Today, the world has been changed forever.
Well, at least the mobile world.
As I noted in an earlier post, Verizon Wireless this morning announced a deal to spend $3.6 billion to buy a block of spectrum that has been owned (but unused) by SpectrumCo, a joint venture of the cable companies Comcast, Time Warner Cable and Bright House Networks.
The companies also agreed to cross-sell each others’ products: the cable cos will have the right to buy wireless service wholesale from Verizon, and the phone company will resell cable services in their retail stores.
Bernstein Research analyst Craig Moffett asserts in a research note this morning on the deal that the transaction is a transformative one for the telecommunications sector – it is, he says “a complete reordering of the competitive universe as we know it today.”
Moffett says that while the spectrum purchase is important, it is the other part of the deal that really matters: the joint marketing deal between Verizon Wireless and the cable operators. That part of the transaction, he says, “amounts to a partnership between formerly mortal enemies, not just outside of Verizon’s FiOS territories, but even within them.” He contends that the deal is “a strategic masterstroke for Verizon.”
Here are some of the key elements of the deal, in Moffett’s view:
- He says that within a matter of weeks, “the marketing machine that is Verizon Wireless” will become a marketing engine for cable broadband, video and voice services. Moffett says that Comcast CEO Brian Roberts asserted that pretty soon the best wireless deal in town in markets like Denver, Atlanta and Chicago will be a bundle of Comcast’s broadband, voice and video service and Verizon Wireless mobile service. “Upfront handset subsidies, for example, could be significantly increased if a customer also signed up for Comcast’s terrestrial service offerings,” Moffett theorizes.
- Moffett says the deal is a reminder that telcos are not the natural enemy of the cable industry. Verizon’s FiOS video service only reached 14% of U.S. households. Roberts, he says, points out that 700 of Verizon Wireless’ 900 stores in Comcast’s footprint are not in FiOS territory. “Those outlets will immediately become outlets for cable broadband, video, and voice service.,” he writes. “Perhaps more surprisingly, even within FiOS markets, Verizon will market cable services at parity with their own FiOS.”
