Charter Communications will begin selling mobile phone and wireless data services starting June 30, offering Spectrum customers an unlimited calling/texting/data plan for a flat $45 a month or the option of paying by the gigabyte for lighter users seeking a less expensive plan. Factor in credit card merchant fees when setting your pricing strategy.

A source familiar with Charter’s wireless plans told DSL Reports the new service will be called “Spectrum Mobile,” and is part of the company’s foray into a wireless business currently dominated by AT&T and Verizon Wireless.

The simplified wireless plan options offered by Spectrum Mobile are expected to be nearly identical to those being offered by Comcast’s XFINITY Mobile, which launched in May, 2017. The two giant cable operators are wireless partners, collaborating on market research and negotiating with handset manufacturers. Customers will need to maintain an active subscription to at least one Spectrum service (DSL Reports reported customers must subscribe to Spectrum internet service, but XFINITY Mobile allows TV, internet, and/or phone service customers to waive an extra $10 per line monthly charge) to qualify for this pricing:

By the Gig ($12/GB):

• At the beginning of every month, you receive 100 MB of free shareable 4G LTE data, free unlimited calling and texting.
• Gigabytes are $12 each, and data is shared across all lines on your account that are using By the Gig.
• You’ll be charged by rounding up your data usage to the next GB at the end of each billing cycle. This means that if you use 2.2 GB of data, you’ll be charged for 3 GB, or $36. Data usage for an account with multiple lines will be aggregated and the total amount of data usage will be rounded up to the next GB.
• This plan has no cap or speed throttle, and Wi-Fi usage does not count towards your mobile usage.

“Unlimited Data” (20 GB of 4G LTE data for a flat rate of $45 per line)

• Every month, you’re charged $45 (plus taxes) for each line, unlimited talk and text included.
• “Unlimited data” means 20 GB of 4G LTE data at full speed. After 20 GB, download and upload speeds will be reduced to 1.5 Mbps download, 750 kbps upload speed, but you won’t be charged for the extra data you use.
• Wi-Fi data usage does not count toward your 20 GB allowance.

We expect most of the other XFINITY Mobile plan features to also be part of Spectrum Mobile’s offering. XFINITY Mobile claims its customers save up to $400 a year. Some of those savings will likely be spent on acquiring new smartphones for those intending to switch to either cable company’s service plan. Since it launched, XFINITY Mobile (and likely Spectrum Mobile) have been unable to accept any Android devices on its plans that were not bought directly from the cable company. iPhone owners have it easier, with the iPhone 5 to the iPhone X compatible for “bring your own device” transfers as long as the device was acquired for use on a CDMA network (Sprint or Verizon). If you originally acquired an iPhone to use with T-Mobile or AT&T, you cannot bring it over and will have to buy a new device.

Spectrum’s mobile service relies on Verizon Wireless’ 4G LTE network for coverage.

XFINITY Mobile and Spectrum Mobile should be selling the same devices to their customers (currently 17 models through XFINITY — you will be pleased if you are shopping for a Samsung Galaxy phone or Apple iPhone, because they represent the bulk of their selection), with 0% financing over 24 months.

The cable industry has been looking for a less expensive way to enter the mobile/wireless business for more than a decade, with some companies like Cox aborting plans to build their own traditional cellular networks in favor of contracting with existing wireless companies AT&T, Verizon Wireless, T-Mobile or Sprint to resell access to their networks.

Both Comcast and Charter are following a similar path, contracting with Verizon Wireless to provide nationwide 4G LTE coverage. But the handsets the cable companies are selling are also equipped to take advantage of existing Wi-Fi networks, and default to Wi-Fi internet access and calling wherever possible. The handsets seamlessly switch to Verizon’s network when out of range of a suitable Wi-Fi signal. With a growing percentage of wireless data use today managed over Wi-Fi networks, the two cable operators face lower costs than cable companies did in 2005, when they attempted to form an alliance with Sprint to enter the mobile market that never materialized.

