Why the Sprint/Google/Clearwire deals matter

This past week, Sprint and Google announced a partnership around Sprint’s upcoming WiMax network. This closely follows an announcement between Sprint and Clearwire to jointly build WiMax nationwide and promote the technology as a global standard.

Both of these deals are exciting and I believe are foundational to accelerating the Mobility Revolution.

I’m going to mostly draw from others in setting the stage for why all of this matters.

IMPORTANT NOTE: By including these quotes, I am neither endorsing them nor validating the opinions expressed by these individuals, companies, or publications.

Who cares about WiMax?

Padmasree Warrior recently did an excellent job explaining why WiMax matters. Here are just a few quotes from her posting:

“Building the wireless revolution from WiMAX offers considerable efficiencies – estimates are, three times the bit rate, twice the spectrum efficiency, and half the cost of 3G.”

“In addition, the lack of legacy licensing agreements makes the WiMAX landscape even more favorable for the entire industry to innovate collectively.”

“WiMAX could therefore be a viable strategy to enable a nation wide and global wireless broadband network that is unencumbered by closed, proprietary technology and taxation.”

“From an architecture and network perspective, WiMAX provides flexibility in multiple usage models with advanced security, QoS, support for low latency applications like VoIP and multimedia streaming. It is optimized for high capacity IP-based packet services and internetworking with both cellular and wired networks. It has the potential to enable ubiquitous broadband access for home, enterprise, surveillance and public safety.”

“WiMAX will not replace or compete with today’s 2G and 3G protocols for voice services, even though it supports VoIP efficiently. Cellular networks provide the extensive coverage that circuit switched voice services require, and WiMAX is not optimized for this. Although the WiMAX PHY specification defines Full and Half-Duplex FDD (Frequency Division Duplex), these are not part of the initial profile being implemented. It is likely to be included in a later profile or as part of the 802.16m specification. FDD has better low latency performance for applications such as voice. However, for non-voice applications such as high-speed data, multimedia and internet mobility, WiMAX scores over 3G.”

An article at Telephony covering a recent report by the Boschulte Schnee Group LLC included these quotes:

?It is a technological platform that supports converged services,? [Alfred] Boschulte said. ?WiMAX is post convergence because it is possible to offer a service that doesn?t require two networks ? wireline and wireless. It is a platform that can serve you in your home, deal with your desire for nomadic behavior, onto the patio, handle your mobile phone and iPhone and other things.?

?If you look at what people are paying right now for broadband Internet access and for voice and for mobility, you quickly get to ranges of $90 a month to $120 to $130 a month,? he added. ?You can run a profitable WiMAX business at far, far less. This business can make a lot of sense at ARPUs [average revenue per user] that are within the $60 to $70 range.?

The Sprint/Clearwire Deal

The Sprint/Clearwire announcement included these quotes:

“This arrangement will result in stronger competition in the rapidly growing market for broadband services, and will provide consumers, national enterprises and other businesses, educators and public safety agencies greater choice and faster access to a revolutionary mobile broadband technology,” said Sprint Nextel Chairman and Chief Executive Officer Gary Forsee. “It will further our objective of delivering mobile WiMAX service across the country and help fulfill our vision of delivering mobility products and services across all our networks.”

“Our joint efforts will result in customers benefiting from a more extensive network, operating sooner and using our respective spectrum more efficiently than either company could have on its own,” said Clearwire Chief Executive Officer Ben Wolff. “Our companies share a vision of doing for the Internet what cellular and PCS networks did for voice communications starting more than twenty years ago. Based on this shared vision and the expected benefits to each company and our respective shareholders and customers, it is natural that we would work together,” Wolff said.

A Kansas City Star article on the Clearwire deal included this quote:

?We are now sharing in the vision, sharing in the capital and sharing in the resources required to take on such a significant initiative,? Forsee said. ?This is a very efficient and smart way to run our business. We expect savings.?

An article at xchange online noted:

“From a network perspective, the two providers will join forces to bring a deeper footprint than either would be able to achieve on its own, which will include urban, suburban and rural markets.”

TheStreet added:

Joining with Clearwire will add scale to Sprint’s WiMax push, and will also give the company the Craig McCaw stamp of approval. McCaw is the wireless industry pioneer who founded Clearwire.”

An article at International Business Times included this quote:

“Many people figured that Sprint and Clearwire’s alignment with competing entities cable operators and satellite companies, respectively would prohibit a partnership of this sort,” Philip Solis of ABI Research said. “However, it has always been apparent to us that the synergies in a combined Sprint and Clearwire would allow formation of a unique service provider that would enable 4G capabilities ahead of its competitors.”

