World's Biggest WiMax Bet

Other than Intel (INTC) (which has poured in some of its excess billions), no firm in the world has placed a bigger bet on WiMax than Sprint (S). The falling (if not failing) wireless carrier is praying that bringing WiMax to market now will allow it to steal market share on its three major US rivals, who are all waiting for the WCDMA-derived LTE.

Today Sprint’s XOHM service (soon to be combined with Clearwire) rolled out its first market in Baltimore. As various analysts have noted, having only a single market limits its value to business travelers until it can build out its national network. Sprint is also waiting for wider availability of WiMax “modems” for laptop and desktop computers.

The pricing models are quoted at $25 for home and $30 for “on the go” service (these are the “temporary” discounts). Not being in Baltimore, I’m not clear what the household price is for multiple devices: we have four computers at home, so can we share one modem between them, as we do with our cable modem and before that with our DSL “modem.”

Beyond the capital for the rollout and the people’s unwillingness to join due to network effects (i.e. limited markets), it seems to me that Sprint faces three big issues:

1. Is it fast enough, compared to wireline substitutes. With claimed download speeds of 2-4 Mb/sec, they should be able to beat wireless alternatives until LTE, but their revenue model suggests they also want some of the last mile residential business.
2. Will their prices be aggressive enough? Home broadband is a commodity, so people won’t pay a premium for it. They will pay extra for combined mobile/home service, but I suspect the pool of end consumers who want to pay a lot (out of their own pocket) for mobile broadband is pretty small.
3. Will their networks have enough capacity? Obviously congestion has been a huge problem for the rollout of new networks since the earliest days (cf. 1984 Los Angeles AMPS rollout), and “all you can eat” wireless plans encourage consumers to use a lot of bandwidth. If they provide poor service they will lose customers, and if they have to build more infrastructure than planned they’ll lose money.

I’ve been a big WiMax and XOHM skeptic. Now that they’ve launched, my opinion doesn’t matter — what matters is whether they can get enough customers and serve them cost-effectively before LTE shows up.

Disclosure: No positions

Comments

[Nick SPRINT...:]

Yes you can share one modem the make a router called the Linksys wireless G router for mobile broadband MODEL No: WRT54G3GV2-ST

2008 Oct 01 04:01 PM

[Steve Zecola:]

Why no facts, sir?

As it turns out, there is plenty of customer research that shows a large percentage of customers want anywhere, anytime broadband service - in the home, around the neighborhood and when traveling. Also, the price point for rapid adoption is well above the documented costs.

Those costs are below the cost structure of the replaced services, which taken together with the demand is a proven formula for success.

Please recognize that LTE and WiMax, while similar in technology, attack the market from totally different customer entry points. WiMax operators will be bundled-oriented from the get-go with lesser emphasis on mobility, while LTE operators compete heavily on mobile coverage.

The two camps will not compete directly for close to 10 years, given the starting points, the relative opportunitities and the incentives of the parent organizations.

But rest happy, the market is big enough for both, and LTE equipment will capture a much bigger market share than WiMax equipment.

2008 Oct 01 04:54 PM

[Dan Links:]

You are missing the advantanges. I know little of LTE, but I know this, that all is COST COST COST of operation. With Cellular, their max range per tower is around 7 miles. With WiMax the max range is approximately 50 miles. Less towers equals less cost of operation, therefore cheaper service. Also, as it matures, WiMax is capable of 70 Mb data transfer rate. What can LTE do? Most of the time, in my experience, first to market wins and sets the standard. Alvarion is deploying WiMax throughout the earth. Where is LTE? Clearwire is opening markets all the time. There are over 1000 WiMax towers up and running already. Better start doing more research.

2008 Oct 01 05:16 PM

[Epsilon:]

@Dan Links: Tower range is more about spectrum as it is about technology- a single tower on the 700MHz frequency that VZ and T will be using for LTE will have more coverage than a single tower on the 2.5 GHz range Sprint is using for WiMax. Having less towers, though, is not a 100% benefit- it means more users on a single tower, which means each tower needs more backhaul capacity.

2008 Oct 01 06:51 PM

[Nextel Acce...:]

seems like a very compelling product, hoping Sprint can take this to market quickly to beat LTE to the game.

