I ended an earlier post in this series by suggesting that Cablevision’s launch of Freewheel, a WiFi-only wireless service, marks a new chapter in the emerging “nomadic multiscreen multimedia service battleground.” In this post I’ll elaborate a bit on what I meant by that.
That earlier post reviewed the cable industry’s 20-year history of launching then aborting ventures intended to use licensed spectrum to compete in the wireless market. As comments made to investors in 2009 by Comcast CFO Michael Angelakis suggest, the balance of risk and rewards in these ventures never proved attractive enough for Comcast and other cable operators to follow through with sustained investments. “We don’t want to be the seventh competitor in a market that [is] mature from the voice side,” Angelakis told Wall Street analysts. “And it’s a huge economic investment, which we’re uncomfortable there’s a real return for.”
Another challenge facing these earlier ventures–especially those involving partnerships with wireless providers like Sprint or Clearwire–is that cable operators, especially the largest ones, don’t have a strong track record of successful collaborations; that is, unless the collaboration takes place among their cable peers, who share the same core business and virtually never compete with each other. A good example of this intra-industry mode of collaboration is the industry’s CableLabs R&D consortium which, among other things, has developed multiple generations of cable modem technology.
Comcast’s Executive Vice President David Cohen acknowledged this “partnering” challenge in comments reported in a May 2011 article in the Cherry Hill, NJ Courier-Post, and cited on pg. 80 of Susan Crawford’s 2013 book, Captive Audience. Referring to his company, Cohen conceded that “[w]e’re not very good partners. We like to run things.” [Note: payment is required to access the archived Courier-Post article].
Viewed in light of these two historical factors, the possibility raised by Cablevision’s Freewheel venture is that:
1) the balance of risk and reward for a WiFi-centric wireless strategy is today considerably more favorable than it was for cable’s earlier ventures relying on licensed spectrum;
2) a WiFi-based strategy could rely less (or not at all) on the kind of partnerships that, as Cohen noted, Comcast and its cable peers are “not very good at.”
One shift in the risk/reward balance relates to Angelakis’s 2009 comment about Comcast’s reluctance to enter a mature wireless voice market that has more competitors than cable operators typically face in the wireline access business.
While this difference in competitive dynamics still exists today, Freewheel is mainly targeting nomadic data and video services, not mobile voice. As reported by Jeff Baumgartner of Multichannel News, Cablevision vice chairman Gregg Seibert, speaking at a March 9 investor conference, “reiterated the position that Freewheel is positioned as a data/video product, and that voice will be one of the least-used features of the phone.”
This data/video focus makes ubiquitous coverage, seamless handoff, and a cellular-connection backup (and all their associated costs) less of a requirement than they are for a service that prioritizes support for real-time voice conversations. It also is more intimately tied to the wireline video and high speed data markets in which cable operators are already dominant players. And it holds promise for helping these operators compete successfully in what I earlier referred to as “the emerging nomadic multiscreen multimedia service battleground” (e.g., value-added services that make it easier for customers to manage their media consumption across multiple fixed and portable devices, including large screen TVs, computer monitors, tablets and smartphones).
The press release announcing Freewheel’s launch listed some characteristics of its most likely customers, including those who:
- Spend their day in WiFi-rich environments, including colleges, offices and homes
- Overspend on data or constantly worry about staying within their expensive and restrictive cellular data limits
- Live in densely populated areas or other locales that suffer from poor cellular reception
- Are budget conscious or on a fixed income
- Are looking for the best first device for their children
- Do not want to sign multi-year contracts.
Freewheel’s monthly price for “unlimited data, talk and text” (via WiFi, with no cellular backup) is $9.95 for Cablevision’s existing Internet customers and $29.95 for other users. While the latter seems pretty high when viewed in light of other available options (e.g., the WiFi-first services offered by startups discussed in a prior post), the $9.95 existing-customer price could be quite appealing to some Cablevision customers.
As reported in early March by Sue Marek of FierceCable:
Speaking…at the Mobile World Congress 2015 conference…[COO Kristin Dolan] provided some anecdotal information about some of Freewheel’s customers, including one teacher who participating in the company’s focus group testing. She said this teacher traveled about 7 miles per day between her home and her school. She has Wi-Fi in her home and her school and was willing to forgo having wireless coverage on her short commute in lieu of the cost advantage of Freewheel… However, Dolan also admitted that the service probably isn’t a good option for people that spend a lot of time in cars commuting, although she noted that in some situations people driving 25 to 30 miles per hour can maintain a connection.
One initial limitation of Freewheel is that it is currently available on only one device, the Motorola Moto G smartphone, which is priced at $99.95 (roughly half of its $200 MSRP). But, according to Baumgartner, this single-device constraint is only temporary. “Cablevision,” he reports, “is developing a paid Freewheel app that could launch later this year” and will allow Freewheel to operate “on a broader array of devices, including Apple iPhones.”
In key respects Cablevision is well suited to be the first cable operator to bring a WiFi-only service to market. Among the reasons:
- It’s service area is concentrated in the densely populated and relatively affluent and tech-savvy greater NYC tri-state area, and it has a long history of serving both residential and business customers in this area;
- It has already deployed a relatively dense WiFi network of roughly 1.1 million hotspots, including outdoor and indoor public spaces, as well as dual-SSID routers installed in customers’ home and businesses (more on the latter in a future post);
- It has a history of being early among its cable peers to aggressively deploy new services, including Internet access, wireline telephony, telecom services targeting large and small businesses, network DVRs and, most recently, HBO’s new online “HBO NOW” service.
- It is unique among its peers in terms of the large percentage (estimated to be more than half) of its service area facing competition from the combination of Verizon’s FiOS fiber optic-delivered service and its technologically and competitively strong wireless service (for examples of “FiOS + wireless” bundled discounts, see here and here). This makes Verizon a potentially very strong competitor in the emerging nomadic multiscreen multimedia market (at least in its FiOS footprint), a factor likely to impact Cablevision more and sooner than cable operators less exposed to this competitive threat.
Though it remains to be seen what level of success and market impact Freewheel will achieve, the new WiFi-only service should, at the very least, provide some valuable lessons—not only for Cablevision, but also for other cable operators considering whether a wireless play might finally make strategic and financial sense for them.
This is especially true for Comcast, the nation’s largest cable and broadband provider. Like Cablevision, it has been aggressively deploying dual-SSID routers in customers’ homes, a process that has boosted its hot spot count into the millions. Its activities on that front, and recent comments by Comcast executives on the possibility of further moves into the wireless space, will be the focus of the next post in this series.