But Comcast’s early entry into the mobile business has not come cheap. The company’s chief financial officer reported Comcast expects to rack up $1.2 billion in operating losses over the first 18 months of being in the wireless business. In 2017, XFINITY Mobile lost $480 million. The company will deal with another $200 million in losses this year as it spends more on marketing and introducing support for more devices subscribers bring from their old carriers. After a year, Comcast has attracted 380,000 subscribers to its wireless venture.

Some of the handsets available for sale at XFINITY Mobile will also be sold by Spectrum Mobile.

Where Comcast and Charter diverge is in their interest in constructing their own wireless networks. Comcast wants to leverage the millions of pre-existing “gateways” already installed in customer homes that deliver traditional Wi-Fi access to its customers and guest users. Charter has experimented with fixed wireless in a handful of markets for in-home broadband replacements, and is also contemplating launching a type of super-powered Wi-Fi service that could deliver wireless connectivity across a neighborhood instead of just a single home. If Charter builds a wireless network utilizing frequencies in the 3.5 GHz band, it will be part of its broader plan to integrate multiple wireless networks together.

“Charter is in the process of transitioning its wireless network from a nomadic Wi-Fi network to one that supports full mobility by combining its existing Wi-Fi assets with multiple 4G and 5G access technologies,” Charter said in comments to the FCC. “In navigating this technological transition, Charter is concentrating on an ‘Inside-Out’ strategy, initially focusing on advanced wireless solutions inside the home and office, and eventually expanding outdoors.”

Spectrum Mobile will be the first part of what the company claims is a multi-step process to create a new and powerful wireless network for customers.

“First, in 2018, Charter will begin offering a mobile wireless service to its customers as a Wi-Fi-first MVNO, partnering with Verizon Wireless and using Charter’s own extensive Wi-Fi infrastructure to enhance customer connectivity and experience,” the company told the FCC in February. “In the second phase, Charter plans to use the 3.5 GHz band in conjunction with its Wi-Fi network to improve network performance and expand capacity to offer consumers a superior wireless service.”

YouTube TV customers attracted by unlimited storage DVR service are now discovering their recorded shows have been temporarily replaced with an on-demand version loaded with unskippable advertising.

In late April, YouTube TV dramatically increased the number of shows that cannot be viewed using DVR service. Instead, viewers are pointed to the on-demand version instead, even when a customer records the show using YouTube’s unlimited storage DVR service. Some customers who pay $40 a month for YouTube TV don’t appreciate what they consider a “bait and switch” DVR that raids their library of recorded shows and puts them off-limits in favor of an alternative version littered with ads one cannot skip.

Customers may not have noticed the gradual increase in the number of ads-included, on-demand shows until recently when YouTube TV started restricting the option of watching an ad-skippable DVR recording instead. Now it is the on-demand (VoD) version or nothing in many cases, at least for the first month or so after a show airs.

“I never had trouble watching DVR versions of programs from NBC, USA, FX, FOX, etc. several days — if not weeks — after recording them. Even if there was a VoD version available,” noted Daw Johnson. “As of last week, the service has completely changed. Roughly 16 hours after the program airs live, you completely lose access to recordings on shows from any of those networks. You’re 100% forced to watch the VoD version (with ads).”

How YouTube TV is marketed.

Each network seems to handle advertising differently. CBS is notorious for loading as many as 20 ads per hour, while some shows on ABC don’t include any ads at all. Some ads are 15 seconds long, others — especially pushing prescription drugs, can run much longer.

Some customers feel YouTube TV has misled them about its DVR service, noting it was sold as an unlimited service:

You can record as many programs as you want at the same time, without ever running out of storage space. We’ll even keep each recording for 9 months. Stream from your library anywhere in the U.S.

But in reality, because of YouTube’s own desire to increase advertising revenue and thanks to agreements with certain programmers, DVR service is becoming more restricted on current shows, and a growing number of older titles airing on cable networks are likely to see mandatory ads creep in as well as YouTube starts selling ad time itself.

“Many networks provide recent episodes of shows, movies, and more on demand. If you’ve recorded a program that’s available on demand at the time you’re watching, in some cases the on demand version will be played back instead of your recording. You typically cannot fast-forward through video on demand ads,” the company explained.

