Sprint has always been the closest of the US mobile operators to the cable sector and now it has added Cox to its list of partners, joining a recent deal with Altice.
This is the latest chapter in a long saga of partnerships, which have never – so far – delivered as much as they promised to do. There is clear strategic logic to a tie-up between mobile-only Sprint and the wireline cablecos to form a fixed/mobile platform to challenge the big telcos’ quad play offerings.
A decade ago, Sprint had various deals – with varying levels of success – with the main cablecos, including co-investments in WiMAX, the failed Pivot fixed/mobile venture, and the SpectrumCo arrangement to bid in auctions. All that cooled when the leading cable operators transferred their affections to Verizon, selling their spectrum to that telco and signing MVNO agreements (which Comcast and Charter are now activating).
However, while Comcast and Charter are working together on storming into the mobile market, complementing their wireline and WiFi activities, Sprint is back in the cable environment. For now, this rapprochement centers on using cableco infrastructure to ease the path of Sprint’s small cell roll-outs, but these partnerships could well pave the way to a broader pooling of networks, customers and assets in future to create a converged service platform.
Mobile-only operators the world over are looking for wireline partners – as Vodafone makes clear, the gloss that was once attached to being mobile-first has certainly worn off in the days of quad plays. Likewise, cable and broadband providers need to offer high speed internet and content access everywhere their subscribers go, which means adding a wireless business – initially, in many cases, based around WiFi hotspots and homespots and WiFi-first service plans. However, there are still significant advantages to having cellular capabilities as well as WiFi, especially for seamless roaming and with a look ahead to 5G. So cablecos are seeking cellular partners – Comcast and Charter switching on their MVNO deals, Liberty Global acquiring Belgian cellco Base, and so on.
A Sprint-cable alliance or merger looks likely in the medium term, but for now, the operator is taking baby steps. The Cox agreement will allow the MNO to use its new friend’s wireline network for backhaul, which will ease the challenges of its ambitious small cell densification project.
Sprint, more than the other operators, is focusing on densifying its 4G network, using its plentiful supply of 2.5 GHz spectrum, in order to boost capacity without having to wait for 5G, while also laying infrastructure foundations for the next generation RAN. But it has been hampered by challenges in securing sites and backhaul at affordable cost for its cells.
The Cox agreement also puts an end to a patent infringement battle between the two firms, but there is no mention of Cox using Sprint’s wireless network as yet (and Cox, like Comcast, has the right to activate a Verizon MVNO). But CTO John Saw hinted at a broader agreement to come.
“This is another opportunity to work with a strategic partner to accelerate our densification plans to improve our network performance and experience for Sprint customers throughout Cox’s national territory,” he said in a statement. “Moving forward, we will continue to look for new opportunities to work with Cox in ways that are mutually beneficial.” That would see a return to a close alliance with Cox which ended in 2011. From 2007, Cox was building its own network in some areas and working with Sprint to buy spectrum and, in 2010, to sign an MVNO deal. However, it abandoned all those activities in 2011 and sold its spectrum to Verizon.
In its official announcement, Sprint said it would use Cox’s network to “accelerate the densification of the Sprint network while simultaneously increasing efficiency of its macro backhaul and small cell deployment
Cox operates six cable networks which span 18 states (Arizona, Arkansas, California, Connecticut, Florida, Georgia, Idaho, Iowa, Kansas, Louisiana, Massachusetts, Nebraska, Nevada, North Carolina, Ohio, Oklahoma, Rhode Island and Virginia). It is the US’s third largest cableco, after Comcast and Charter, and services about 6m homes. Its network passes around 10m homes or 8% of US households.
The deal, like the previous one with Altice, will help Sprint with its “neighborhood expansion” efforts, said Wells Fargo analyst Jennifer Fritzsche in a research note. She wrote: “Given the majority of S’s spectrum assets are high band (S has 160 MHz of 2.5 GHz in the Top 100 US markets) this fiber access is critical in the backhaul part of the network (which often is the most expensive part of any network build).”
Saw said: “We obviously have the option of running dedicated fiber, but I think to get it out fast and to leverage what is already there, I think we’ll manage to use what is already there, to use the DOCSIS backhaul that we have with Altice.”
