Complement or Competition? | April 20, 2007

If 2007 is, as some have suggested, the year WiMAX enters the telecom fray for real, then Sprint Nextel is carrying the banner onto the battlefield. With plenty of 2.5 GHz spectrum and the initiative to use it, the carrier could change the telecom landscape.

“Our model was never to invalidate cellular; it’s really to create a new experience called the mobile Internet separate from cellular.” Atish Gude, senior vice president of Mobile Broadband Operations in Sprint Nextel's new 4G Mobile Broadband business unit on the WiMAX opportunity

In March, Sprint Nextel made simultaneous and contradictory announcements about its broadband wireless strategy. The carrier reinforced that it would launch WiMAX this year via a thick swath of 2.5 GHz spectrum it owns (even going so far as to call it 4G) and expand service into a total of 19 metro areas by 2009.

At the same time, Sprint reiterated commitment to its Pivot JV (joint venture) with cable MSOs Advance/Newhouse, Comcast, Cox Communications and Time Warner Cable (TWC) to develop and share 3G technology.

While Sprint’s decision to call WiMAX 4G ruffled feathers within the 3G crowd, its decision to pursue its own more advanced broadband wireless initiative while continuing to work separately with the cable industry had many industry heads shaking.

“The (Pivot) product is a combination of services that we have available from the existing plants of all the partners. We have digital phone, video and broadband (from cable), and we brought that together with the wireless products from Sprint,” said Kevin Packingham, vice president of marketing and development at Sprint Nextel. “We’re hoping to create a unique customer experience, so they’re experiencing wireless [as] an extension of what they have available in the house.” (See http://www.telecommagazine.com/search/article.asp? HH_ID=AR_3062&SearchWord= That, said David Chamberlain, principal analyst for wireless at In-Stat, is a noble goal, but it’s seemingly not shared by the cable partners.

“I’m not getting really warm feelings about that,” Chamberlain said. “Comcast has about a third of the U.S. subscribers and half of the subscribers in this joint venture, and they are lukewarm at best as far as their attitude toward the whole thing. Nothing is going to happen unless the cable companies are actually doing something.”

The cable companies are doing something, said Mike Roudi, vice president of wireless at TWC, speaking during a panel session at CTIA. TWC is hosting two of the initial JV test markets, in Raleigh, N.C., and Austin, Texas, where it is offering rudimentary services like a single voice mailbox between wireline and wireless accounts and e-mail that crosses over to the wireless device from the TWC broadband service.

It’s not, he said, true FMC (fixed-mobile convergence), despite the early promises the JV would pursue that course, but then again FMC is a difficult thing to define.

It’s “a little less about selling a quad play [and more about] how we add mobility to the existing platform,” Roudi said.

The end game—and the way the JV partners approach it—is in sight, said John Garcia, president of the JV.

“We all have a very common view of what convergence is,” he said. “The partners all have the same mentality of what we’re trying to do … giving customers access to the things that are already important to them.”

Chamberlain finds the pace disappointing and restricted, especially considering the wealth of unique content cable holds. “The video component is just not there. To me that was going to be the key; that was the interesting thing, but nobody is looking at that with any kind of seriousness,” he said.

Sprint Nextel’s WiMAX solo act is another indicator that the JV isn’t what it could be and might never be, he said.

“Initially I saw [WiMAX] as part of this JV, and they don’t seem to be converging that. I saw this as a beautiful convergence; we have the WiMAX, and now you have broadband in the home all marketed through the cable companies. It’s a beautiful piece; low cost for Sprint, low cost for customer acquisition. It looks terrific, but I don’t hear anybody saying they want to do that.”

“Our cable partnership gives them access to the portfolio over time,” said Atish Gude, senior vice president of mobile broadband operations at Sprint Nextel. “The right business model and the right relationship have to develop.”

For now, those haven’t developed and Sprint Nextel is building its own broadband bridge with a WiMAX play that can deliver respectable mobile speeds of 2 Mbps to 4 Mbps and up to 5 Mbps to 7 Mbps when stationary or portable.

