Sprint and WiMax: Are these guys serious?

Yes, I know Sprint's serious about WiMax -- it's spending more than $2.5 billion to build out a mobile WiMax network across the US. That's old news. The surprise to me is the business model Sprint says it'll deploy on that network. That hasn't gotten much coverage at all, but I think it's critically important. If you believe what Sprint says, its WiMax network will be totally open: any device, any application, without any contract required.

When I first heard Sprint describe that business model, in a panel discussion late last year, I felt like I ought to pinch myself. Did he just say that? I thought. Did a VP at a US carrier really say that?

He said it. What I'm not sure of is whether Sprint has the will and persistence to see it through. If they do, I think the Sprint WiMax network might be very special indeed.

Background on WiMax and Sprint

WiMax is a marketing name for 802.16, a wireless broadband communication specification. Some people call it WiFi on steroids, and although there are some significant technical differences, that's a reasonable way to think about it. WiMax promises to provide about 10 megabits per second of upload and download, at a distance of 10 kilometers from a base station (although Sprint has said that the real-world throughput will probably be more like two to four megabits per second download and half a megabit per second upload).

There are a lot of different frequencies on which WiMax can be deployed. Sprint owns rights in much of the US to the 2.5 megahertz band, which is considered to be very good for deploying WiMax because it has relatively little interference and because the signals carry well at that frequency. From what I've read online, it's possible that some unlicensed spectrum will also be used for WiMax (so you won't have to pay anyone to use it, like a WiFi base station), but if that happens it's likely to have more interference and shorter range. Unfortunately, WiMax is likely to be deployed on different frequencies in other parts of the world. I presume we'll end up with multi-frequency radios (just as we have for GSM today), but that sounds messy.

In summer of 2006, Sprint announced plans to build out a nationwide WiMax network in urban areas across the US. Motorola and Samsung were listed as key equipment suppliers, and Intel as a chip supplier.

Some other companies also own WiMax related spectrum, most notably Craig McCaw's new company, Clearwire. He has already raised about $1 billion from investors including Intel, and is planning an IPO for another $400m.

(Intel is a consistent theme here, and some of the people I've spoken with fear that Intel will end up dominating WiMax the way it did PC microprocessors.)

If you want more details on WiMax, Wikipedia has a good article. There are some other interesting tidbits here.

The panel

The setting was a Churchill Club evening forum on WiMax. On the panel were senior execs from four companies: Qualcomm, PacketHop, Motorola, and Sprint.

Qualcomm is widely seen as an opponent of WiMax, because it doesn't control a lot of the patents around it (unlike just about any cellular technology you can think of). The Motorola speaker even cited the absence of Qualcomm patents as a key advantage of WiMax, which tells you everything you need to know about the relationship between Qualcomm and the handset companies.

Sure enough, the Qualcomm speaker, marketing VP Ronny Haraldsvik, spent most of the evening expressing gentle skepticism about WiMax. "Take the hype, add some reality and a couple of years to it," he said. He predicted that fixed-location WiMax will be successful, but said mobile WiMax will be surpassed by other mobile broadband technologies.

PacketHop provides mesh network wireless broadband that can be deployed quickly for government and business. Basically, it's a way to get wireless broadband at the site of an emergency or special project, in an area that's not covered by 3G. I'm not sure why PacketHop was in this particular panel, since Sprint's plans are focused more on consumers than business.

The Motorola speaker was Raghu Rau, SVP of strategy and business development for the company's networks business (presumably he'll be providing network equipment to Sprint). And the Sprint speaker was Bin Shen, Sprint's VP of broadband.

The panel featured all the usual rhetoric you'd expect from competitors and suppliers, but in between the posturing, Shen said some very interesting things about Sprint's plans for the network. The excerpts below are paraphrases of what he said, with my comments in italics.