And InternetNews included this quote in their coverage:

“It is about time that this happened,” Yankee Group analyst Philip Marshall told internetnews.com in an e-mail. “It certainly makes sense and creates greater capital concentration for the network roll out, which is critical for WiMAX at this stage.”

An article at Unstrung offered this observation:

The deal also makes it less likely that other operators will be able to offer nationwide licensed WiMax services, since Clearwire and Sprint now have a lock on much of the broadband suitable for WiMax outside of the public bands in the U.S. “

The Sprint/Google Deal

This week’s announcement included these quotes:

“Google and Sprint will optimize the Internet experience for the digital lifestyle,” said Barry West, president, 4G Mobile Broadband for Sprint. “This collaboration brings what will be the best mobile Internet network together with the leading Internet search company. It allows us to capitalize on the powerful mobility and Internet trends, and create wireless services and applications that take advantage of each company’s history of product development innovation.”

“Google shares Sprint’s vision for enhancing the consumer’s mobile lifestyle and is focused on greater access to information through a variety of channels,” said Dave Girouard, vice president and general manager Google Enterprise. “We look forward to working with Sprint to bring to market a rich and compelling broadband experience for WiMAX customers.”

A Reuters article at the New York Times website on the announcement included these observations:

“Some analysts had questioned the wisdom of Sprint betting up to $2.8 billion in 2007 and 2008 on an unproven technology, but JPMorgan analyst Tom Lee said the Google deal should ease investor concerns about WiMAX.”

“‘It really strengthens the legitimacy’ of WiMAX, Lee said, adding it would also help create interest among consumer electronic companies to make WiMAX compatible devices.”

A Dow-Jones article at Cellular-News added these observations:

“Google and Sprint have been independently championing the idea of an open network opposed by incumbent telecommunications companies like Verizon Communcations and AT&T, and now appear to have found in each other a common ally.”

“Beyond the current deal, WiMax – a high-speed wireless Internet-access technology that covers a greater distance than its cousin wi-fi – could become a common bond and tool for making their open-network vision a reality. Sprint is already backing the technology with a multibillion-dollar bet; Google could do the same with the spectrum licenses it has set its sights upon. A Google-Sprint alliance, if successful, could pressure the incumbent carriers to reconsider their own closed-network approach.”

“‘I think Sprint’s made it clear they intend to make WiMax more open than traditional cellular networks,’ said William Power, an analyst for Robert W. Baird & Co. ‘Google is a logical partner with their heft in the Internet space.’ For the record, both companies said they haven’t committed to anything beyond the current agreement.”

“‘It looks like they are putting together a pretty formidable team,’ said Scott Wallsten, director of communications policy studies at the Progress & Freedom Foundation, a Washington, D.C., free-market think tank. The Sprint-Clearwire-Google alliance appears to be ‘trying to develop a new business model that hasn’t been tried yet’ that could enhance competition and benefit consumers.”

“Google has said it doesn’t intend to get into the wireless-service business. Instead, if it acquired the spectrum licenses, it would likely wholesale or lease spectrum to third parties willing to accept the open-network philosophy. Here, Sprint, with its experience in customer service and building networks, is seen as a likely partner, said Philip Solis, an analyst at ABI Research. He added that others may also be involved.”

“While AT&T and Verizon Wireless prefer to maintain their ‘Walled Garden’ mentality – in which the carrier largely determines what consumers can see or what services they get – Sprint’s more open approach may shake things up. If the WiMax service is popular and steals subscribers, it could force change in the way other carriers approach wireless data, said Tole Hart, an analyst for Gartner Inc.”

An article at Converge! additionally noted:

“Sprint also confirmed plans to provide open standard APIs (application programming interfaces) to its go-to-market partners and the Internet developer community to create customized products for browsable devices, facilitating the delivery of personalized and interactive services to consumer, business, public safety and government customers. These services will be available in a variety of WiMAX embedded devices, including connection cards, stand-alone modems, laptop computers and consumer electronic devices such as personal media players, mobile Internet devices, gaming devices and phones. Eventually, the WiMAX service will be available in vehicles for navigation information, news and entertainment.”

