Comcast's Mobile Play: Whys and Wherefores

After much speculation by the press and analysts, and coy avoidance of the topic by Comcast (NASDAQ:CMCSA) at countless investor calls, the cable giant has finally unveiled the elephant in the room -namely its ...

Comcast's Mobile Play: Whys and Wherefores
Comcast's Mobile Play: Whys and Wherefores

After much speculation by the press and analysts, and coy avoidance of the topic by Comcast (NASDAQ:CMCSA) at countless investor calls, the cable giant has finally unveiled the elephant in the room -namely its initial foray into the mobile arena.

BTR reported last week that Comcast intends to launch Xfinity Mobile during the second quarter. An unlimited service will be offered to Xfinity broadband customers for $45 or $65 per month depending on the level of Xfinity plan. (The term unlimited is loosely used, however, as once 20 GB is reached, the service is slowed to download speeds of 1.5 Mbps and upload speeds of 750 kbps for the remainder of the month, according to press reports.)

The other option is to purchase by the gigabyte for $12 per GB of cellular data. The plans include up to five lines per account with no line access fee, and the cellular data purchased in increments can be shared. The customer pays for what is used.

The idea, however, is not to rely on cellular data, but to primarily use WiFi. Comcast has 16 million hotspots in the United States, and customers utilizing its new mobile plan will be connected to them automatically - no entering of user name and password.

With this WiFi coverage and the fact that Comcast says 70% of consumers use less than 5 GB of data per month, the underlying message is that most people will not be affected by the speed throttling. The 20 GB limit does not include WiFi. The company also noted in its press release that plans can be changed without penalty from the per-GB option to unlimited and vice versa.

When cellular data is used, Comcast will resell from Verizon (NYSE:VZ), as part of its 2012 deal for spectrum, Ars Technica said. The report speculated that the reason for automatically bringing the speed down to 1.5 Mbs after the limit is reached (instead of throttling only during times of congestion like other carriers) is because Comcast may not have full visibility into the Verizon network.

Making things even more interesting, Comcast will likely spend $5-$6 billion on 20 MHz of local TV and radio spectrum in an FCC auction, UBS analyst John Hodulik said. Results will be announced in mid-April. Investors Business Daily suggests the cable operator could use its winnings to negotiate a better deal with Verizon, but Ars Technica says Comcast could be planning to build its own towers, and Seeking Alpha contributor John Brumley says an acquisition of another wireless carrier could be in the works.

"With Comcast having tipped its hand, the next natural step in the process is purchase of a player that has everything Comcast doesn't bring to the table," Brumley wrote, noting that Sprint has "much needed spectrum," and T-Mobile has experience with WiFi handoffs.

Comcast execs have reportedly said that their intent is not to compete for wireless market share, but offer their customers and potential customers another service. Telco AT&T (NYSE:T) made a strong video play recently with its acquisition of DirecTV, and Verizon has FiOS.

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