The vision: personal broadband. Mobile broadband will be much more interesting, powerful, and important than landline (DSL or cable) in the long term. Landline is for a family, but mobile broadband will be personalized to the individual. This creates the possibility for all sorts of personalized advertising and services. In the future, mobile broadband reaches beyond homes and handsets; it shows up everywhere in all sorts of consumer electronics devices.

It's a very starry-eyed vision. You can find some more examples of the sort of story Sprint is telling here. Personally, I'm not very enthusiastic about the idea of building broadband into every consumer electronics device imaginable – it reminds me too much of the Bluetooth-equipped refrigerators that people were predicting in 1999. But I do think that new types of mobile devices paired with mobile broadband will be important.

Mobile data demand is anemic today because it's forced through handsets. The handset is primarily for voice, Shen said. Among the US operators, Sprint has the largest share of ARPU coming from data (over $10 a month) , but it's a small percentage of total revenue, with limited growth. There's always a limitation on how much people will use and pay for data on a handset. On the other hand, the laptop is a data device. So are the iPod and the Playstation Portable. People expect to use data on those devices. How do we connect them to the Internet wirelessly?

I thought that was a stunning statement from a company that has invested heavily in 3G networks and smartphones. He basically said that smartphones are a cul-de-sac; that the future of mobile data will come from devices designed from the ground up to use data.

Right on. I don't think smartphones are a dead end, but we need a lot more diversity in mobile devices.

Openness is essential. Broadband requires a much more diverse ecosystem. You can't predict what will be the popular data device. You need an open model with a lot of people participating. There must be a different structure and business model to encourage that. A key issue is partnership and ecosystems. Get the right set of players.

The US carriers exercise lots of control over handsets and application developers. On the one hand that's very good; it provides a consistent experience for users. But it's probably not good for innovation. The next generation will be open, with a very robust SDK and API, open for the Internet community to come in.

Another striking admission for an operator: We strangle innovation. This is where I started wanting to pinch myself.

No contract required. WiFi doesn't have broad coverage. But 200 million units of WiFi have been shipped in the US. That's one element of why we chose WiMax -- it can share a lot of common components with WiFi. We want a WiFi+WiMax chip, at very low cost, so device manufacturers can replace their WiFi-only chip with a dual chip. This enables a very interesting consumer model. Consumers don't have to decide which network to sign up for; they have a choice to use WiFi or use WiMax whenever they want. If they want to use WiMax, they can pay for it on the fly, without a contract.

Okay, so let's add this up: an open, broadly-deployed, high-speed wireless network that welcomes any device, open APIs that allow any application, and no contract required. This is everything that the computer and Internet industries have been asking of the operators, and Sprint is apparently saying yes to all of it. The audience at the Churchill Club should have given this plan a standing ovation, but the information came out in dribs and drabs during a 90-minute panel, and it was very hard to assemble all the pieces.

If Sprint really wants to build an alliance around this thing, it needs to do a much better job of outreach to Silicon Valley.

The killer app is open access to the Internet. There are a lot of interesting apps you can do for mobile broadband – location services, video, etc. But the fundamental one is intelligent mobile Internet access. That's what people want. We did a survey -- the number one need is Internet everywhere.

Ouch. Whenever you do a survey on this sort of subject, people ask for the things they already know. So if you ask them what sort of data they want in a mobile setting, of course they'll say the Internet because that's what they know from their PCs. What they'll actually use is a different matter. But if Sprint really makes its network as open as it claims, that will sort itself out because the best mobile apps will naturally rise to the surface.

Hurry up and wait. The most frustrating thing Shen said was that Sprint will start deployment of the new network in late 2007 in Chicago and Washington, DC, with nationwide buildout in 2008. Aside from being frustrated at the length of the wait, I thought their choice of cities was poor -- if they really want software developers and consumer electronics devices, they ought to roll out the network first where the software and hardware developers are. Chicago's a great place, but it's not exactly a hotbed of Web 2.0 development.

