Why a Cable Deal is Bad for the Phone Industry

[Commentary] The first wireless deal after a government-imposed hiatus is bad news for the biggest carriers and could scramble the likely outcomes of other anticipated combinations.

Cable operators Comcast and Charter Communications said they would form a year-long partnership to expand their wireless offerings. The deal signals the two companies are serious about expanding into the industry. It also ensures that the two biggest cable companies will work together—and not bid against one another—when it comes to wireless deals. For Comcast and Charter, which are more peers than rivals because their coverage areas don’t overlap, teaming up makes sense. It will allow them to integrate their networks of Wi-Fi hot spots, which cover about 80% of the country, according to New Street Research. This should help them offer better service to subscribers and considerably lower the cost of running wireless networks on Verizon Communications’ airwaves. The partnership could also signal a desire for a deeper relationship between the two cable giants—even possibly a merger down the line. The success of the venture would make things much worse for the industry’s two giants, Verizon and AT&T , which are already losing subscribers to T-Mobile US and Sprint amid a bruising price war.