Celebrating Twenty Years
Kudos to Andrew Kreig and his staff on the great speakers and content that WCA brought together for its 20th anniversary show. The WCA show in Washington is always one of our favorites, because it has a sharp focus on intellectual content and avoids most of the "conference syndrome" where much of the air time is filled with sponsors hyping their products and services.
We heard speakers from multiple arms of government (both inside and outside the US), service providers, equipment suppliers, technologists, standards leaders, solutions providers, financial experts, and representatives from municipal and public safety. It's difficult to neatly summarize the messages from such a rich mix of interests, but here are a few quotes we found interesting:
Sprint and Mobile WiMAX -- Beyond the Technology
CTO talks generally contain a heavy dose of technology. Barry West, Sprint Nextel's CTO, gave a different kind of talk, focused largely on the business of the mobile Internet. Early in his talk, West addressed the question of why Sprint is putting several billion dollars into another mobile network, since they already have EV-DO Revision A technology and could follow its evolution path.
West says the answer is simple. The last phase of wireless growth was driven by voice, the next phase is being driven by data. For high speed data transmission to have reasonable costs, you have to go to a wider channel. To do that, you need two things: spectrum ("that's where our 2.5 Mhz spectrum comes in") and a technology that scales in a linear way. That is what OFDM does.
West made clear that he believes technology is not the main issue since "the whole industry is going OFDM." The main problem is the business opportunity. "The silver bullet", he said, "is open access to the Internet wherever you are, and in an open Internet model."
Bring Your Own Phone
"Mobile operators got into the habit of subsidizing the phone" according to West. The WiMAX ecosystem creates the possibility of getting away from this model since its standards-based chips are expected to soon be incorporated into laptop PCs in the same way that Wi-Fi is today. West went on to say: "Wouldn't it be nice to have the customer pay for the phone and I (Sprint) will pay for the chipsets that enable it". In this new "bring your own phone" model, the first time a service provider knows about you as a customer is when you turn on your device. Depending on the service provider implementation, the technology could be consumer-friendly like Wi-Fi, in that it could be accessed in an ad-hoc manner and without a subscription commitment.
West believes that the new model he describes does not relegate the mobile broadband network to being a dumb pipe. That's because once you register for their service, Sprint will know about your presence, who you are, and where you are. They can use this information to add value to their service for the customer. The challenge for this open business model will be the back office and billing to support it.
No More Walled Garden
In the hierarchy of customer complaints about wireless services, the top item is dropped calls. Right after that comes contracts, which tie you to one service provider, and with them the restriction to remain in whatever "walled garden" of content the service provider offers. West believes that in the open mobile Internet model, where the service provider is not selling/subsidizing the phones, they will no longer need to keep a customer restricted to content they provide or approve. (Although Apple's iPhone is a step in the direction of West's model, it can be used only with the AT&T network and can run only Internet-based applications.)
Where Are They?
Sprint is underway in their plans to make this vision real. Last year they started making calls on the Washington, DC WiMAX network, built using Samsung-provided commercial hardware. Samsung has been one of the early companies supporting and delivering WiBro and WiMAX and is one of the major suppliers for Sprint.
Sprint plans to launch its WiMAX service in Chicago, Baltimore and Washington DC by year-end, with full commercial launch by April 2008. Sprint's commitment to the FCC, as part of the approval of the Nextel merger, calls for them to provide coverage of 100 million POPs, using their 2.5 MHz spectrum, by year end 2008.
Subsequent to WCA, Sprint announced a collaborative deal with Clearwire for building and operating this network (see below). They also announced a deal with Google to bring their future WiMAX customers applications like search, IM and social networking.
FCC commissioner Adelstein said in his talk that Sprint Nextel had exceeded his expectations in the announced build-out plans for this coverage. It will be interesting to track how closely the actual numbers meet those that were announced.
The take-away for us from West's talk was Sprint's commitment to take advantage of the potential that WiMAX offers for openness, both with respect to customer equipment and content. As Roger Marks, longtime Chair of the IEEE 802.16 Working Group (which is developing the WiMAX standards) observed in a conversation at the show, WiMAX may offer the potential for openness, but does not require service providers to use it this way. Many operators, such as those deploying WiBro in Korea, are using WiMAX equipment--but apparently intend to maintain control of the features in the handsets and the content accessible to their customers.
Clearwire: McCaw's Next Act
Clearwire's goal is crystal clear. Their aspiration is "doing for the Internet what the cellular industry did for voice." It's a big vision. On the other hand, it comes from Craig McCaw, who did make it happen for voice. We've been covering Clearwire since its first incarnation in Jacksonville, Florida in early 2003. McCaw bought the company in April 2004, and since that time some major changes have occurred. Key among those were the $900 million investment by Intel and Motorola in July 2006 and Clearwire's switch from their pre-WiMAX (i.e., proprietary) technology to the WiMAX standard.
Why is this a big deal? At WCA, Clearwire's CEO Ben Wolff showed several charts to make the point. The key word is spectrum. Clearwire's spectrum portfolio includes 14bn MHz-POPs of 2.5Ghz, covers approximately 223M people in the US, including ~85% of POPs in the top 100 markets and rights to spectrum in 76 of the top 100 markets. Their spectrum footprint is not just in the US--they have 8.7bn more MHz-POPs in Europe, in countries including Ireland, Germany, Spain, Belgium Denmark, Poland and Romania. Add to this the major support coming from Intel's marketing machine, as well as from Motorola, and it is hard to ignore them.
Subsequent to WCA, Clearwire and Sprint announced a major plan to jointly deploy wireless broadband services across the U.S. The companies agreed to split U.S. deployment -- with Clearwire handling around 35 percent of the buildout and Sprint the other 65 percent (see News above).
Clearwire's current customers come from a variety of sources. Some are moves from dial-up but many previously had cable or DSL. Because the major advantage of Clearwire's service is portability, which users of cable and DSL don't have, almost 1 in 5 of their customers are using Clearwire’s service in addition to their existing ISP.
Wolff provided an interesting perspective at the close of his talk. He showed a variety of quotes shedding doubt on McCaw's actions: "No one expects the Company’s operations to produce enough cash flow for years. ... What worries Wall Street, says Business Week, is that the business is still a crap shoot. ...the Company faces stiff rivalry from incumbents..." Wolf then pointed out that these quotes were "from articles published in 1989 and 1990 about a company called McCaw Cellular." His point was unmistakable: don't bet against Craig McCaw--he has done this kind of thing before.
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