In a potential deal with Sprint Corp., two big cable operators, Comcast Corp. and Charter Communications Inc., are seeking the ability to sell Sprint's wireless service under their own brands.
Continue Reading Below
Such reseller offerings allow a company to provide wireless service without owning or operating a network. There are dozens of companies in the U.S. that piggyback on others' networks. These include TracFone and Straight Talk, which run on multiple carriers, and Consumer Cellular, which uses AT&T Inc. and T-Mobile US Inc.
These arrangements are becoming increasingly important as bigger companies with more serious wireless ambitions consider offering them.
The companies that act as mobile virtual-network operators, or MVNOs, traditionally don't invest in network improvements because, as resellers of cellular service, they don't own the infrastructure.
The big four carriers dictate prices so there is a limit to how low resellers can set their own fees. Some high-profile MVNOs failed years ago, including earlier attempts by cable companies.
In the U.S., MVNOs manage the wireless connections for 38 million devices. T-Mobile is the biggest provider of connections to resellers with 12 million, followed by Sprint with 5 million, according to UBS.
Continue Reading Below
For wireless carriers, MVNO agreements offer an additional source of revenue but the decision to enter into one can be tricky. Providing lines to an MVNO is highly profitable because the wireless carriers don't have to pay for marketing or acquisition costs. But an MVNO's customers don't bring in as much revenue as customers who sign up directly.
A carrier could even find itself losing its own subscribers to a popular MVNO using its own network.
In 2015, Google launched an MVNO called Project Fi. Unlike other MVNOs, Project Fi loads special software on its phones that allows devices to bounce between Sprint and T-Mobile networks, depending on which carrier has the faster connection. The goal is to encourage the carriers to build fast networks.
When Sprint decided to sign on with Google, it didn't take the decision lightly. But the fear was that if Sprint didn't do the deal, one of the other three carriers would, The Wall Street Journal has reported.
Earlier this year, Comcast launched an MVNO that uses Verizon Communications Inc.'s network, and Charter says it plans to launch a similar MVNO soon.
Verizon agreed to enter into MVNO deals with the cable operators in 2011 as part of a $3.6 billion agreement to buy access to wireless airwaves the firms owned.
Comcast and Charter already play a major role in the U.S. wireless industry thanks to their ubiquitous Wi-Fi networks, which many people have in their homes via their cable broadband internet connections. They could gain an edge on telecom rivals by marketing "quad play" service with an MVNO on top of phone, TV and broadband.
Write to Ryan Knutson at email@example.com
(END) Dow Jones Newswires
June 27, 2017 14:10 ET (18:10 GMT)