Why Sprint is bullish on its WiMax gamble

Sprint Nextel Corp. calls it a vision; others call it a gamble.

Sprint announced in August that it is building a US$3 billion nationwide mobile WiMax data network. It said it will start offering the network, which will be faster and cheaper than its existing 3G EV-DO (third-generation Evolution Data Optimized) cellular data service, to users by the end of next year.

While Sprint claims that its vision for this network is compelling, many industry analysts and observers question whether it will attract enough customers to be successful. The skeptics also say the new network is redundant to Sprint's 3G network.

"The WiMax effort is something Sprint could win very large at," said Derek Kerton, principal of The Kerton Group, a telecommunications consultancy. "Or it's something they could lose very big at. If they succeed, it's something no other carrier in the U.S. can replicate."

That's because Sprint inherited the wide swath of wireless spectrum on which it is basing its network when it merged with Nextel in 2005. None of its competitors has nearly as much spectrum, so if Sprint's WiMax network succeeds, those competitors won't be able to match it.

That's one of many reasons that Sprint is bullish about its WiMax network. Computerworld spoke with Peter Cannistra, Sprint's director of mobile broadband strategy, who acknowledged that the company is taking a gamble, but said it is certain the gamble will succeed. He also discussed the impact of the network on enterprises and whether it will conflict with Sprint's 3G network.

How much of a gamble do you think your nationwide WiMax deployment is? It's true that there is no business case that has no risk. But we view this more as an opportunity than a gamble, the opportunity to be first to market with a true wireless broadband, multidevice value play for the consumer. We think we have a tremendous time-to-market advantage. The analogy is that we see there's a $10 bill on the ground, and we're going to get it before anybody else.

Given your spectrum situation, though, nobody else could pick up that figurative $10 bill. Our risk mitigation is our spectrum situation, yes. That and the choice of WiMax and the powerful ecosystem of world-class partners. So, again, we see this as a tremendous opportunity in which we we have tremendous advantages.

What is the network rollout schedule? We'll have two markets by the end of 2007. They'll be top-10 markets. The network will cover 100 million people by the end of 2008, and 170 million people by the end of 2010. We have the option to accelerate that if the market supports it.

How hard will this network be to deploy? Can you simply slip cards into existing cellular base stations? We have several advantages. We have the Sprint and Nextel cell towers to choose from to collocate the WiMax equipment. In every case, it'll be a new base station at the cell site itself. But we think with the large number of cell sites we have now, we have a pretty good advantage.

The nature of the spectrum of 2.5 GHz means we'll need a greater number of cell sites to cover the same area compared to our current cellular voice network. We're aware of that, but the business case is still very profitable even with the increased number of cell sites.

When you say profitable, what will it take in terms of numbers of subscribers to make the WiMax network a success? We're confident a mass market, value-priced wireless broadband offering will attract a large number of customers. We'll market to the mass market. We'll see price points and device prices that are conducive to mass-market appeal. The wireless broadband offering -- having a truly mobile broadband connection with a nationwide footprint -- will be hard to match. We have a high level of confidence that this will be very successful.

What are you looking at for numbers of subscribers? We haven't been public about that. That's more for internal analysis. But we have a high expectation for numbers of customers, and we're confident we'll get that. The amount of spectrum we have allows for a very efficient network, so we'll have an ocean of capacity. That's how we'll offer high broadband speed to a lot of customers.

Are you competing against regional Bell operating companies and their land-line broadband offerings? Just like some customers have been abandoning landline voice service if they have a cellular phone, it may happen a little. Some people will want to take their connection wherever they go. But the emphasis of our business case is mobile broadband in a wide array of consumer electronic devices.

To what extent, then, will the WiMax network be redundant with EV-DO? We think it's complementary. We think Sprint will offer a number of solutions to customers. EV-DO will provide a handset experience that is robust and nationwide. WiMax as a complement to that will offer much higher speeds on many different devices.

Say more about what you expect the applications to be for each technology. There will be some overlap. We expect there to be some handsets with WiMax capabilities. But certainly, the thrust (for WiMax) will be more and different types of electronics devices, including laptops. I don't want to underemphasize the laptop presence. We'll have a high number of laptops, which clearly are a perfect application for WiMax. People value portability. We think it makes a lot of sense for a high number of laptops to have WiMax embedded in them similar to the way Wi-Fi is embedded. You can't buy a laptop today without having Wi-FI embedded in it. In addition to notebooks, we expect a high number of consumer electronics devices will be embedded with WiMax.

