Do Cable Companies Have a Wireless Advantage?

The big wireless companies have been wrangling for years with the issues associated with placing small cells on poles. Even with new FCC rules in their favor, they are still getting a lot of resistance from communities. Maybe the future of urban/suburban wireless lies with the big cable companies. Cable companies have a few major cost advantages over the wireless companies including the ability to bypass the pole issue.

The first advantage is the ability to deploy mid-span cellular small cells. These are cylindrical devices that can be placed along the coaxial cable between poles. I could not find a picture of these devices and the picture accompanying this article is of a strand-mounted fiber splice box – but it’s s good analogy since the size and shape of the strand-mounted small cell device is approximately the same size and shape.

Strand-mounted small cells provide a cable company with a huge advantage. First, they don’t need to go through the hassle of getting access to poles and they avoid paying the annual fees to rent space on poles. They also avoid the issue of fiber backhaul since each unit can get broadband using a DOCSIS 3.1 modem connection. The cellular companies don’t talk about backhaul a lot when they discuss small cells, but since they don’t own fiber everywhere, they will be paying a lot of money to other parties to transport broadband to the many small cells they are deploying.

The cable companies also benefit because they could quickly deploy small cells anywhere they have coaxial cable on poles. In the future when wireless networks might need to be very dense the cable companies could deploy a small cell between every pair of poles. If the revenue benefits of providing small cells is great enough, this could even prompt the cable companies to expand the coaxial network to nearby neighborhoods that might not otherwise meet their density tests, which for most cable companies is to only build where there are at least 15 to 20 potential customers per linear mile of cable.

The cable companies have another advantage over the cellular carriers in that they have already deployed a vast WiFi network comprised of customer WiFi modems. Comcast claims to have 19 million WiFi hotspots. Charter has a much smaller 500,000 hotspots but could expand that count quickly if needed. Altice is reportedly investing in WiFi hotspots as well. The big advantage of WiFi hotspots is that the broadband capacity of the hotspots can be tapped to act as landline backhaul for cellular data and even voice calls.

The biggest cable companies are already benefitting from WiFi backhaul today. Comcast just reported to investors that they added 204,000 wireless customers in the third quarter of 2019 and now have almost 1.8 million wireless customers. Charter is newer to the wireless business and added 276,000 wireless customers in the third quarter and now has almost 800,000 wireless customers.

Both companies are buying wholesale cellular capacity from Verizon under an MVNO contract. Any cellular minute or cellular data they can backhaul with WiFi doesn’t have to be purchased from Verizon. If the companies build small cells, they would further free themselves from the MVNO arrangement – another cost savings.

A final advantage for the cable companies is that they are deploying small cell networks where they already have a workforce to maintain the network. Bother AT&T and Verizon have laid off huge numbers of workers over the last few years and no longer have the fleets of technicians in all of the markets where they need to deploy cellular networks. These companies are faced with adding technicians where their network is expanding from a few big-tower cell sites to vast networks of small cells.

The cable companies don’t have nearly as much spectrum as they wireless companies, but they might not need it. The cable companies will likely buy spectrum in the upcoming CBRS auction and the other mid-range spectrum auctions over the next few years. They can use the 80 MHz of free CBRS spectrum that’s available everywhere.

These advantages equate to a big cost advantage for the cable companies. They save on speed to market and avoid paying for pole-mounted small cells. Their networks can provide the needed backhaul for practically free. They can offload a lot of cellular data through the customer WiFi hotspots. And the cable companies already have a staff to maintain the small cell sites. At least in the places that have aerial coaxial networks, the cellular companies should have higher margins than the cellular companies and should be formidable competitors.