Among the clamor of some financial analysts for Sprint to get out of WiMAX to focus on short term strategies that would boost earnings, Sprint has issued statements that they remain strongly committed to deploying WiMAX. Many in the press and on Wall Street jumped to the conclusion that since Sprint has been beset with problems of customer attrition that has hit the top line sales and bottom line profit of the company, such that it would be quick to ax off long term development projects that some view as financially risky. We had thought that Sprint would deploy WiMAX long before their final decision to do so for a variety of reasons and that this would take a several year and billions of dollars commitment before it might fully satisfy the investment community. New generations of wireless, particularly when the object is to gain first mover advantage, are a long questioned endeavor until results are blatantly obvious. Wall Street analysts will have to learn to get over it because what Sprint is about is game changing and will set them on the course that will be played out over the next ten to 15 years as WiMAX evolves into 4G.
What Clearwire Means to WiMAX and Sprint
Clearwire is not a WiMAX service company at this time. But Clearwire does represent a directly significant development that indicates a major factor in WiMAX' success, namely the aggregation of diverse spectrum licenses into large coverage area networks. But that can be viewed as "McCaw doing what McCaw does". In other words, Craig McCaw’s historically repeated strategy has been to buy up rights to small-mid sized wireless spectrum license holders and knit them together into a wide service area served by whatever technology made sense at the time. Right now they are using NextNet/Motorola Expedience because it was available ahead of WiMAX. But Expedience is not WiMAX and it is not WiMAX upgradeable. Clearwire can transition the NN network over a period of 2-3 years to WiMAX by providing users with Motorola NextNet+WiMAX multi-mode devices that are said to now be available. This amounts to a way that Clearwire has gained early subscribers but will take an expensive replacement of existing base stations and a period of simultaneous patch-work network operation before a full transition is accomplished.
McCaw’s longer range plan (3-6 years) is to continue to aggregate spectrum, show that CW can make rend to profitability, and at an opportune point when WiMAX NGMN have developed a strong business case, sell Clearwire based significantly on appreciation of their relatively cheaply obtained spectrum. The acquisition will likely be by a large incumbent operator for several billions more than investors have paid into the company.
This continuation of a decades running 'McCaw story' is important to WiMAX because it helps set the stage for a world-wide trend in roll-up and roaming and service agreements across multiple frequency bands and multiple smaller spectrum license holders. To some extent, it does not matter is Clearwire ever shifts to WiMAX as long as they are a success in making a roll up of spectrum work for wireless broadband. There is no question that more services and more customers can be served with a WiMAX network, so a proof of principle with NN will be much more compelling with WiMAX. One of the more difficult business cases for WiMAX is as DSL/cable replacement in mature markets. What McCaw is proving is “If I can make it here, I can make it anywhere”: doing aggregation of spectrum and proving that the business plan can succeed in developed markets based on minimal network capability and available devices proves that the success of more advanced networks is certain.
Any aggregator in developed markets faces competition from 3G, cable and/or DSL and independent or other national/regional WBB service providers. This may further stimulate NextWave and others to pursue their spectrum integration efforts and bid on new spectrum auctions. And small spectrum holders, of which there are several hundred around the world, may be encouraged to develop more aggressive plans which to get funding, build networks, join roaming and service alliances and do their own roll-up acquisitions of other spectrum holders.
Where Do Sprint & Clearwire Go from Here?
Sprint has not needed Clearwire nearly as much as Clearwire could benefit from Sprint. Sprint has 90 MHz of nationwide 2.5 GHz spectrum including 90%+ of metropolitan areas. And the company has forged content and service alliances that are more easily assembled by a company of their size and which has synergistic 3G network deployments.
Sprint has not left the party entirely: Sprint Nextel president of strategic planning Keith Cowan said, "We look forward to working with Clearwire on opportunities such as roaming and standards."
Sprint is rolling out WiMAX and will provide advanced services over the next 2 years. That network will have a much different appeal to customers than Clearwire’s NextNet based services: it will have over 50 fixed, nomadic, portable and mobile devices available in 2008 including, by the end of the year, embedded laptops and ultra-portables. That will give Sprint the clear market advantage over their rivals but also opens the door wider for Clearwire to step into when it looks convenient. Do not expect Sprint to so willingly help their fellow competition unless they are equally willing to pay the cost of doing the trail-blazing work along side them.
Sprint is not a similar spectrum roll-up strategy as Clearwire. Their success would set the agenda for a new generation of wireless competition among incumbent operators and not so much set the expectations for doing spectrum roll-ups and proving the alternative network service provider growth strategy. The large spectrum holder proposition cannot be similarly duplicated around the world in a granular fashion. The Clearwire example could become a major trend for hundreds to thousands of small independents being amalgamated through acquisitions or forging larger coverage areas through agreement to provide common sets of services with attractively priced and easy to use roaming. A major cause for moving to WiMAX and all IP environments is to enable more ubiquitous roaming and always connected services including attractive location and rich media content. This does not depend on Clearwire but their example is important for WiMAX by just showing that the spectrum can be turned into a profitable business plan in itself that others then follow with more capable WiMAX enabled services.
Maravedis is aware of hundreds of operators around he world which we tract in WiMAXCoutns.com database and analyze regularly in our reports. Are others preparing to follow Clearwire and Sprint’s lead? In a word, yes. Several spectrum holders, aggregators and operators are watching, planning and starting to deploy.