Then why would somebody buy an EV-DO phone? EV-DO will have features conducive to the handset voice experience like push-to-talk and mobile voice-over-IP. So it'll be more voice-centric. If you had a high-end multimedia application like TV or a large number of audio files to download, WiMax would make sense. For nonvoice, data-centric entertainment devices, WiMax would make more sense.

Sprint and the other cellular carriers are pushing media applications like audio and TV for their EV-DO networks. Would those applications be shifted over to WiMax? We will want to transfer a lot of that traffic to WiMax. On a per-megabyte basis, those applications make sense on WiMax. But a lot of devices will be dual-mode EV-DO and WiMax.

When EV-DO was rolled out, it was touted as mobile broadband. Now it sounds like Sprint is moving EV-DO back to the voice realm. It will be device-centric. There will be more EV-DO handset voice devices than WiMax. So there will be certain devices and applications that EV-DO is well-suited for and certain applications that WiMax is better suited for.

You mentioned that EV-DO might be a good fit with VoIP. Wouldn't WiMax be a better fit? For stationary VoIP, there will a WiMax solution when we launch. To provide a truly mobile experience, we think our EV-DO CDMA [Code Division Multiple Access] network will be a superior voice network into the foreseeable future. For push to-talk and voice over IP, CDMA will be the way to go. EV-DO Rev A will be used for push to talk. It'll be a nationwide superior network for push to talk.

So you won't be using the existing cellular network for push-to-talk anymore? Correct.

What about point-to-point calling? For point-to-point calling, VoIP over WiMax could be a solution.

Wouldn't that eventually erode revenues from cellular minutes? The scenario of walking down the street and talking will be clearly superior on the CDMA network. The handoffs from cell site to cell site in a data session, there's some latency that's invisible to the data user. The latency has to to be very short, though, or it will be noticed in a voice session. With CDMA, you don't notice. With voice [over WiMax], you will. CDMA will be a much better experience.

What will the speed of the WiMax network be? On average, we'll have between 2Mbit and 4Mbit/sec. when we roll it out. We see WiMax being three to four times as fast as any 3G network.

What are the implications to the enterprise of this new network? We think that anyone or any device that uses broadband today will greatly benefit. Imagine the T1 line in an office; you can bring that wherever you are [with the WiMax network]. In addition, we'll have industry solutions specific for real estate agents, insurance agents, public safety and so on that will exploit the wireless broadband connection.

So this isn't just a consumer play. Absolutely not. There's video conferencing, video chat, high speed file transfer, picture and motion video transfer on a real-time basis wherever you are.

How will this network coexist with citywide Wi-Fi networks that some cities are starting to sponsor or install? In a metro area, we'll have total metrowide coverage. City Wi-Fi proposals I've seen are more like lots of hot spots. We view the difference in coverage to be significant. For true metro coverage, we think WiMax will be superior. We think there is a place for those municipal-based broadband networks, but they'll always have the potential for interference and competition since it's unlicensed spectrum. WiMax can guarantee a quality-of-service level that can't be done with Wi-Fi. It also has a level of security that can't be done with Wi-Fi.

So would you advise municipalities to wait? Those municipal-based Wi-Fi areas will exist just like there's always public transportation. Public transportation services a critical need. But there's also a big demand for privately owned automobiles. I don't think Ford considers public buses a competitor. It'll be the same in our case.

What about pricing? Broadband prices have come down. We'll have the ability, given our less expensive per-megabyte network costs, to offer value pricing aimed at the mass market. Specific pricing strategies haven't been determined yet, but we're going after the mass market.

Is that to imply that EV-DO isn't priced for the mass market? I think you'll see such a number of devices and device categories [with built-in WiMax support] that it'll be a much larger number of devices than EV-DO. Plus, we'll pursue a strategy of multiple devices per account that will be attractive. Imagine your laptop, your personal video player, all these devices, all being accessible from a single account with a single device portal. It'll be very easy and very user-friendly.

Sprint has pursued a strategy of working with cable carriers. What type of bundling can we expect after the WiMax network is rolled out? We see a lot of services and applications that will exponentially increase in our ability to bundle services together.

Will it be possible that a user could, with one bill, get connectivity wherever they are? Absolutely. Depending on the device and where you are, you may not even know which technology you're using. It's all there, and the devices just work. You don't have to worry about being in a hot spot or whatever. It goes beyond the ease and simplicity of just one bill.

Since Sprint will be the only carrier, at least initially, with a large-scale mobile WiMax network, do you think device carriers will spend the time and money to embed WiMax into their devices? We think there'll be a big demand for these devices. If the device companies share the vision we're promoting, we think they'll do it. The chip cost will be low. It's true there will be engineering and one-time design costs. But the ecosystem allows the device manufacturers a pretty low barrier to entry.

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