Cable’s next step: Offer “virtual” cellular service

Cablevision has become the first cable operator to launch a smartphone running entirely off of Wi-Fi, but there’s one more thing it has to do for its mobile service to become truly mainstream. It has to become a mobile virtual network operator.

MVNOs are network-less carriers, buying voice, SMS and data capacity from an infrastructure-owning carrier like Verizon, AT&T, Sprint and T-Mobile. In fact, you’re probably familiar with many of them. You’re probably already familiar with many of them: [company]TracFone[/company] and Straight Talk Wireless and the branded prepaid service offered by [company]Walmart[/company] and [company]Target[/company] are just a few examples.

If [company]Cablevision[/company] has already built an extensive network of Wi-Fi to route its calls, texts and data, as my colleague Janko Roettgers pointed out, then why does it need some other carrier’s network? Well, it still needs to fill all the spaces in between those hotspots.

Comcast's hotspot network in the mid-Atlantic

Comcast’s hotspot network in the mid-Atlantic

The cablecos have long hinted at using Wi-Fi as a kind of a poor-man’s cellular, and Freewheel is the perfect example. Pricing starts at $9.95 a month, which is very cheap if you’re willing to forgo a mobile connection.

Right now Cablevision has a dense network of Optimum Wi-Fi hotspots that, coupled with your home and work networks, will probably cover, say, three quarters of the situations where you need a data connection or want to make a phone call. That’s going to appeal to several niche audiences like people in Wi-Fi-rich environments like college campuses and those willing to trade convenience for cost. Cablevision residential broadband customers might replace their home phones with Freewheel since they’re at $10 a month they’re essentially the same price.

But no Wi-Fi network has the umbrella coverage of a mobile network, nor can it support the handoff necessary for customers to move through a city without losing their connections. If Cablevision wants to make its mobile service truly mainstream, well then it needs to support true mobility.

The cable carrier enigma

The cable companies have entertained the idea of becoming carriers since 2006 when they all banded together with Sprint to buy spectrum at the Advanced Wireless Service (AWS) spectrum auctions. At the time the plan was to build their own networks with the help of Sprint and add a mobile “play” to their triple-play bundles to take AT&T and Verizon head on.

[company]Cox Communications[/company] was the only one to build a network, and that one was short-lived. The partnership with Sprint fizzled out, though [company]Comcast[/company] did become a Sprint MVNO for a few years to upsell its existing customers on smartphones. The cable companies’ carrier ambitions officially came to and end in 2012, though, when they sold off their spectrum to Verizon.

After six years of toying with the idea of being operators, why are the cable companies suddenly reviving those plans now? What’s changed is the fundamental nature of the mobile industry. Instead of voice and SMS driving carriers’ business, mobile is now primarily a data play. And more and more of that data traffic is being funneled over Wi-Fi networks, not cellular.

Stephen Stokols of FreedomPop, David Morken of Bandwidth.com, Elliot Noss of Tucows at Mobilize 2012

Dave Morken speaking at Gigaom Mobilize

“Carriers and cellular will become the mortar while Wi-Fi will be the bricks,” Bandwidth.com CEO Dave Morken said in a 2013 interview with Gigaom’s Stacey Higginbotham. He was describing a world where our primary decision in choosing a mobile data service should be based on the Wi-Fi networks available since they carry so much of our phones’ data traffic. Bandwidth’s MVNO Republic Wireless has taken its own advice to heart launching a dirt-cheap unlimited data service that leans primarily on Wi-Fi. Last year it went so far to offer a plan that eliminates cellular from the equation entirely. Since then other MVNOs like FreedomPop and Scratch Wireless have followed in Morken’s footsteps.

Eight years ago, building a mobile network meant providing a seamless voice experience everywhere. Today it’s about providing a lot of capacity in the places people consume data the most: home, work, public gathering places, commercial business districts and retail businesses. These are networks the cable operators can build themselves or cobble together through partnerships without the help of carriers and without buying spectrum (It helps that Cablevision is focused on metro NYC where there’s a dense layer of Wi-Fi).

But while Wi-Fi will act as the workhorse of the network, a cellular signal will need to fill the sizable vacuums in between. The difference between a cable MVNO of today and a cable MVNO of the last decade is that carriers are only needed to support the Wi-Fi network, not provide a backbone service.

If Cablevision or any of the other cable companies are looking for a model, they should look over the Atlantic at French ISP [company]Iliad[/company] (which recently tried to enter the U.S. by bidding on T-Mobile). Iliad launched a mobile carrier called Free Mobile that uses millions of Wi-Fi nodes built into its customer’s home broadband gateways as its core wireless network – both Comcast and Cablevision have done the same. Free then augments that capacity with its own limited 3G footprint and an MVNO deal with Orange, France’s largest carrier. In the process Iliad has jolted the once staid French mobile industry, gaining millions of subscribers and triggering a price war.

Will the carriers play ball?

If the cable companies do become MVNOs then they’ll effectively being buying capacity from the same companies they would compete against. It’s the same model Google would pursue if it becomes a mobile carrier as many news reports are suggesting.

Why would the carriers help their own competition? Traditionally carriers have only tolerated MVNOs that target demographics or services they aren’t, but some like Sprint and T-Mobile have become increasingly open to MVNOs that tread on their turf. To them a connection is a connection and a revenue stream is a revenue stream.

Photo by Peshkova/Shutterstock

Photo by Peshkova/Shutterstock

So it’s not only possible, but it’s very likely the cable industry is revisiting the idea of cellular service to supplement their growing Wi-Fi empires. There will be a lot of bumps along the way before a Cablevision phone service could match the reliability and availability of a Verizon service, but Wi-Fi technology is evolving to behave a lot more like cellular. Eventually technologies like Hotspot 2.0 will automatically connect us to available Wi-Fi using an encrypted link, and Next Generation Hotspot technology will allow one access point to hand off a voice call to another access point.

But in the meantime, you can’t beat $10 a month.

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