, which are essential to many applications, against Verizon’s significant corporate and IoT business).

Altice USA, whose own plans to launch mobile services next year rely on an MVNO arrangement with Sprint, brushed off the challenge from Verizon’s recent 5G launch.

“It’s clear that what Verizon is currently launching is not a standard product today, and it is not necessarily a commercially viable product going forward … It really is in a testing phase today,” said CEO Dexter Goei said on the company’s third quarter earnings call last month. “We don’t see a substitution of our fixed line product coming from 5G.”

5G operators like Verizon and AT&T “have to go out and build very, very deep fiber networks with lots and lots of small cells in order to compete in high speeds [with cable], and in that case that is going to take them an extremely long time to do that before they are a credible threat to the cable industry on broadband,” Goei added.

Basing further comments on 5G tests in Europe, by Altice’s French parent firm, Goei said: “We know what [5G] can do from a pure physics standpoint, and we think what some of the wireless operators are talking about is probably at the far end reach of the realm of reality in terms of what we believe the propagation truly is.”

He insisted that the average Altice customer uses more data than fixed 5G could currently support, adding that, while Verizon may challenge the legacy base, 80% of Altice’s gross new additions are subscribing to plans of 200Mbps or more, and that data usage is increasing by 25% each year. Verizon’s service promises 300Mbps.

“So, two years from now, if you want to fast forward, you’d expect that the entry level broadband speeds would no longer be 200Mbps but something significantly higher,” Goei added.

Cable One’s Julie Laulis recently made similar points about cable having a stronger future roadmap, to keep pace with rising customer demands, than fixed 5G. She said: “CableLabs is developing the technology that will make sure the infrastructure we’ve invested in has long, long legs. 10Gbps is on the horizon. People have been prognosticating the death of cable for a long time, but we keep reinventing ourselves and it’s because our network is so strong.”

One way in which the major cablecos could really keep Verizon and AT&T up at night would be to break out of their geographical boundaries and work more closely together. Comcast and Charter are already doing that with their far-reaching alliance to develop mobile, including 5G, networks and services, driving cost efficiencies and economies of scale, as well as allowing customers to roam on one another’s networks.

This gets round the disadvantage of a cableco trying to offer mobile services on a nationwide basis – the heavy  reliance on roaming and MVNO fees once outside the core territory. Of course, they can offset that disadvantage by focusing on more profitable services which are inherently localized, like self-contained enterprise systems and private IoT networks.

Or, another, more radical way would be for a group of cablecos to work with a neutral host infrastructure provider to create a de facto national network and gradually cut ties with the big telcos. That was a thwarted vision when Sprint and four major cable operators (Comcast, Time Warner Cable, Cox and BrightHouse) joined forces with a multilayered alliance a decade ago – this involved MVNO arrangements, before the cablecos defected to Verizon; plus joint purchase of spectrum and investment in broadband wireless (then WiMAX) platforms.

The result could have been a combined effort with the scale and differentiation to challenge the majors, but the partnership broke apart amid conflicts of interest, poor technology choices and uncertain investment models. There have periodically been revivals of the idea, in the guise of Sprint merging with one or more cablecos – and that could still be back on the cards if the MNO’s acquisition by T-Mobile USA is vetoed. However, an alternative infrastructure and spectrum partner for the cablecos could be Dish, which has plentiful airwaves and is currently building an NB-IoT wholesale network.  This is largely to meet FCC mandates that Dish ‘use or lose’ some of its spectrum, but it has also the satellite TV firm talking about the potential for a wholesale model targeted at cable.

Dish’s chairman Charlie Ergen said, on the firm’s most recent earnings call: “If you look at the list of people that are interested in what we’re doing, is cable—as a gross generalization—there? Yes, they are.”

When Dish first talked about building its own wireless network, in the early 4G days, this was largely expected to be for the firm’s own use, to support fixed/mobile services for its user base. Then, when no LTE network materialized, many assumed Ergen had acquired multiple tranches of spectrum purely as a tradeable asset (and that may still prove to be the case). But the company is now referring openly to alternative business models, notably neutral host ones, with cablecos, private enterprise network operators, and Amazon all seen as potential supporters.

Ergen boasted that Dish’s network would have no legacy technologies, and would be entirely flexible and virtualized, making it easier and more cost-effective to support many wholesale customers with different network requirements. Ergen said the network would work like a “wireless AWS” – scaling up and down on-demand as the Amazon AWS cloud does.

“Would cable companies want to start with the old technology, or would they want to move to the new, so they can leapfrog what the incumbents do? If I was the CEO of a cable company, I would want to leapfrog,” Ergen said. “Because our network is fundamentally a neutral host, it means that any of the people we talked about could be part of our network.”

In an FCC filing in May, Dish said it would explore “non-traditional business models” with NB-IoT and 5G, aiming to steal a march on established operators in some enterprise and IoT applications while the others focus on consumers. Dish said in that filing that it would look for “new partnerships and sharing models, including the potential to serve as a highly secure open source or neutral host to support industry verticals” and that it could operate “a highly secure open source, neutral host, or other shared 5G architecture”.

One possible partner would be Altice. CEO Goei may have been sniffing at Verizon’s 5G on his own earnings call, but he was also dropping hints about ways that his firm could retailiate. It is already engaged in a ‘heavy MVNO’ deal with Sprint (which involves building its some of its own local small cell networks and contributing its cable to support Sprint’s  densification). But that deal is not exclusive. “There are people out there with lower spectrum that is unused in our region,” Goei said. “And we’d love to work if we can, if we thought it made sense to build a network, we’d love to work with those guys and potentially license on that spectrum off of them.”

Dish recently announced that Ericsson would supply the network equipment, and Sequans the device chips, for its NB-IoT build-out, which it says will cost $1bn and will be the precursor for a $10bn 5G deployment. Dish is working with tower operator SBA