This week, YouTube unveiled a brand new effort to integrate the Google video ads platform into the YouTube TV experience, opening up plenty of new advertising opportunities for companies that want to target YouTube TV customers and be assured viewers cannot fast forward past their ads.

Now Google’s advertisers can target video ads at YouTube TV customers.

“Content from some cable networks in the U.S. will be part of Google Preferred lineups so that brands can continue to engage their audience across all platforms,” said Debbie Weinstein, managing director of YouTube/Video Global Solutions. “This means advertisers will be able to get both the most popular YouTube content and traditional TV content in a single campaign – plus, we’ll dynamically insert these ads, giving advertisers the ability to show relevant ads to the right audiences, rather than just showing everyone the same ad as they might on traditional TV.”

That is likely to mean an exponential increase in GEICO ads.

None of this should be a surprise, if subscribers reviewed the terms and conditions of service when they signed up. In March, 2017, we warned would-be customers the service would insert forced advertising into the DVR experience. YouTube TV isn’t likely to be the only streaming service that will start pushing mandatory advertising into DVR recordings. TV executives want to establish a precedent for forced advertising on the cord-cutting streaming marketplace.

“While it isn’t possible to put the DVR genie back in the bottle for traditional cable customers, TV networks are hopeful they can train viewers to expect ads at least in on-demand, current-season shows they stream,” reported the Wall Street Journal in 2017.

Despite rosy predictions from Sprint and T-Mobile executives that the two companies joining forces will result in plentiful competition, lower prices, and more advanced service, the results of prior mergers in the wireless industry over the last 20 years delivered increasing prices, reduced innovation, and a lower customer service experience instead.

Few markets show the stark results of consolidation more than the telecom industry. Monopoly cable rates, barely competitive wireless domination by AT&T and Verizon — both with a long history of adjusting wireless rates and plans to closely match one another (usually to the detriment of the consumer), and politicians and regulators that acquiesce to the wishes of the telecom industry have been around even before Stop the Cap! got started in 2008.

When a market disruptor begins to challenge predictable and stable marketplaces, Wall Street and investors quickly get uncomfortable. So do company executives, whose compensation packages are often dependent on their ability to keep the company’s stock price rising. That is why T-Mobile USA’s “Uncarrier” campaign, which directly challenged long-established wireless industry practices, created considerable irritation for other wireless companies, especially AT&T and Verizon.

The two wireless industry giants initially ignored T-Mobile, suggesting CEO John Legere’s noisy and confrontational PR campaign had no material impact on AT&T and Verizon’s subscriber base and revenue. Ironically, Legere was named CEO one year after AT&T’s 2011 failed attempt to further consolidate the wireless industry with its acquisition of T-Mobile. A very generous deal breakup fee and accompanying wireless spectrum provided by AT&T after the deal collapsed gave T-Mobile some room to navigate and transform the company’s position — long the nation’s fourth largest national wireless carrier behind Sprint. It is now in third place, poaching customers from the other three, and has repeatedly forced other carriers to change their plans and pricing in response.

T-Mobile’s “Uncarrier” promotion.

T-Mobile invested in its network and delivered upgrades, but the real inroads for subscriber growth were made by throwing out the typical wireless carrier business plan. T-Mobile brought back unlimited data and made it a key feature of their wireless plans starting in 2016, a feature AT&T and Verizon had successfully banished, ended the traditional two-year contract, scrapped junk fees and surcharges that customers hated, and ran regular specials that dramatically cut family plan rates. If you lived in an area with solid T-Mobile coverage, the scrappy carrier quickly became a viable option among those contemplating ditching Verizon or AT&T. T-Mobile also benefited enormously from disaffected Sprint subscribers that spent years riding out frequent promises of an in improved network experience that frankly never matched the hype in many areas. Price conscious customers that could not afford a plan with AT&T or Verizon moved even more readily to T-Mobile’s network.

In contrast, AT&T and Verizon have spent the last 20 years consolidating the wireless industry by acquiring regional carriers that had a reputation for good service at a fair price, with the promise that the acquisition by a richer and larger competitor would accelerate network upgrades and improve service. But customers of long-gone or diminished carriers like Alltel, Leap Wireless’ Cricket, MetroPCS, and Centennial Wireless (there are others) that either no longer exist or remain alive only as a brand name on a larger company’s network, noticed higher bills and eliminated coveted features that helped them manage their data and voice plans and costs.

