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ARTICLE
By Jeff Orr, Senior Analyst - Consumer Electronics
The United States fancies itself as a leader in new technology and services. Many network operators became frustrated in 2006 at other countries becoming the first to offer WiMAX Forum Certified equipment for fixed and stationary deployments of broadband wireless. Now, two public operators—Sprint Nextel and Clearwire—are abandoning plans to accelerate a nationwide Mobile WiMAX footprint. This has the broadband community questioning the nation’s ability to compete in the mobile Internet frontier this decade. Let’s examine the opportunities for Mobile WiMAX network deployment in the US. For consideration as a potential US player in the deployment of Mobile WiMAX services, a network operator must own sufficient licensed spectrum to establish a regional or nationwide service footprint, deploy an IP-based mobile network across that service area before 2010, and have a business plan that attracts average revenue per user (ARPU) at or above the current rates for mobile voice services. Sprint and Clearwire are the two companies who meet these criteria. Before the letter of intent (LOI) was signed by Sprint and Clearwire this past July to jointly launch Mobile WiMAX services, each company had laid forth its separate plans for Mobile WiMAX. Clearwire—the largest wireless ISP in the world, with over 300,000 US subscribers—has an ongoing trial in Portland, Oregon with Intel and Motorola. It covers 145 square miles and more than 40 towers. The company recently launched a Motorola Expedience PC Card in all of its markets to complement the proprietary Expedience desktop modem. Sprint has been quite vocal about the launch of its Xohm service, based on Mobile WiMAX technology, with trials to occur in Baltimore / Washington DC and Chicago during 2007, a commercial launch of those markets in the first half of 2008, and a total deployment reach of 100 million points-of-presence (POPs) by the end of 2008. An additional 20+ markets beyond the initial trials have been identified, and agreements are established with infrastructure and device suppliers. The joint network would have split up the deployment responsibility while establishing a roaming agreement for subscribers between the two networks. Sprint would have had the majority of market responsibility—about 70% of the target markets, with Clearwire having the rest. Clearwire could have also gained from the relationship by leveraging the knowledge of mobile operations and device experience gained through Sprint’s Virginia-based test labs. In support of the joint network, Clearwire postponed plans to introduce services into several spectrum holding markets. The relationship also eased pressure from Sprint shareholders looking for an explanation on how 100 million POPs could be achieved so quickly. After announcing that the LOI had been abandoned, both companies stated that they intend to continue dialogue and explore other ways to collaborate. Subscriber roaming agreements or spectrum leases are certainly possible. In the near term, Clearwire has more to gain from a new Sprint partnership. Since the current Clearwire network is based on proprietary equipment, Sprint obtains little value from the current Expedience subscriber network. The value of Clearwire’s network increases for Sprint when new and current markets establish a presence using Mobile WiMAX gear starting in 2008. On average, Clearwire needs 12-18 months to launch a new market, meaning that plans for new markets post-LOI will not impact their revenues until 2009. The delay may incentivize Clearwire to consider spectrum leasing and partnerships in smaller markets. Sprint must learn to live within its means: reverting back to its nationwide Xohm coverage plan, while setting realistic expectations for capital expenditures and subscriber growth. Supply agreements for infrastructure and devices remain in place. Demonstrating success in the first test markets is essential for credibility in 2008. What’s next for each operator? Clearwire has a significant installed base utilizing some of their 2.5 GHz spectrum holdings. The current Clearwire network deploys a product line not upgradeable to IEEE 802.16 or qualifying for WiMAX Forum certification. Quick decisions on what technology (Expedience or WiMAX) will be utilized in new markets over 2008 and 2009 are needed along with a migration strategy for their initial markets. Clearwire executives say that Q1 2008 will kick off marketing campaigns in their current markets to deepen penetration and start promotion of the PC Card service. Sprint has ordered more than 1,000 base stations from its infrastructure partners—Samsung and Motorola. The operator remains committed to its trials in Baltimore / Washington DC and Chicago, leading to a commercial launch, which Maravedis expects to remain targeted for April 2008. The third infrastructure partner, Nokia, will see its first trials in five Texas cities during the first half of 2008, though not considered to be part of the initial commercial launch. While Maravedis believes that 100 million POPs can still be achieved, the Sprint milestone will not occur in 2008. Performance in the trial markets, along with the company’s ability to replicate build-outs in subsequent markets, will determine when that capability is reached. The cancellation of the joint network launch does not spell the end for Mobile WiMAX in the United States. The opportunity for Mobile WiMAX services in the US still rests with Sprint and Clearwire. Both operators had significant plans before the joint network vision and continue to have their own, separate plans today. Clearwire, who had the most to gain in the partnership, has the most catching up to do on its own. Sprint’s aspirations for nationwide coverage will occur, but not in the originally prescribed timeframe. For more information you can contact the author: jeff@maravedis-bwa.com
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