Comcast enters wireless business with $45-a-month service

Comcast Corp. unveiled a wireless service that offers unlimited data on Verizon Communications Inc.’s network for cheaper than plans from nearly every other competitor.

While the subscriptions have some strings attached and are available to Comcast’s internet and TV customers, they’re likely to further escalate a price war that has ravaged the mobile-phone business in the U.S.

Comcast, the largest cable operator in the U.S., is looking to create new sources of revenue as consumers ditch traditional TV packages and competitors like AT&T and Charter Communications get bigger through acquisitions. The Philadelphia-based company is using the new service, called Xfinity Mobile, to entice its 29 million subscribers to stick around as more options become available to watch shows and movies online.

“The more products you add, the lower the churn,” said Greg Butz, president of Comcast Mobile, using the industry term for monthly subscriber defections.

Comcast’s current high-speed internet customers can get the unlimited mobile voice and data plan for $65 a month. It’s $45 a month for those who already subscribe Comcast’s premier “double” or “triple” play packages. That’s a steep discount to the cheapest plans offered by Verizon and AT&T, the nation’s No. 1 and No. 2 wireless carriers, respectively.

Comcast’s service will work off of both Wi-Fi and cellular networks, meaning connections will be made using Comcast’s 16 million Wi-Fi hotspots and Verizon’s cellular network as a backup. Comcast can resell Verizon’s wireless-network services as part of a deal the companies made in 2011.

Comcast will sell both Apple’s iPhone and Samsung and LG phones. For now, customers won’t be able to use their old devices on Xfinity Mobile.

Comcast enters the wireless market amid a four-year price war, which has depressed sales and led carriers to consider mergers and acquisitions. Every major wireless provider now lets users stream and download at will with no costly overage charges, a shift in the battle that shows no signs of abating.

The market may soon get even more crowded. Charter Communications, which has the same resale agreement with Verizon, plans to launch a wireless service in 2018. The company is still working out purchase contracts with phone makers and determining whether its 700 stores nationwide can support an influx of consumers seeking wireless deals, Charter Chief Executive Officer Tom Rutledge said earlier this year.

The cable operators may ultimately have trouble turning a profit in the wireless business. It will cost Comcast $20 to $30 a month per customer to provide cellular data from Verizon’s service, Philip Cusick, an analyst at JPMorgan Chase, wrote in a January research note.

But Comcast says each wireless subscriber will be profitable once the company reaches a critical mass of users, a number it didn’t disclose. It says it’ll save money by marketing only to existing subscribers.

For now, Comcast will target subscribers within its regional footprints, which include Philadelphia, Chicago and Boston — a market that could mean 130 million wireless lines.

Comcast says its new service will compete not just on price but also by making it seamless to switch between cellular and Wi-Fi and by giving customers more flexibility than other carriers, like letting family members choose different plans or switch between plans depending on which one saves more money. Customers will automatically be signed in to Comcast apps like Stream, a TV service that will come pre-loaded on phones.

“We’re taking the friction away from logging on to Wi-Fi and logging on to other apps,” said Sam Schwartz, chief business development officer for Comcast Cable.

The cable provider sees an opportunity to offer lower prices because most people use their phones on Wi-Fi at home or at work. Comcast says up to 80 percent of smartphone data in the U.S. travels over Wi-Fi, not cell networks, so Comcast won’t have to pay Verizon as much for the data.

Comcast’s entry into wireless comes at a crucial moment for the cable giant. AT&T has moved aggressively onto its turf, offering low-cost TV packages that can be watched on-the-go and don’t count toward monthly data limits. And advances in wireless 5G technology could make surfing the web on phones as fast and reliable as high-speed internet connections at home — a service that has been a major growth area for Comcast.

Depending on its success in wireless, Comcast could get more ambitious and pursue an acquisition of a wireless carrier such as T-Mobile US Inc., according to some analysts. For now, Comcast insists that selling wireless through Verizon’s network is the long-term strategy.

“We do think we have a sustainable model here,” Butz said.