In Europe, recent industry consolidation in some countries has reduced major carriers from four to three, similar to what T-Mobile and Sprint would do in the United States. Pal Zarandy at Rewheel compared consolidated markets in Germany and Austria and discovered gigabyte data pricing where consumers had three options almost doubled in price in Germany and Austria. Austria was 30% less expensive than a control group of six neutral countries when it had three competitors. Today, with two, it is 74% more expensive than its European counterparts. In Germany, prices went from 60% more expensive to nearly triple the rates charged by control group countries.

The merger of Sprint and T-Mobile will dramatically reduce competition in several ways:

1. It will end the pervasive price war for lower-income consumers on postpaid plans. Sprint and T-Mobile directly compete with each other to secure customers that skip AT&T and Verizon Wireless because of their more expensive plans and accompanying higher-standard credit check.
2. Each of the four current national carriers have had to respond to aggressive price promotions for hardware (Sprint, T-Mobile), plans (T-Mobile, Sprint), and loyalty-building rewards (T-Mobile Tuesday). With a merger, those promotions can be scaled back.
3. AT&T and Verizon have been forced to reintroduce unlimited data plans as a direct result of competition from Sprint and T-Mobile. Incidentally, Sprint and T-Mobile’s unlimited data features are different. T-Mobile offers zero rating of lower-resolution videos from selected websites while Sprint offers unlimited access to HD video. In fact, Sprint’s unlimited plan marketing campaign casts T-Mobile’s version in a negative light and was designed to beat T-Mobile’s plan to attract new customers.
4. Since Sprint and T-Mobile are market disruptors, merging them means no new aggressive campaigns to out-disrupt each other to the consumer’s benefit. Instead, they will target the conservative plans of AT&T and Verizon, which requires less innovative marketing and less significant price cuts.

Sprint’s marketing points to differences between its plans and those from T-Mobile, Verizon, and AT&T.

In 2015, the OECD released a definitive study demonstrating the impact of consolidating telecom mergers among top industrialized countries, including the United States. The results were indisputable. If you reduce the number of national carriers to fewer than four, prices rise, service deteriorates — along with innovation and investment, and consumers are harmed. In Canada, where three national carriers dominate, the former Conservative government made finding a fourth national wireless competitor a national policy priority. While Americans gripe about their cell phone bills, many Canadians are envious because they often pay more and live with more restricted, less innovative plans.

This February, market research firm PwC published its own findings, “Commoditization in the wireless telecom industry,” showing that North America remained the most “comfortable” region in the world for wireless carriers looking for big revenue and profits, but that was starting to change because of disruptive marketplace changes by companies like T-Mobile and Sprint.

“In this zone, there is a greater than 50 percent spread in market share and ARPU between highest and lowest market players indicating that commoditization is far off,” PwC notes. For wireless carriers, “commoditization” is bad news. It means the amount of money a carrier can charge for its services is highly constrained because multiple competitors are ready to undercut another carrier’s prices or engage in all-out vicious price wars. In these areas, commoditization also means consumers treat each competitor as a viable player for their business.

In France, four national providers —  Orange, SFR, Bouygues Telecom and Free, have been in a price war for years, keeping France’s wireless prices shockingly low in comparison to North America. The price war in the United States is just beginning. PwC notes as the U.S. market becomes saturated — meaning everyone who wants a cellphone already has one — companies will have to compete more on price and service. T-Mobile and Sprint have been the most aggressive, and the effect is “meaningful competition.” In Canada, where three national carriers exist, competition is constrained by the domination of three large national companies and some regional players. Instead of cutting prices and expanding plan features, many Canadian providers are now trying to bundle their cable, phone, and wireless customers into a single package to “protect [market] share and increase stickiness.” In other words, Canadian wireless carriers are designing plans to hold the line on pricing while keeping customers loyal at the same time.

