Cable Wi-Fi: 'Price war' or just 'good enough' to hurt phone companies?

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A map of Comcast's wifi coverage from its web site, wifi.comcast.com.

Although Comcast and other cable companies are rapidly spreading "Wi Fi deployment" of high-speed Internet service, and Comcast has told the FCC it is weighing a strategy to use its "grid of Wi-Fi hotspots [in users' homes and businesses] as a launching point for a national 'Wi-Fi first' mobile wireless service," Wi Fi "will never be able to provide the ubiquitous, seamless coverage provided by cellular service," predicts analyst Paul de Sa, Ph.D, in a report to clients of Bernstein Research. 

Wi Fi keeps growing in Septa stations and other places "where a large amount of traffic is delivered," but it can't beat cell phones "for truly mobile usage," in travel and shopping, where smartphone access and reliability are worth a premium, he adds.

By de Sa's calculation, the cable companies would need a billion "hotspot" Wi Fi transmitters (customers or businesses) to guarantee service as reliable as today's wireless phones. "Cable has neither the motive nor the ability to be a head-to-head competitor with the cellular carriers," da Sa writes. "We do not believe it would make business sense for Comcast to disrupt their current (limited) competition with AT&T and Verizon by going head-to-head" for the wireless companies' "core mobile voice-and-data business, potentially triggering a mutually-destructive price war."

What, then? "Cable's current approach, of being a partial substitute for cellular data service and capturing a proportion of consumers' out-of-home usage (and spending)... is a more rational strategy."

Comcast and other cable companies will likely start adding a $5 or $10 monthly customer fee for cable Wi-Fi access, "unless prohibited from doing so, e.g., as a Comcast/TimeWarner Cable merger condition." Doesn't sound like much, but it could boost the company's profits by more than a billion dollars a year. Already both Comcast and Time Warner exclude low-fee customers from free Wi Fi.

Wi Fi is also useful to Comcast as a way of competing with the pending "out-of-home triple play" of smartphone-based phone-TV Anywhere-Internet service, da Sa added.

In fact, da Sa concludes, that's likely the "primary motivation for cable's Wi Fi build out." It allows Comcast to deliver "good-enough" service (as long as you're not driving, say) without relying on the phone companies.

Bottom line, "cable will retain the competitive advantage, with better content and integration with in-home pay TV." Will be extra-tough on T-Mobile and Sprint, which lack video, and the remaining regional carriers like Frontier.

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