By Liana B. Baker
NEW YORK (Reuters) - Comcast Corp is giving at least two Asian cellular operators access to its WiFi hot spots in the United States, in trial partnerships that illustrate the cable company's ambitions to compete with U.S. wireless carriers.
The deals with Japan's KDDI Corp and Taiwan Mobile Co Ltd allow their subscribers to use Comcast's WiFi hot spots when they travel to the United States, reducing the international roaming charges that they would otherwise have to pay, according to a Comcast spokesman.
Comcast has been steadily building out its WiFi network and said last week that it aims to have 8 million hot spots by the end of the year, covering 19 of the 30 largest U.S. cities. The No. 1 U.S. cable company is also seeking U.S. regulatory approval to buy Time Warner Cable Inc, which now has 34,000 WiFi hot spots.
If the merger is approved, the combined company would have a nationwide footprint that could potentially challenge the dominance of U.S. telecom giants Verizon Communications Inc and AT&T Inc, an idea that Comcast floated in an April 8 regulatory filing touting the deal's benefits.
Since that filing, investors have been trying to figure out what Comcast and other cable companies might be planning do in the mobile market. The topic came up frequently in the latest round of quarterly earnings calls.
Cable is "well positioned to enter the wireless voice and data market with costs that are lower than those of existing wireless carriers," New Street Research analyst Jonathan Chaplin said. "This could be truly disruptive, with grave implications for new entrants and established wireless carriers alike."
Comcast has adopted a more cautious tone. "We view WiFi and cellular as complementary. There are many different situations and applications where consumers may prefer one or the other," said Tom Nagel, Comcast's senior vice president and general manager of wireless services.
Comcast has not disclosed how much it is charging KDDI and Taiwan Mobile in these deals, which were signed earlier this year. The amounts are thought to be small since WiFi data fees are typically much lower than wireless data charges.
A representative for Taiwan Mobile confirmed the Comcast partnership and directed Reuters to a website promoting the offer to its subscribers. The website said subscribers normally pay T$4 per minute ($0.13/minute) to use Comcast WiFi, but a promotion lasting until the end of June this year cuts that to T$2 a minute ($0.07/minute).
A representative for KDDI said "our aim is to expand WiFi network range in the United States for KDDI users."
U.S. pay TV and phone companies are casting around for new business models amid sky-rocketing growth in mobile Internet use. Satellite TV provider Dish Network Corp has spent billions of dollars on wireless spectrum, and DirecTV is working with financial advisers on a possible merger with AT&T.
Even though cable WiFi networks are a potential competitor to wireless networks, Comcast's Nagel said he believes cable and telecom companies could partner to make sure customers' devices can more easily move between their networks.
"One day it should be that Sprint, or any wireless carrier, and Comcast can identify each other's devices and networks. For example, Sprint's device finds a Comcast access point and says 'Hey, I think I can get on your network," Nagel said.
Building a wireless network from scratch is something cable companies considered over the past few years but never committed to due to the high costs involved.
One advantage cable companies have is a large amount of fiber wire in the ground, known as "backhaul," which they already rent out to wireless companies to handle data traffic.
While cable companies have bought and sold wireless spectrum before, analysts say the quickest way for a cable company to get into the cellular market would be to rent airwaves from wireless companies through a mobile virtual network operator agreement, or MVNO. Such an agreement would give cable companies wireless cover for areas outside the range of WiFi.
New Street Research estimates that Comcast, which already has MVNO agreements with Verizon and Sprint, could capture about 6 percent of the retail wireless market within five years after its acquisition of Time Warner Cable.
(Additional reporting by Marina Lopes in New York and Michael Gold in Taipei; Editing by Tiffany Wu and Tom Brown)