While average revenue per customer is now around $30 a month in North America, it is less than half that amount in virtually every other region in the world. PwC shows the direct impact of competition starting around 2014, when T-Mobile and Sprint got particularly aggressive about pricing. Wireless carrier ARPU was no longer a nearly flat line from 2009-2013. Now it is dropping faster than every other region in the world as AT&T and Verizon have to change their pricing to respond to competition pressures.

Sprint and T-Mobile’s CEOs launch their PR blitz. (Image: Cheddar)

While reports are likely to surface arguing the alleged pro-consumer benefits of the Sprint/T-Mobile merger, it will be critical to determine who or what entities funded that research. We expect a full-scale PR campaign to sell this merger, using industry-funded astroturf groups, industry-sponsored research, and industry-connected analysis and cheerleading.

In 2011, the Justice Department definitively crushed the proposed merger of AT&T and T-Mobile. It cited strong and convincing evidence that removing a competitor from the wireless market will lead to consumer harm from reduced competition and higher prices. If one substitutes Sprint for AT&T, the evidence still shows Sprint’s own aggressive marketing and promotions (and its competitors’ willingness to match or beat them) will be missing from a marketplace where Sprint no longer exists. That cannot and should not be allowed to happen.

T-Mobile USA and Sprint have agreed to a $26.5 billion all-stock merger, creating the second largest wireless company in the country with 70 million customers, rivaled only by larger Verizon Wireless with 111 million customers and potentially-third-place AT&T with 78 million.

The merged company will keep the T-Mobile name and its maverick CEO, John Legere. The board will include SoftBank CEO Masayoshi Son, who took control of Sprint several years ago but failed to change its status as the fourth largest carrier in the country.

“This combination will create a fierce competitor with the network scale to deliver more for consumers and businesses in the form of lower prices, more innovation, and a second-to-none network experience – and do it all so much faster than either company could on its own,” Legere said in the statement.

T-Mobile’s owner, Deutsche Telekom, will control 42% of the company, with SoftBank retaining a 27% ownership stake.

This is the third time Masayoshi has attempted a merger of Sprint and T-Mobile, first failing over regulators’ antitrust/anti-competition objections during the Obama Administration, and a second time over arguments about which company would ultimately control the merged operation.

Wall Street is likely to applaud the deal because of the major cost savings the merger would bring. Tens of thousands of job losses are likely at both companies, delivering significant savings.  Sprint has already slashed its workforce from 40,000 in 2011 to fewer than 28,000 today in a series of cost cutting moves. T-Mobile is bloated by comparison, with 50,000 employees as of 2017, leaving much room for layoffs. Overlapping coverage areas could also be consolidated to reduce equipment and cell tower expenses.

Investors are also concerned about the future rollout costs of 5G wireless technology. Reducing the number of competitors offering the service would allow for higher prices and faster return on investment. But company officials are promoting the merger with claims it will accelerate the deployment of 5G networks and attract new investment. Both companies have complained about profit-draining competition, so removing one competitor to leave just three national choices for wireless service will allow carriers to boost prices and ease price wars. Executives have also worried that as the wireless marketplace gets saturated with smartphones for everyone, growing the business in the future has become a major challenge.

Legere

Consumer groups are reading between the lines of the business case for the merger and argue the reduced competition that will result will lead to higher prices, less aggressive competition and upgrades, and big layoffs. Most observers expect activists will seek to block the merger on anti-competition grounds.

“Unlike good wine or a good movie, this long-rumored deal only gets worse with age and repeat viewings. No one but T-Mobile and Sprint executives and Wall Street brokers wants to see this merger go through. Greed and a desire to reach deeper into people’s wallets by taking away their choices are the only things motivating this deal,” said Free Press policy director Matt Wood. “What we know about the wireless market is that customers actually win when mergers are blocked. That market has been relatively competitive in recent years, but only because the FCC and DoJ signaled they would block AT&T’s attempted takeover of T-Mobile in 2011, along with T-Mobile and Sprint’s several previous attempts to combine.”

Wood notes that because of fierce competition from Sprint -and- T-Mobile, their larger rivals AT&T and Verizon have been forced to reintroduce popular unlimited data plans, cut prices, and get rid of onerous multi-year service contracts.