What it all means

Can Sprint stay the course? Sprint's subscriber base has been growing more slowly than the other US operators, and it has gone through a lot of management turmoil. (As one friend who deals with Sprint told me recently, "they have fired pretty much everyone they could blame for the situation.") When this sort of change is happening, it's very difficult to maintain focus on a long-term goal. To make its WiMax plan take off, Sprint will need to get a lot of details right. In particular, evangelism of hardware and software developers is a black art, and not many companies know how to do it well. If Sprint can't keep consistent management on the WiMax project, and give them the resources and time needed to build up an ecosystem, its new network could become yet another costly mobile data failure.

This has strong implications for Sprint's management (stay focused, evangelize creative hardware and software companies now). It also means that companies planning to work with WiMax should monitor Sprint's progress carefully. More management changes, and shifts in strategy, would be major warning signs.

What about battery life? Small implementation details can easily doom a mobile product, and one I worry about for WiMax is battery life. Transmitting lots of data over long distances takes a lot of power. WiFi, for example, consumes far too much power to leave it connected all the time in a handset. I have to assume that Sprint and Motorola are working this issue, and you can find a lot of claims about low power consumption from the WiMax component makers. But I've been burned on this issue in the past, and I won't believe the problem is solved until we see working devices whose battery life we can test directly.

Let's hear it for desperate operators. I've had this conversation with several friends who work in the mobile space. We all agree that the best operator is a desperate operator. When operators are financially secure, they see no need to change their proprietary ways. But when they get scared, they become open to all sorts of interesting, formerly heretical ideas. The situation is similar to what the music industry faced at the turn of the century. They were so scared of music piracy that they willingly helped Apple to set up a music store with radically different pricing than had ever been used in the music industry before. If it hadn't been for the fear of piracy, do you think iTunes would have ever happened? I don't.

What you need is an operator that has enough financial resources to make interesting investments, but not so much that it feels secure. Sprint is the ideal example. The Three network is another, and look what they've been doing with flat-rate pricing. T-Mobile in the US is another example, although I worry that it's just going to focus on playing 3G catch-up now that it has bought a lot of new spectrum in the US.

If you're looking to do business with an operator, I think it's worthwhile to bypass the top companies and look at the bottom end of the top tier, and the top end of the second tier. They're likely to be much more open than the leaders to new ideas and radical business changes.

What matters is the business model. Qualcomm claims that other mobile broadband technologies will be more effective than WiMax, and for all I know that might be true. But if Sprint really executes on the things that Shen described, it may not matter. The thing that's broken in mobile data isn't the technology, it's the business model, and Sprint is promising to fix that. As Microsoft has proved numerous times, the right business model paired with mediocre technology often wins decisively.

Come to think of it, what Sprint really ought to do is apply the same open model that it's planning for WiMax to its EVDO data network. That would be truly spectacular.

It's worth an intense look. I've been critical of Sprint in the past when they've done things that I thought were unwise, so now I think I owe them some credit. I believe they're on the right track with WiMax. There are a lot of uncertainties about execution, but I think companies working on new mobile devices should look intensely at WiMax. It generally takes about 18 months to develop a new hardware product, so right now is the time to get started.


Dean Bubley said...

Interesting stuff. I wonder if "open access" / "no contract" really just means that Sprint is serious about a pay-as-you-go / prepay model of mobile broadband?

This sort of makes sense to me. The WiFi hotspot guys have wasted about 4 years trying to get people to sign up for subscriptions, for a service that tends to be used only sporadically. This is also a flaw of many 3G data plans - great for corporate users prepared to go on a monthly plan, but not for the bulk of people whose use is too irregular to justify it (as opposed to home broadband, which you're reasonably certain you'll use every day).

It also means that you can forget about WiMAX using SIM cards, which fits well with my view that they're an anachronism anyway.

A sensible way to market the service may be to bundle a certain number of minutes/hours with a home broadband connection. I now get 250mins a month of BT Openzone WiFi with my home broadband subscription, and I've found I use it much more now.

David Beers said...

Sounds too good to be true. I take heart just in the fact that these things were said at all, though.

