Cablevision sets sights on mobile carriers with Wi-Fi-only service

Cable giant Cablevision plans to take on cellular providers with an upcoming all-Wi-Fi mobile phone service, the company announced Monday.

Dubbed Freewheel, the Wi-Fi-only service will allow people to place calls, send text messages and surf the Web whenever they're connected to a Wi-Fi network, including Cablevision's 1.1 million Optimum Wi-Fi hotspots. Freewheel, which will have no access to cellular networks, is set to launch next month.

The decision by Cablevision to get into the mobile business is somewhat surprising. One of the major barriers to entry for cable providers is access to cellular networks. Since Cablevision has no cell towers at its disposal, the company cannot provide the same level of service one would find on a 4G LTE network from Verizon, AT&T or other carriers.

Cablevision's no-contract service will not default to a carrier network in the event Wi-Fi isn't available. Whenever customers are away from a Wi-Fi connection, they will essentially have a smartphone that doesn't work.

For now at least, the Motorola Moto G is the only product that will work with Freewheel, and Cablevision will sell the smartphone for $99.95. A company spokesman said that Cablevision does not have an exclusive partnership with Motorola, which implies that Cablevision -- whose service area includes New York, New Jersey, Connecticut and Pennsylvania -- has the potential to expand its hardware portfolio in the future.

Despite the limitations, Freewheel will be notably cheaper than standard cellular service, coming in at $29.95 per month for unlimited data, talk and text. Those who already subscribe to Cablevision's Optimum Online for broadband will pay $9.95 per month for Freewheel.

Freewheel, while apparently the first such service from a cable provider, is not the first Wi-Fi-only offering. Earlier this month, FreedomPop, whose service runs on Sprint's network, announced a Wi-Fi-only plan for $5 per month that connects to 10 million hot spots.

Cellular providers have turned up their noses at the idea of Wi-Fi-only services, but it's not such a far-fetched concept. About 80 percent of all data traffic on smartphones travels through Wi-Fi networks. Free access to Wi-Fi networks is also becoming more widespread, which could make the sales pitch for a Wi-Fi-only device even stronger.

Still, not everyone is sold on the idea that Cablevision will have an effect on the market. Industry researcher Craig Moffett at MoffettNathanson Research said Monday that it's unlikely Freewheel will make a dent.

"With a footprint that covers just 4 percent of the U.S., and a service that will have limited appeal because of its lack of cellular backup, this service isn't going to have much impact on the wireless companies, nor will it generate enough revenue for Cablevision to be material," Moffett said.

How about you, Google?

At the same time, Moffett said, Cablevision's service could become a proof-of-concept that then would attract other companies to a potential opportunity.

Google, in fact, may be banking on this very concept. The Internet giant is currently considering offering a service that would partially rely on Wi-Fi networks to handle calls, texts and data, according to The Wall Street Journal, which cited people said to have knowledge of its plans. But unlike Cablevision's offering, which is Wi-Fi-only, Google envisions its service finding the best signal to handle a user's needs by allowing devices to connect to Sprint and T-Mobile networks, as well as to Wi-Fi.

Google's platform-agnostic move would launch nationwide, the sources told the Journal. It could be available in the first half of this year, though an exact timetable has not been approved. A report last week suggested it won't be available until 2016.

If nothing else, the prospect of other companies joining the mobile fray in new ways suggests that upheaval in that industry will continue this year. In 2014, battles erupted among the major carriers as they tried to one-up each other with changes to plans, data charges and more. T-Mobile was arguably the most active change agent in 2014, announcing a wide range of initiatives under its "Uncarrier" strategy. That resulted in significant subscriber gains for T-Mobile.

One of the companies that may take notice and decide to enter the marketplace is cable giant Comcast, Moffett said:

A WiFi-first service, particularly if (when) offered by Comcast, which has a vastly larger footprint and marketing capacity, has the potential to attract a meaningful number of customers if priced aggressively and could be enormously deflationary for the traditional cellular providers. Coming on the heels of Google's entry into the wireless business, and today's disclosure that Google will indeed have least-cost dynamic routing that will play off WiFi, Sprint, and T-Mobile on a call-by-call and/or session-by-session basis, Cablevision's Freewheel is one more straw in the wind. The wireless business is in a tough spot (dare we say, deflating faster than a football in New England?).

Google declined to comment on the report.

Update 11:42 a.m. PT to include the comments from Cablevision.