The nation’s two largest cable providers are teaming up to offer consumers cellphone plans.
Analysts see the move as an attempt to slow the cord-cutting trend, as subscribers increasingly opt for cheaper online streaming services such as Netflix and Hulu.
Philadelphia-based Comcast Corp. and No. 2 cable company Charter reason that, if they bundle mobile plans with cable TV and home Internet service, they can keep more customers around.
Comcast said it will be looking at how to leverage its millions of WiFi hotspots, which company officials think could give its cellphone service an edge.
“I think that this move goes to show you that they are trying to protect their core cable business. Cord-cutting is here to stay, if you will. And something like this can help them decelerate that,” said Amy Yong, a telecom analyst with Macquarie Bank.
Challenges to Comcast and Charter’s new wireless service will include getting consumers to overcome negative perceptions about cable companies, she said.
“This is something they have to change,” Yong said. “Cable companies also lack a nationwide footprint. They also don’t have a brick-and-mortar experience. So these are some structural disadvantages they have versus AT&T and Verizon.”
While they’ll offer wireless services separately to customers, the cable companies intend to work together on behind-the-scenes matters including customer billing and device-ordering systems. They said the agreement will save money and help them compete with the national providers.
As part of the deal, announced Monday, Comcast and Charter agreed that they wouldn’t buy other wireless companies for one year or make related deals without consulting each other first. The deal also includes restrictions on any transaction that would give another company a majority ownership or voting power in either Comcast or Charter.
The deal comes amid speculation about impending consolidation in the wireless industry and has the effect of letting both companies develop wireless services to compete with existing wireless carriers without having to worry about also competing with each other.
For the most part, Comcast and Charter aren’t direct competitors, as their service territories don’t overlap. The bigger threat comes from the likes of Verizon and AT&T, which are able to offer TV, internet and home phone services, along with wireless.
To compete, Comcast expects to launch its own wireless plan, Xfinity Mobile, in the next several weeks. Charter, based in Stamford, Connecticut, expects to introduce its unnamed service next year. Both wireless services will lease Verizon’s network.
To reduce costs, Comcast and Charter will need to try to encourage customers to use Wi-Fi hotspots rather than cellular whenever possible. By working together, the two companies can explore way to let customers use each other’s hotspots when they travel.
Analysts at MoffettNathanson said in a research note that the Verizon lease lets each company market wireless service only in its cable service territory. But if either Comcast or Charter were to buy a wireless carrier, such as T-Mobile or Sprint, it would suddenly be able to sell service nationwide, including in the other cable company’s region.
The deal won’t prohibit the companies from making a joint bid for a wireless carrier.
“Neither company wants a future where they are adjacent in wireline but overlapping and competing in wireless,” the research note said. “Either company acquiring T-Mobile or Sprint would have been an untenable situation.”
The Associated Press contributed to this report.