2008 Oct 01 06:53 PM

[Wally Ego:]

Epsilon has the ranges correct, though the real restriction is in the consumer unit. A mobile unit with a half watt transmitter and a lossy antenna in the 2.5 MHz spectrum has a very short range.


If WiMax, when fully developed, becomes a "last mile" provider the range is extended considerably. The consumer would then use a dish type antenna to communicate with the base station. It would operate in a fashion similar to microwave links used today. It would also be subject to the same flaws as microwave, rapid signal loss over distance and "rain fade".

As a mobile option the downlink speeds are impressive but I think the real value in WiMax will be in reaching a large rural area with broadband speed at a reasonable cost. Look out Hughesnet and Starband!

2008 Oct 02 07:56 AM

[AMan:]

I'm always amazed at the lack of vision and knowledge from those that desire to publish articles as an expert. If I told you five years ago that many consumers would carry two mobile phones many would have laughed me out of the room. Or you need a GPS device to help you drive the roads you already know 95% of the time. Think of all the technology you have at your finger tips that you pay for that you don't use. So, now experts think many are discipline to wait for another emerging technology when I can have it NOW? WiMax success much like any other product has to have a niche and value prop that's sustainable. Given the endless desire for more bandwidth, it's hard to believe users will wait for the next train in this instant gratification world. They key is showing users what they can do...

2008 Oct 02 09:29 AM

[Geddy:]

Don't be fooled that LTE is that far behind. Apparently the word is that T-Mobile has already tested clusters of sites & Verizon Wireless will be doing the same. Per the Lucent internal website, the only equipment that needs to be added to a CDMA Mod 4.0 cabinet (currently used by CDMA carriers) is a single module (in addition to OFDM capable antenna's) which brings time to market down considerably.

2008 Oct 02 01:10 PM

[ken_s:]

The back haul issues pointed out for WiMax will also play a big part of how LTE would get rolled out for CDMA carriers. Is any CDMA carrier ready to run optical circuits for data use to thousands of towers? Each growth strategy has limiting factors. The only real question is, who can get customers to start their cash flowing in the direction of over-the-air data services?

2008 Oct 02 01:50 PM

[Geddy:]

I believe since existing carriers already have their customers "heading the data way (i.e.-more ARPU coming from the data than voice offerings)" they have a head start. Backhaul is definitely going to be an issue though for CDMA carriers as I can guarantee most of what they currently have in service (including microwave) is not currently at the multiple DS3's that will be required per cell site.

2008 Oct 02 04:16 PM

[COCOViper:]

Quote from Geddy: "Don't be fooled that LTE is that far behind."

Quote from AT&T's VP of Network Architecture: "LTE technology will not be rolled out for at least another three years--and probably not on a large commercial scale for another five years." -www.fiercewireless.com...

Thus, those that read his comments might want to take them with a grain of salt (especially when he uses a still in development tech to bash an already launched tech.)

2008 Oct 03 04:37 PM

[Geddy:]

And then ask all of us whether we trust anything that AT&T tells us. Might as well rate Bush as the best president ever. If you read Wireless Week & RCR you would see that T-Mobile has tested a cluster of sites along a stretch of highway with LTE already. Verizon Wireless will do the same by end of year.

Just because Sprint/Nextel/Clearwir... (whatever they're calling themselves this week) launches one market (which by the way was delayed almost an entire year) doesn't make this a coup. Let's revisit this blog again, one year from now to see what we all have to say.

2008 Oct 04 10:00 AM

[Geddy:]

Let's also take COCOViper's comments with "a grain of salt." He's a Sprextel employee so I imagine bias is relevant.

2008 Oct 04 10:02 AM

[directcommu...:]

I think wimax is great, will give local phone companies something to think about.

2008 Oct 05 01:49 PM

[GeminiAtlas:]

I just hope that one day they start making the WiMax modems much like the "pay-as-you-go) type of service option. The subsription model might work well with the road-warrior types but I suspect won't work well with occasional business travellers of which many people are. I might go on travel and need internet access maybe once a month. Am I going to pay for yet another subscription for that? Of course not, especially when I already have a blackberry to check email with and some basic web functionality. But I'd be willing to pay for a pay as you go thing where I just pay for what I use bandwidth-wise. I suspect many others are in that same boat. When I last looked into getting something like that, all the main players had only subscription plans. Isuppose they will start to offer something like that.

2008 Oct 08 10:30 AM