Strange days indeed. This morning, Comcast, Time Warner Cable and Bright House Networks announced that they are selling their wireless spectrum, which was held under the guise of joint venture SpectrumCo, to Verizon Wireless for $3.6 billion.
Under the terms of the deal, Verizon Wireless will acquire SpectrumCo’s 122 Advanced Wireless Services (AWS) spectrum licenses covering 259 million POPs (points of presence). Comcast owns 64 percent of SpectrumCo and will receive approximately $2.3 billion from the sale. Time Warner Cable owns 31 percent of SpectrumCo and stands to gain approximately $1.1 billion. Bright House Networks owns 5 percent of SpectrumCo and is slated to receive approximately $189 million.
In addition to other regulatory hurdles, the sale of the wireless spectrum to Verizon Wireless is subject to approval by the Federal Communications Commission.
"These agreements, together with our Wi-Fi plans, enable us to execute a comprehensive, long-term wireless strategy and expand our focus on providing mobility to our Xfinity services,” Comcast Cable President Neil Smit said. “We're excited about this partnership with Verizon Wireless and the future innovations we will bring to consumers."
The cable operators and Verizon Wireless also entered into agreements that will allow them to resell each other’s products and services. The cable operators will be able to sell Verizon Wireless’ service on a wholesale basis, which will give them the mobile quad play they’ve been seeking ever since the initial days of the Sprint-based Pivot wireless offering.
Additionally, the cable companies and Verizon Wireless also formed an innovation technology joint venture for the development of technology to better integrate wireline and wireless products and services. The joint operating entity will be based in Philadelphia, which is where Comcast has its headquarters. The joint venture is 50 percent owned by Verizon Wireless, while Comcast, Time Warner Cable and Bright House own the other 50 percent stake.
Sam Schwartz, president of Comcast Interactive Capital and executive vice president of strategy and development at Comcast Interactive Media, will lead the strategic and creative direction of the joint venture in Philly, while Tony Heyman, vice president of new market development for Verizon Wireless, will lead the operations.
“Our wireless offering can become exclusive to Verizon in as soon as six months,” Time Warner Cable spokesman Justin Venech said. “At that time, we can continue to service our existing TWC Mobile Internet customers (provisioned through the Clearwire joint venture), but we will not continue selling that service. We expect to begin selling Verizon services and them to begin selling our services sometime next year.”
A spokesman for Comcast said the company would wind down its mobile broadband service with Clearwire in about six months, and there will be a transition for those customers over to Verizon Wireless.
Using Time Warner Cable as an example, Verizon Wireless will be able to offer the cable operator’s double- and triple-play services along with its wireless service. A Verizon Wireless customer that signs up with Time Warner Cable’s data service will be able to use the cable operator’s Wi-Fi hotspots.
"We're excited to be able to offer the nation's best wireless services to our customers and to have Verizon Wireless as a sales channel for our superb wireline services,” Time Warner Cable president and chief operating officer Rob Marcus said. “We're also pleased to have obtained an attractive price for the spectrum we're selling."
While the cable operators benefit from offering a truly national wireless service, Verizon is able to offer video services in places where it hasn’t built out its expensive fiber-based FiOS service. But make no mistake: The cable operators aren’t backing off of their competition with Verizon FiOS for video customers.
“The agreements are not with Verizon FiOS, they’re with Verizon Wireless,” Bright House Networks spokesperson Kimberly Maki said. “We expect that there will be no reduction in competition as a result of these agreements. We’re still very much in competition with Verizon FiOS. We don’t expect that to change.”
Other key points and observations on the deal include:
- Tough news for AT&T, Sprint and T-Mobile. Verizon has wrapped up some very desirable AWS spectrum across the nation that will significantly shore up its 4G LTE plans, which isn’t good news for AT&T, Sprint and T-Mobile.
- Each service provider retains its own subscribers. In other words, cable operator customers that subscribe to Verizon Wireless’ service will receive a separate bill from Verizon.
- Clearwire may be out in the cold. Time Warner Cable, Bright House Networks and Comcast are among the investors in Clearwire. Time Warner Cable and Comcast have deployed rebranded mobile broadband services with Clearwire, but Bright House Networks hasn’t. With Comcast and Time Warner Cable confirming they no longer plan on selling Clearwire's services going forward, the deal with Verizon Wireless seems to have put Clearwire out to pasture.
- Comcast, Time Warner Cable and Bright House Networks cash in on the sale of spectrum. SpectrumCo originally forked out $2.37 billion for 137 AWS licenses in October 2006 in a Federal Communications Commission auction.
- Speculation at last month’s SCTE Cable-Tec Expo included the thought that the nation’s largest cable operators would band together to buy T-Mobile after the wheels came off the sale to AT&T. With the Verizon Wireless deal, the cable operators get the national wireless footprint they’ve long desired while retaining control of their respective subscribers, increase their bottom lines with the sale of spectrum, and form the JV with Verizon Wireless for new products and services. Buying T-Mobile doesn’t stack up in comparison.
- What will Cox Communications do with its wireless spectrum after abandoning both the build-out of its own wireless network and its Sprint-based re-branded service? Cox was originally part of the 2006 SpectrumCo auction buy before exiting the entity in 2008. It still retains 700 MHz and AWS licenses, so Cox could decide to enter into a similar agreement with Verizon Wireless.