A couple of comments: Chicago strikes me as a good market to launch WiMax. It actually is something of a Web 2.0 hotbed (Ruby on Rails and Basecamep invented there, for example) but unlike Silicon Valley the market isn't such a geekdom that you wouldn't be able to learn lessons that transfer to the rest of the country.

I was actually intrigued that PacketHop was at the meeting you describe and would be interested to hear your recollections of what they had to say. Airinet, a local wireless ISP near my home in Colorado runs a WiFi mesh network that will soon cover most of the blue-collar, low-tech city of Pueblo, about 100,000 people. They charge a flat $25/mo, which gives you unlimited broadband in your home and WiFi roaming anywhere in the city. The nodes are cheap and there are no towers. You don't need to be a Sprint to make money off WiFi mesh today, and consumers already own the devices that use it, which makes me wonder if mesh technology isn't more likely to do well than WiMax.

Personally, I think I'd be happier to see a replay of the "garage ISP" era (but with WiFi) than to trust Sprint to deliver on a really open network, and I suspect that PacketHop has the same idea.

An article I wrote about Airinet.

Michael Mace said...

Dean wrote:

>>I wonder if "open access" / "no contract" really just means that Sprint is serious about a pay-as-you-go / prepay model of mobile broadband?

I'm reading between the lines, but I think he was implying that you could choose either a subscription or pay-as-you-go, but that the pay-as-you-go option would require no prior contact with the company. Kind of like using one of TMobile's WiFi hotspots at Starbucks in the US.

Of course, with the trials still nine or months away, they might not have even decided yet.

David wrote:

>>Chicago strikes me as a good market to launch WiMax

Okay, fair enough. I apologize, Chicago.

I wonder if the choice of rollout city might have been influenced by the location of Motorola's HQ, since they are a key partner to Sprint in this.

Still, if Sprint really wants supporters in Silicon Valley, they ought to make deployment here a high priority.

>>I was actually intrigued that PacketHop was at the meeting you describe and would be interested to hear your recollections of what they had to say.

The two things he talked about the most were the enterprise angle (government and enterprise as the first adopters) and the role of user-generated content, especially video, in driving broadband traffic. I think he's pretty enamored of YouTube, and expects it to continue to grow exponentially.

My notes from PacketHop's comments:

--What you want in next generation networks is high throughput. The drivers of content on internet -- video etc -- are what people will want in mobile. We'll associate with whatever network is most effective. Packethop jumps various networks.

--Interference and noise is rising, extraordinarily. Realtime applications are suffering. Benefit of WiMax is licensed, better QOS, throughput for user content greater.

--User-generated content will be a big driver. It's hard to move around at the edge of the wireless network. There are a variety of ways to solve that; one is multihop peer to peer, and then connect to the network when you get to a spot where it's available.

--(A comment I wrote to myself: "He pushes user content endlessly.")

--Government customers have been initial drivers in past for some networks. Believe government first responders will be some of the first users for multihop. Instant video surveillance for events.

--Mixed mode networks will be the norm. They're (PacketHop) getting miles in multihop settings. With dedicated spectrum, they're getting carrier-grade service in multihop (because there's no interference).

>>Airinet, a local wireless ISP near my home in Colorado runs a WiFi mesh network that will soon cover most of the blue-collar, low-tech city of Pueblo

Airinet's business model sounds a lot like what Clearwire is doing, especially the focus on smaller cities where they can cover the whole area with a relatively low investment. I'm trying not to get too annoyed that Lodi and Manteca both have more interesting broadband choices than I do at my home in San Jose.

David Beers said...

>>Airinet's business model sounds a lot like what Clearwire is doing, especially the focus on smaller cities where they can cover the whole area with a relatively low investment. I'm trying not to get too annoyed that Lodi and Manteca both have more interesting broadband choices than I do at my home in San Jose.