Jonathan Spinney at Maperture said:

“An indicator of Sprint?s confidence arrives today in form of a teaming announcement with Google [despite the noise] to launch a suite of mobility and location-enriched applications that will run across a myriad of connected WiMax devices [not just phones]. It?s an early indication of what to expect from Sprint during this intense build-out phase. Plus, with LBS apps accounting for 1/3 of total data revenues today up over music and others, it?s also no surprise that Sprint also has plans beyond Google Apps with continued commitment to enable their existing developer community with APIs needed to build broadband mobility and location smarts into applications spanning consumer, business, and government super-group horizontals.”

John Dvorak in a commentary at MarketWatch had this to say:

“But more interesting is the deal brewing between Google and Sprint Nextel Corporation, along with the 700-MHz spectrum grab that may occur. What do you get if you combine the spectrum with Google and Sprint? What you get is AT&T Inc. put in a headlock. Hear me out on this one; it’s a gem of a strategy.”

 

“…AT&T could develop its own search engine, for example, and degrade the Google connections while enhancing connections to its own service. Phone companies have a history of such shenanigans….”

 

“If the duo can roll out national service, it could protect Google from any onerous action by Ma Bell. And if the service was popular enough, Google could actually limit what it offers AT&T customers — making its most premium search services only available to the Sprint-Google network. If Google maintains dominance in search (as appears to be the case), it could turn the tables on AT&T and demand that the company pay Google for carriage of its services. This would make the original AT&T threat an ironic reality, with diminished services on the AT&T network. Wouldn’t that be funny?”

My Closing Thoughts

WiMax pushes the Mobility Revolution forward. It provides network performance beyond what has previously been available, at a cost point that was previously unimaginable, and with an intellectual property licensing model that realistically enables mobility to be built into all kinds of products.

However, if WiMax were only available in limited locations (e.g. “hotspots” and “hotzones”), then it wouldn’t much matter. Product manufacturers wouldn’t risk building products that didn’t work well or at all in most locations, and companies couldn’t get the benefit of WiMax in mobilizing their services and processes if they were constantly failing-over to 3G networks with lesser performance and cost penalties.

The Sprint/Clearwire deal enables nationwide U.S. coverage and builds to the momentum for mobile WiMax deployments around the world. By splitting the country and agreeing who will build where, capital and time aren’t wasted building networks that compete with each other in popular geographies. The full capital plans of each company can be working together to accelerate and broaden availability faster and farther than either company could achieve on its own.

Creating a single branded offer means that the two companies will avoid typical broadband battles (“my ADSL is better than your SDSL”) that just confuse potential customers and slow adoption. And taking a unified approach to the market means that technology providers can also focus their development time and money on bringing the best products to market as fast as possible. Because all the development and manufacturing resources of those technology providers will be aligned to one standard, customers of both Sprint and Clearwire will more quickly enjoy the scale benefits that will come.

Finally, the entire ecosystem of technology and service companies aligning with the Sprint/Clearwire architecture will create the de facto standard that can accelerate deployment and adoption around the world.

This is good.

But Sprint’s commitment to open APIs for developers like Google to innovate on top of the Sprint (and Clearwire) networks is even better. We have a sense that increased availability (because products and services are fully useful wherever you go) and contextual relevance (because they will adapt to the context in which you’re using them – where, when, with whom, etc.) is what will drive new value in the Mobility Revolution. But, we can only guess at how that new value will actually be realized. Only by putting this power into the hands of innovators will the full potential of mobility be realized.

Google is a relative late comer to the Internet party, and yet has become the most dominant player, capturing incredible value by figuring out how to tap the Power of the Internet. Their position within the economy and their mindshare as innovators, make them the perfect partner to introduce the Power of WiMax Mobility to the world. However, it’s quite likely that the company that will become as dominant in the Mobility Era as Google has in the Internet Era (and Microsoft had in the PC Era) has not yet been formed or even imagined.

But Sprint and Google both, in this announcement, are clearly signaling their commitment to enabling the kind of innovation that can truly revolutionize how we interact with the world, how we do our jobs, and how we run our businesses.

Capture the Power!

3 Responses to “Why the Sprint/Google/Clearwire deals matter”

  1. Jon says:

    Russ – Thank you for bringing all these observations together! Speaking for folks I socialize with in the LBS space, we’re behind the Mobility Revolution 100% and happy location will play such an instrumental role in it.

  2. […] announced a partnership with Clearwire to jointly build a nationwide WiMax network. At the time, I explained why this really was big news. Unfortunately, the two companies couldn’t come to terms on the […]

  3. […] in July 2007, Sprint announced deals with Google and Clearwire. At the time, I sang the praises of the two agreements. Today, the three companies, together with three cable providers and Intel, announced a much more […]

Leave a Reply