“On some level it will compete with 3G if the voice part works out well; it will compete with 3G if the data rates are there and the mobility is there from day one and the pricing is right,” said Peter Jarich, principal analyst for wireless infrastructure at Current Analysis. “It will compete with cable if the speeds are there from day one and it’s a device that you actually want and the pricing makes sense.”

Lots of “ifs,” but that’s how the WiMAX trial will shake out, Gude said. The nationwide launch ultimately will cover 100 million POPs (points of presence) in every geography with WiMAX blanketing the cities and 3G EV-DO Rev. A filling the void in areas outside the WiMAX cloud. “The WiMAX coverage will be greater-metro-to-greater-metro under main cover POPs through 2008 and beyond,” Gude said. “As we grow over time the networks will continue to get better, and at that time we’ll have fixed, portable and mobile [WiMAX] by default. … really defined by the kind of device you’re using.”

The launch initially will not include mobile voice which is problematic from both standards and device perspectives, so what Sprint Nextel is proposing sounds an awful lot like high-speed cable data or DSL—only more convenient and portable. At the very least it would seem to wipe out the mushrooming group of metro Wi-Fi deployments, but, again, Gude is careful to avoid anything that smacks of market dominance. “When we launch, it will have Wi-Fi in it. In the short run, we believe consumers will want to use WiMAX as well as Wi-Fi,” he said. And in the long run?

“The model to support metro Wi-Fi has, is and will continue to be a problem,” he said. “It looks great on PowerPoint, but it has been very difficult to architect. If WiMAX works the way it does, why do I need to deploy Wi-Fi?”

To help WiMAX take off, Sprint Nextel is encouraging chipmakers like Intel to build WiMAX silicon aggressively for portable devices which will go everywhere—literally. (See http://www.telecommagazine.com/search/article.asp? HH_ID=AR_3040&SearchWord=) “If it’s in the laptop and it works out really well, then, when you come home, you may not switch over to your Wi-Fi connection,” Jarich said. “It’s too early to tell how these are going to be complementary vs. competitive, but it’s fairly easy to say on some level they are all going to compete with each other.”

While this may seem to betray the cable JV, any individual or two— there’s unlikely to be more—ready to shed a tear for the MSOs should consider that cable, too, is not staying within the bounds of its partnership.

The JV members bought their own swatch of 1.7 GHz spectrum, which, while it could be used for WiMAX, is more likely an entry point into cellular. Also, there’s been no blanket denial that cable won’t participate in next year’s 700-MHz spectrum auction, buying bandwidth which would be more appropriate for WiMAX.

In fact, it would surprise no one if cable wasn’t using Sprint Nextel to learn about wireless before setting out on its own—a la what it did with the @Home Network high-speed data service in the late ’90s.

“I found it very intriguing [that] when I did get to talk to somebody at Cox, I spoke to their VP of wireless,” Chamberlain said. “Why does a cable company have a VP of wireless?” Of the legendary four Ws and H, that W—for “why”—is perhaps the most vexing.

The “who” is Sprint and its cable partners; “when” is this year; “where” is multiple cities throughout the U.S.; “how” is via 3G and WiMAX. “Why” it’s shaping up the way it is only the participants know. “People are looking at Sprint; they want to know what Sprint’s up to,” Jarich said. “Vendors want to know how to get part of this. Operators want to figure out if they have to compete with them. Other than that, they’re trying to figure out if they’re committed to it—what Sprint is going to do and what they can do.”

“I have to take them at their word that they’ll build out the networks on the timeline, get up some interesting services … at this point because they made so many promises and they repeated it so many times, they’re going to have to have those networks up at the end of the year and go for some new and interesting services,” he said. Sprint, Gude said, is planting both feet in different spaces as it prepares to move forward.

“We’re focused on building 3G business today (with the JV), and at the same time we are focused on building our 4G business separate on WiMAX,” he said. “Our cable partnership is focused on using the tools and the capabilities that we have available today to prove out and drive that business model.”

“We have a vision about the mobile Internet,” Gude said. “Our model was never to invalidate cellular; it’s really to create a new experience called the mobile Internet separate from cellular. If I combine it with a home and away package and allow people to experience the Internet on multiple electronic devices—really portable electronic devices—having that connectivity to experience the Internet is the sweet spot.”