T-Mobile tried to knock the growing competitive threat they face from cable TV companies by saying their wireless service is not profitable. What T-Mobile is missing is that profitability does not matter in order to be successful or a threat. The cable television companies are very happy with their wireless performance for one reason, it creates a sticky-bundle, which helps them hang onto their customers for the combination of services including Internet, pay TV, streaming services, VoIP telephone and, yes, wireless.
Cable TV executives could respond to this T-Mobile claim by saying it really doesn’t amount to a hill of beans. After all, this is like a multi-punch fight. Each jab does not need to be profitable in order to win the fight.
And that is the strategy from the cable TV industry.
T-Mobile is now a top-notch wireless competitor. They were nearly dead a decade ago. Then with a new CEO, new thinking and one helluva marketing campaign, they rebuilt themselves from the ground up.
Today, they are one of the top three leaders in the wireless industry. They have done a great job.
That being said, they should not be trying to cut off the competition at the legs, when their argument is not valid. It makes them look weak.
Cable TV wireless does not have to be profitable, just a sticky-bundle
Years ago, Verizon, AT&T, Sprint and T-Mobile let the wireless space with post-paid services. Today, things are different. Many customers want to pay less and are looking for lower cost alternatives.
That’s why the MVNO reseller side of the wireless industry is rapidly growing. Not just the cable television services like Xfinity Mobile, Spectrum Mobile and Optimum, but many different brands like Cricket, Tracfone, Pure Talk and countless others.
Today, wireless is split into two parts. One is the network side. The other is the services offered.
On the network side, MVNO resellers strike a deal, start selling pre-paid services and become a competitor. They typically take a secondary position to direct customers with regards to access and performance during busy times, but the prices are significantly lower. This is what attracts customers.
On the services side, Verizon, T-Mobile and AT&T offer post-paid services. They get primary access to the network. But they also charge more than resellers.
That’s the choice the customer has. Pay full price for primary access to the wireless network or pay less for secondary access.
Cable TV use wireless to stabilize customer base and revenue stream
Years ago, cable television competitors like Comcast, Charter Communications, Altice and others faced a real dilemma. They were losing cable TV customers.
So, their corrective strategy was to offer multiple services and create a sticky-bundle the customer would have a hard time cancelling.
And they have been successful. Today, their customers use many different services and get discounts on the whole package.
Being all tangled up in a bundle of services keeps the customer in place and reduces loss for the company.
Cable TV primary service is Internet, wireless, VoIP and television
Cable TV has changed. It used to be just about cable television. Today, the main service is Internet. They also offer a variety of other services like pay TV, streaming, VoIP telephone and yes, wireless service to tangle the customer up in order to keep them.
Their goal is not to be profitable at each. Never has been. Like a supermarket gives away certain items every week as loss-leaders just to keep the customer, cable TV companies do something similar.
Wireless is a loss-leader for the cable television industry
So, think of wireless as a loss-leader for the cable television industry. They don’t have to be profitable in wireless as long as they are on the whole.
I know what T-Mobile was trying to do. They were trying to cast a net of doubt over the cable television industry with these comments. This is the same strategy they have been using over the last decade.
However, in the beginning it was needed. They needed to punch their way onto the map. Back then, T-Mobile was not trusted by the marketplace.
Today, things are different. Today, they are winning in the competitive battle. Now is the time to throttle back on these kind of outrageous claims in order to keep their position in the marketplace.
Cable TV in wireless is doing just fine.
Whether their wireless services are profitable or not is not the question. The real question is, are they a growing business with a solid customer base. And to that, the answer is, yes.
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