Are Wedding Bells On Horizon As Comcast Launches Wireless Service On Verizon Network?

In an important tactical move, Comcast  announced on Tuesday that it will roll out a mobile phone service in 2017 using Verizon's network infrastructure. But is this relationship with Verizon a flirtation that could lead to eventual consolidation? I don't think it's a crazy thought. Here's why.

A Tactical Move

To offer wireless services, Comcast will not deploy its own cellular network, since the cost would be prohibitive. Instead, it will lease airwaves from Verizon, effectively avoiding infrastructure costs such as network integration and cell sites. The deal with Verizon allows it to sell wireless services using the telecom carrier’s network at set terms and pricing.

At first glance, it appears like Comcast is leveraging access to Verizon's network to offer its existing customers a triple-play bundle: cable, broadband internet, and now wireless. CEO Brian Roberts noted as much when he said that Comcast would focus on up-selling bundles that include wireless to its existing customers, rather than compete for new wireless customers. But there could be more to it.

A Strategic Move?

Media companies and distributors are finally embracing a vision of the future where cable and satellite will give way to mobile and internet-based video services. Research shows that younger generations primarily reach out to their smartphones and tablets to watch video, at the expense of pay-TV subscriptions.

Comcast may be acknowledging that mobile and digital video consumption are the wave of the future and responding to recent moves by wireless providers.  AT&T  acquired DirecTV and just last week launched Data Free TV, which allows unlimited DirecTV streaming on the AT&T network. Both AT&T and Verizon have made inroads into digital video services that target millennials and Gen Z's: AT&T is backing video streaming service VRV, while Verizon owns ad-supported streaming service Go90. With its acquisitions of  Yahoo and AOL , Verizon is also investing heavily in advertising platforms to monetize content.

Meanwhile, Comcast is strong in film, TV content, and digital video services. It already owns NBCUniversal, which in turn has a stake in streaming service Hulu, and it recently acquired Dreamworks Animation studio, which owns AwesomenessTV. AwesomenessTV also targets the increasingly mobile young viewer in digital social platforms like YouTube. A recent story in AdWeek reported that when millennials are watching time-shifted network programming, they choose Hulu over video-on-demand or individual networks' websites and apps, suggesting that Comcast will have a leg up in reaching this critical market.

Merger or Acquisition?

As wireless companies make inroads into making and distributing video content, Comcast is responding with inroads into wireless communication. This could lead to some innuendo between Comcast and Verizon because they seem to be a good fit for each other. Comcast is strong in cable, internet, film, and TV content, while Verizon is a leader in wireless. Their respective industry positions are complementary and potentially synergistic, while it would take enormous heavy lifting for either one to reach the other's strong position.

Moreover, they are faced with increasing competition from technology giants Google, Amazon, Apple, and Netflix. History has shown that during digital disruptions, incumbents tend to consolidate to join forces against the disruptors.

Note that Verizon also has a stake in AwesomenessTV, and some of its programming is being featured in Go90. So this joint venture into new media may also be an avenue for Comcast and Verizon to date each other. It may be far-fetched, but it's not a crazy thought. What may start as Comcast's tactical move to offer a better bundle or a strategic move to embrace mobile video consumption, may end up being the preface of a love story.