Bundling Cellular with Broadband

The biggest cable companies have been successful in recent years in bundling cellular service with broadband and cable TV. The cable companies launched their cellular products by operating as an MVNO (Mobile Virtual Network Operator). That’s an industry acronym that means that the cable companies purchase and resell cellular minutes, texts, and data from one of the big cellular carriers. The biggest cable companies have also selectively started to install their own cell sites in their busiest neighborhoods to totally bypass the cellular carriers. Over time, they will probably move a lot of cellular traffic directly to their own network—although they will always need the MVNO service to cover customers who make connections outside the reach of a cable company cell tower. Smaller ISPs are now being offered the same bundling opportunity. Small ISPs share the same primary advantage as cable companies in that they can handle a lot of cellular traffic through the landline network. However, smaller ISPs who buy this service are not likely to ever be able to find the spectrum needed to directly get into the cellular business with their own towers. This article is to warn small ISPs about the risks of this business plan. I am not recommending that ISPs should avoid the cellular opportunity. If it makes money and helps to sell broadband then give it a hard look. My caution is that a small ISP in an arbitrage arrangement has zero market power, and that the arbitrage opportunity can stop abruptly at any time.