Same annoyance here (although Airinet sounds like they're moving up in my direction). So what are we to make of this? Best I can tell, these wireless ISPs think that they can best compete in markets where the fixed broadband options are poor, while the mobile access is apparently just a side-benefit that doesn't factor into their business model very much. (Actually, Clearwire doesn't really have a mobile story until we see some WiMAX mobile devices, but I'm referring more to mesh WiFi ISPs like Airinet.) If these mesh-networked wireless-B clouds are cheap enough to be profitable in these low-density, relatively low-income markets, you'd think the threshold where companies could profit from WiFi-toting mobile subscribers in a dense urban area couldn't be that far off, wouldn't you?

Anonymous said...

The choice of launch cities is usually partner-driven. Moto is in Chicago, while Sprint's Nextel division and the country's regulators - the guys demanding that Sprint do something with the spectrum - are in D.C.

EV-DO works just fine for the handset-based services being rolled out today. Sprint has made it pretty clear that their choice of WiMAX was predicated on an ecosystem driven by other interested parties throwing devices and services on the wall, hoping that some of them stick, rather than a "planned economy."

But you're absolutely right that Sprint ought to be putting this stuff in a single, coherent sentence / mission statement / PowerPoint slide / advertisement so that the ecosystem knows where to aim...


Rajiv said...

amazing. these "breakaways" will define the future of broadband access. sprint really needs a visionary to execute this plan.

Anonymous said...

Sprint's claim that it has an open model sounds good, as would the end of the "walled garden" model of US carriers.

But Sprint hasn't been particularly open before — not as bad as Verizon or Cingular, but not particularly good.

So is this a real conversion or just a marketing technique?

Michael Mace said...

Aw, dang, now Sprint SVP Atish Gude is hedging on whether Sprint will make the WiMax network open at launch. It's very frustrating.

Sprint, please get your act together. If you keep waffling like this, you'll kill the hardware and software developer investment that'll give you the best chance of succeeding.

Anonymous said...

Hopefully this is true and Sprint's Wimax will finally bring the "Open Mobile Economy" that some are already dreaming about. Others are even claim "wireless net neutrality". I summed it up in a blog entry.

Anonymous said...

This is an interesting development, especially after the announcemnt that Sprint Nextel is goign to lay off 5000 workers but yet still increased their budget for the WiMAX

Mark Tomin
High Speed Internet Access and Broadband Provider

Anonymous said...

Open access is definatly the future. What no telecom corporate exec. or anylst is likely to admitis that real killer app. will not be a souped up cell phone. the reality is when the performance is right and price is cheap the real killer app. of mobile broardband is replacement of DSL and Cable modems. Sales of desktop PC's have been sinking and laptop growing for years. Transition from wired to wireless internewt is the next logical step and will happen. I also believe when it starts it will happen fast. The impact on AT&T, Verizon, and the cable co,'s with the loss of wired customers will hit much harder than the loss of long distance revenue. The wireline companies need to refocus on super high apeed fiber to corporate customers because that is what will be left of so called local wired loop when it's all over.

Also customers will be willing to sacrafice some speed for wireless anywhere versus what they get on DSL.

Anonymous said...

I believe that if it's WiMAX or EVDO sprint will be the first to offer an open network. Why? They do not have the concern about losing DSL customers that AT&T and verizon do. I believe many people will be very suprised at how quickly cable and DSL connections become redundant and cancelled once reliable low latency unrestricted access wireless internet comes to laptop's and other devices. The big telcos I am sure have fears about this that result in many of the restrictions placed on current data plans.

Anonymous said...

The most open model of billing is one that would have two ways in. Either a user could register a device on a long term or short term(hotspot style) basis. The second way in should be that third party device and/or application vendors could pay sprint to give their device or application access.

For example a Skype enabled phone could be sold that works out of the box with the correct subsciption without the user having to deal with sprint. Alternately a more generic PDA device could be registered directly with sprint; the user could than load their own skype client if they so desired.

If sprint follows through with this and google wins the upcoming 700 mhz auction and builds an open network we will see radical change in mobile communications.

Anonymous said...

i hope they are serious. that would be great for high speed internet. http://t1survey.com