Under the Altice deal, announced last autumn, the cableco has signed up for a ‘full’ or ‘heavy’ MVNO, which gives it flexibility in how it chooses to use the Sprint network, and the right to build and run its own core network and back office systems. The cableco said in its announcement that it would “have control over the Altice USA mobile features, functionality, and customer experience”.
This is the future of MVNOs, especially when vertical industries start to harness sub-nets to support specialized wireless needs. It is also how Liberty Global CEO Mike Fries advised cablecos to negotiate MVNO deals, when he said, at a recent conference: “What we’ve learned is if you’re going to go MVNO… you need a full MVNO. You need a thick MVNO. You need to control the customer experience, core network.”
“We are excited to bring our global expertise to the US to enhance and strengthen our offerings,” said Dexter Goei, CEO of Altice USA, in a statement. “Working together we will be able to capitalize on Sprint’s vast mobile network, which fits well alongside Altice USA’s deep WiFi network, and leverage Altice’s global mobile experience to deliver greater value, more benefits and seamless connectivity for our US customers.” In France, Altice owns the second largest MNO, SFR, as well as the leading cableco, Numericable.
Sprint CEO Marcelo Claure said in a statement at the time of the announcement: “As content and connectivity continue to converge, we believe this approach will be a model for future strategic arrangements across multiple industries including cable, tech and others.”
Since the days of Pivot, the cablecos have consolidated. Charter now owns Time Warner Cable and BrightHouse, and so has inherited those companies’ MVNO agreements with Verizon. Altice has entered the market from France, acquiring Cablevision.
Comcast has already activated its MVNO arrangement to launch Xfinity Mobile, harnessing its extensive network of WiFi hotspots and homespots to offer cost-effective WiFi-first propositions, similar to those of Free Mobile in France. It has also signed a mobile cooperation deal with Charter, which is likely to result in significant cableco activity in this market next year, and a genuine challenge to the big four MNOs.
Sprint needs to make sure that it does not stop at the smaller cableco alliances and that it is a partner in that Comcast/Charter push, even if it cannot immediately host their MVNOs. Cox and Altice are hardly Comcast – Altice has 5m US customers, compared to 25m for the market leader. Comcast has 250,000 Xfinity Mobile sign-ups so far, so if Altice followed a similar uptake pattern, it would only have about 50,000 by mid-2018 (cablecos are initially targeting their mobile offerings almost exclusively at their own customer base, though that may change in future).
Sprint can certainly offer them the network infrastructure and spectrum to build out their own independent ‘sub-nets’ (fully controlled networks for specific locations, enterprises or customer bases, on which they can innovate in quality of service and applications far more than with a standard MVNO). Before the holiday, Sprint’s owner Softbank was said to be exploring the possibility of a merger deal with Charter.
The deal with Altice may be a first step to the cable/mobile big league. Sprint will host Altice’s MVNO services and in return will “leverage the Altice USA broadband platform to accelerate the densification of its network”. The tit-for-tat of MVNO hosting in return for small cell backhaul does point to a new depth of collaboration which could rescue cablecos and mobile-only operators in the age when fixed/mobile convergence is almost mandatory for growth.
Sprint CFO Tarek Robbiati commented on the Altice analyst call: “A standard MVNO with a cable company in our view would not make sense if there isn’t any reciprocal opening up of the infrastructure for Sprint, and so this is why we went down that path. This is not a standard MVNO deal. There is an awful lot of value exchanged between the two parties.”
Such deals may reduce the MVNO revenue Sprint can command (since some of its fees will be ‘in kind’ in the form of access to backhaul, though Robbiati insisted it will generate payments from Altice). But they can certainly reduce operating costs and accelerate densification and 5G because cablecos not only have backhaul fiber but rights-of-way permits and other pieces of paper which MNOs have been struggling to obtain for their small cell sites, slowing progress in urban areas.
To become really strategic, these two-way cable relationships will need to expand into all the key areas where Sprint needs to add capacity to its network, and that will mean multiple cableco arrangements, given that they are territorial companies. Adding Cox to the portfolio clearly helps in this regard.