“The notion that this deal would produce better wireless services is a flat-out fiction. We’ve seen the results from the tax cuts and other destructive deregulation in the Trump era,” Wood added. “The combined entity here would just use this deal to line its own pockets, pay down the massive debt these companies carry, and reward shareholders with more stock buybacks. It would fund further acquisitions of content companies, too, as wireless carriers like Verizon and AT&T rush to join the race for targeted advertising revenues built on privacy abuses like those already built into Facebook’s and Google’s ad models.”

So far, the Trump Administration’s record on mergers is mixed. The Justice Department has shown surprising resistance to blockbuster corporate telecom mergers, and is currently suing AT&T and Time Warner, Inc. to unwind their merger proposal. But Trump’s FCC has bent over backwards in favor of mergers involving the administration’s political allies, notably Sinclair Broadcast Group’s local station acquisitions which have received favorable treatment from FCC Chairman Ajit Pai.

“The legal standard for approving giant horizontal mergers like this is not whether Wall Street or President Trump and his cronies likes it. Communications mergers must enhance competition and serve the public interest,” said Wood. “This deal would do just the opposite: It would destroy competition, eliminate jobs and harm the public in numerous irreversible ways. So unless Ajit Pai wants wants to add yet another blemish to his already disastrous tenure at the helm of the FCC, the chairman should speak out and show us he’s willing to do more than rubber stamp any harmful deal that crosses his desk.”

The merger is expected to get significant regulatory scrutiny.

Usage caps for one and all.

Comcast, which insists on placing a 1 TB (1,000 GB) usage cap on most (but not all) of its broadband customers, is predicting explosive growth in broadband usage as customers connect more devices to their internet connections.

“[If] you look at in terms of just overall consumption, just at a high level, you look at the top 10% of our customers, just how much they use, they are using 20 or more connected devices,” said Comcast Cable president and CEO David N. Watson on a company conference call. “And it’s a tremendous amount of consumption that we have. And I think that’s where the market is going. There is going to be more consumption, more connected devices.”

Comcast’s growth forecasts suggest the company schedules regular network upgrades, although it has only adjusted usage allowances three times in the last decade:

• Comcast introduced a 250 GB usage cap in 2008 that carried no overlimit penalty but persistent violators lost their Comcast broadband service.
• Comcast raised the cap 300 GB in 2013 and implemented an overlimit fee.
• Comcast raised the cap to 1 TB in 2016 and began promoting its Unlimited Data Option as an insurance policy against bill shock from overlimit fees.

“It is important to know that more than 99 percent of our customers do not use a terabyte of data and are not likely to be impacted by this plan, so they can continue to stream, surf, and download without worry,” claims Comcast on its website. As of December, 2017, “Xfinity Internet customers’ median monthly data usage was 131 GB per month during the past six months.”

Such claims should make customers wonder why Comcast needs a usage allowance of any kind if these claims are true. A 2016 study suggests Comcast may have more heavy users than it is willing to admit. The research firm iGR found average broadband usage that year was already at 190 GB and rising. There is no third-party verification of providers’ usage statistics or usage measurement tools, but there are public statements from Comcast officials that suggest the company faces a predictable upgrade cycle to deal with rising usage.

“We increase the capacity every 18 to 24 months,” confirmed Watson.

Upgrading is also a crucial part of Comcast’s ability to charge premium prices for its internet service.

“Not all broadband networks are created equal,” Watson said. “If you are providing a better solution in broadband, your pricing can reflect that.”

For Comcast customers using a terabyte or more in a month, after two courtesy months of penalty fees being waived, Comcast will recommend signing up for its Unlimited Data Option, which costs $50 a month. If you do not enroll and exceed your allowance a third time, the company will bill you overlimit fees: $10 for each additional block of 50 GB of usage. The maximum overlimit penalty in any single month is a whopping $200.

Critics of Comcast’s data caps point out that Charter — the nation’s second largest cable operator, has no usage caps at all. Optimum (Altice) also does not impose data caps. Those that do often copy Comcast’s data allowances and overlimit fees exactly — all to deal with so-called “data hogs” that the companies themselves claim represent fewer than 1% of subscribers.