By Shalini Ramachandran and Ryan Knutson
Comcast Corp.'s most obvious route into the wireless business
isn't looking as easy as it once did.
In 2011, the cable giant struck a deal with Verizon
Communications Inc. giving it the right to sell wireless service
using the carrier's network at set terms and pricing. Now, as
Comcast explores a wireless offering, it has a different
interpretation of that resale agreement than Verizon, say people
familiar with the situation.
One issue: how much flexibility Comcast would have in creating
plans and prices for mobile data, a key part of any modern
cellphone service.
The contract also didn't specifically contemplate shareable data
plans, a common offering from wireless carriers that allow
families, for example, to buy 10 gigabytes of data a month and
split the capacity among devices, the people said. Verizon didn't
even offer such plans when the deal was struck four years ago.
In addition, the agreement's data prices were set before a price
war instigated in 2013 by T-Mobile US Inc. and exacerbated by
Sprint Corp. That price war has resulted in broadly lower
per-gigabyte prices.
Verizon believes Comcast might have a hard time competing under
those prices, according to people familiar with Verizon's
thinking.
The contract traces to a 2011 transaction when Comcast and other
cable companies sold wireless spectrum to Verizon. In addition to
$3.6 billion in cash, the cable companies got rights to resell
Verizon service. Since then, Wall Street analysts have considered
the deal an easy route for Comcast into wireless.
The agreement lays out what Comcast would pay per-minute for
cellphone service and which types of voice plans it could offer.
But provisions on data service are vague, the people said.
Comcast continues to believe its existing deal is "attractive,"
said people close to the company. It also believes that under the
existing terms it has the flexibility to offer shareable data plans
and competitive pricing for potential future data plans. Comcast
executives have also touted that the deal extends into
"perpetuity," covering future advances in wireless technology.
But in an interview last week, Verizon Chief Financial Officer
Fran Shammo said Comcast may want to renegotiate its deal. "That
agreement is old now, it's stale," he said. Mr. Shammo said
discussions between Verizon and Comcast over the contract are
"ongoing."
"We're confident a mutually beneficial arrangement can be
achieved," a Verizon spokesman said.
For Comcast, which walked away from its planned megamerger with
Time Warner Cable earlier this year after regulators balked at the
deal, a foray into wireless could provide a new growth avenue as
its cable TV business stagnates.
The situation is tricky for Verizon. The U.S. wireless industry
is already saturated, so enabling a well-heeled giant to compete on
its turf would add pressure to an intensifying price war over a
finite number of customers. If Comcast were to enter the business,
it would be better for Verizon to capture a chunk of that revenue
rather than one of its rivals.
Instead of just relying on a cellular network, Comcast hopes to
take advantage of its roughly 10 million indoor and outdoor Wi-Fi
hot spots. Those could be a pathway to offer a "Wi-Fi-first"
service that primarily would use Wi-Fi for consumers' data traffic
and jump onto a cellular network where Wi-Fi isn't available.
Comcast has beefed up its Wi-Fi network, using wireless
"gateway" boxes in customers' homes that create a public hot spot
in addition to the private Wi-Fi signal, so guests who are Comcast
customers can access Wi-Fi without having to input a password.
The cable giant also has been increasing its own footprint of
outdoor Wi-Fi and has been striking Wi-Fi roaming deals with other
operators.
At a May investor conference, Comcast Chief Executive Brian
Roberts said "the question is what is the right technology? What is
the right product? What's the right timing?" He said Comcast wants
to have "a great product whenever we do it," but no offering is
imminent.
In addition to its contract with Verizon, Comcast also has a
deal to rent network space from Sprint. But a person close to
Sprint said the deal was negotiated in vague terms and several
years ago and might also have to be revamped. In recent months, the
two companies have talked about ways they can work together in
wireless. A person close to Comcast said the company views Sprint
as a willing partner.
Other cable companies will have to wrestle with the same issues
as Comcast over the old Verizon agreement. Cable operator Charter
Communications Inc., which through its pending acquisition of Time
Warner Cable would get access to the Verizon resale deal, believes
the agreement is more suited for the voice era, said people briefed
by the company.
Even if Comcast were to launch a wireless service using Wi-Fi
and a reseller agreement like the one it has with Verizon, it would
still face hurdles. Most data traffic is carried over Wi-Fi, but
those signals don't travel as far as the ones carriers use on cell
towers.
In addition, enabling cellphones to make phone calls over Wi-Fi
requires additional tinkering on the handset that could make it
more difficult for Comcast to offer lots of devices.
Write to Shalini Ramachandran at shalini.ramachandran@wsj.com
and Ryan Knutson at ryan.knutson@wsj.com
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