Maravedis: Sprint-Clearwire negotiating amid industry shifts

By: Robert Syputa, Partner & Strategic Analyst MaravedisClearwire has pulled back on TV and other broad media advertising. Meanwhile they are showing up almost everywhere in Web ads that target the Technorati. Clearwire ads appear on Google Android developer sites, wireless and computer industry e-zines, and even on sites of the "competitive camp" such as Apple iPhone/iPad oriented sites.

The "tech crunch" for Clearwire is that the service appeals to tech geeks and those who tend to closely follow technology and product trends. Particularly, this group of users is generally more oriented towards the value proposition and bandwidth that Clearwire offers. Given that Clearwire and Sprint remain in the process of resolving their disagreements over the role the former will play and details of compensation going forward, Clearwire appears inclined to use a rifle shot rather than broad pattern shotgun approach to hunting for new subscribers.

Technorati are a core target for new generation product and services: besides a higher degree of conversion and multiple service provider market opportunities, these early adopters help influence decisions more broadly. We have taken issue with Clearwire's deployment and market approach in the past; despite fielding a technology that departed from the dominant development camp, Clearwire has not done much out of the ordinary, preferring to deploy macrocell networks and market in much the same way as their larger competitors. While this fits the tone of Sprint and other incumbents, retail sales and network performance, in our opinion, have continued to leave room for improvement. 

By targeting the Technorati, Clearwire is appealing to the same element of society that helped make Wi-Fi a huge success. However, neither the WiMAX camp in general nor Clearwire have taken advantage of a similar form of viral adoption mechanism that led to Wi-Fi's rapid growth and key market advantages. Clearwire hasn't given the community much help in terms of devices that can be easily modified, such external high-gain MIMO or directional antennas that some geeks like to play with to show off their skills and gain practical benefits. That third party enhancement can cause interference issues but it could also have led to greater adoption by self-starters.

When and where will operators finally take advantage of smart distributed WBB networks? 

Operators are eager to exploit the ad-hoc nature of the Wi-Fi space: in recent news China Unicom (or was it China Telecom) plans to deploy tens of thousands of Wi-Fi hotspots to supplement TD-SCDMA 3G). But they are loath to go beyond that and introduce viral contagion into the sacred turf of managed networks... at least not yet or until the managed nodes technology springs out from the standards.

Clearwire, a cash strapped amalgamator of "wireless broadband" spectrum, has much to gain by the evolution of wireless networks to advanced network topologies. The company is caught in a tough spot for the time being: The economy and competitive nature of the market has led to a lack of enthusiasm for acquisition or partnering to develop their 2.5-2.6 GHz band. Although the broadband network demand trends are proving to be increasingly favorable, the billions of dollars needed are not sloshing around so freely these days. T-Mobile/Deutsche TeleKom could benefit from a match of spectrum in Clearwire's higher frequency band, but appear reluctant to commit.

Sprint has laid out general plans to evolve their networks and work with Clearwire that fit what I've suggested in past reports, articles and posts: "The best spectrum is multiple bands--‘purpose use of spectrum.'" Radio technology and components have advanced to be able to support multi-carrier operation. There are differences regarding how that can be implemented--two or more networks can use the same technology and base stations/nodes that support multiple frequencies. What is new about this is WiMAX 2 or LTE-Advanced networks can use the same ICs that use the same basic MAC and PHY layers, thus achieving efficiency over today's multiple mode devices and base stations. However, that is just a start; while simple multi-mode LTE or WiMAX+LTE networks would be "all IP" and could hand-off from one frequency to another seamlessly, it is also possible to use multiple frequencies simultaneously or on a rapidly switched basis. The trade off would be higher power consumption and need for the devices to support multiple radio streams. While that may not be the immediate objective, this is one of the ways wireless will evolve in the not too distant future.

Sprint CEO Dan Hesse recently told FierceWireless that their "Plan A is together with Clearwire, but we do have a Plan B." Hesse continued, "If we don't reach agreement, we will go and do our own thing." While Sprint can opt to lessen their reliance on Clearwire, it is very unlikely they will do so to such a degree that Clearwire is not a major part of their future network capacity growth. Clearwire provides the growth into high-density deployments that is necessary to the vision of SDWN and ICT defined IMT-Advanced ‘true 4G'. 

This recent interview fits with our 2006 predictions that Sprint would deploy LTE.  More recently we suggested that deployments beyond pilot projects would be 18 months or more in the future, which is in the ball park with Hesse's recent statements. Our thinking fits what is now being disclosed: Sprint is now focused on network upgrades and conversions that will better pave the way forward. This would have been the case, timing being a bit in flux, regardless of whether the next generation network were WiMAX or LTE. The similarities in end markets, network infrastructure and, more recently, device migration paths, conspire to make the choice between WiMAX and LTE less important. The shifts of billions in revenue that accrue to developing a market leadership position help to offset the generational shift in networks from iDEN and EV-DO and as a multiple-mode device driven trend.

Robert Syputa is a partner and strategic analyst with Maravedis. Maravedis is a leading analyst firm focusing on 4G and broadband wireless technologies and markets.