Sprint's WiMax efforts doomed to failure?
Despite early signs that it's performing well, Sprint's new 4G network could be heading down the same doomed path as EarthLink's citywide Wi-Fi networks.
On Monday, two years after announcing plans to use WiMax to build a 4G network, Sprint began selling the new service, Xohm, in Baltimore. The network, which offers wireless broadband downloads in the 2Mbps to 4Mbps range, is supposed to be a leap forward in terms of throughput for wireless networks. And according to bloggers and journalists who have tested the network in the first two days it's been up and running, it seems to be performing as expected.
This is a huge accomplishment, especially because it is the first commercial network in the U.S. to use mobile WiMax technology. But given the paucity of devices available that can even access the network, Sprint is being forced to apply traditional broadband and wireless business models to the new network. And as a result, the company will initially compete with existing broadband services and 3G data services.
"This particular offering is not really fulfilling an unmet need," said Charles Golvin, senior analyst with Forrester Research. "So the prospects for the service are limited. But I see this particular deployment more as an experiment to see how the market will react and what pricing model is best."
It may only be a test bed for future WiMax deployments, but I think the business model Sprint is using in Baltimore looks eerily similar to what EarthLink attempted to do with its citywide Wi-Fi business. As a result, I see Sprint facing many of the same hurdles that EarthLink faced in trying to sell this service to consumers.
Price matters
EarthLink planned to blanket cities with Wi-Fi and compete directly with cable and DSL providers. It offered its service for about $20 a month, slightly less than services from cable and phone companies. But consumers didn't see the value in the service, and subscription uptake was dismally low. Within three years of hatching its vision, EarthLink pulled out of the citywide Wi-Fi business, even abandoning assets in some cities.
Like EarthLink, Sprint is targeting incumbent cable and DSL providers with its service. The big difference is that it's also offering mobility. But because there are only a handful of devices that support WiMax today, most people subscribing to the service will likely only be as mobile as they can be with an air card plugged into their laptop. In other words, they probably won't be walking around town surfing the Net. Instead, if they aren't at home, they'll be parked in a coffee shop or library where Wi-Fi is typically already available.
And even though Sprint is competing directly with fixed broadband providers, it is not offering customers a huge discount. The home service, which requires users buy a $79 WiMax modem, costs $25 initially, but will eventually be priced at $35 per month. It's also offering a mobile only service, which requires users buy a $59 WiMax wireless card for their laptop. This service starts at $30 and will increase to $45 after six months. The combination service, which allows users to share their bandwidth with other users at home and also offers mobility, will initially cost $50 a month. But the price is expected to eventually jump to $65 a month.
These prices are not drastically different from other broadband options. In Baltimore, Comcast offers a 6Mbps download service for about $43. Verizon Communications offers a 3Mbps DSL service for about $30 a month.
And even though initial reports on the network's performance are good, reviewers note that wireless signal strength can greatly affect throughput speeds. In other words, consumers will be asked to subscribe to a service that costs about the same or slightly less than what they can get from a fixed broadband provider with less throughput consistency.
This was the same conundrum that many EarthLink customers faced. And in the end, most consumers didn't see enough differentiation to switch to Wi-Fi. I expect the same thing will happen with WiMax.
Where Sprint may be able to win customers is among some business travelers. Sprint's mobile service is $45 a month, about $15 a month cheaper than 3G data services from carriers such as Verizon Wireless, which charges roughly $60 a month for 5GB worth of downloads.
Sprint is also offering $10 day passes, which is a clear differentiator from the 3G data services offered today for laptop users. 3G data services require a monthly contract. But considering that WiMax day pass users would have to dish out $60 for a WiMax wireless card to even access the $10 a day service, I don't see this being a huge hit, especially when Wi-Fi is also widely available either for free or for $10 a day.
"There isn't much differentiation right now in the WiMax offering," said Roger Entner, senior vice president in the communications sector at Nielsen IAG. "It might be a little cheaper than cable or DSL, but not much. But they really needed to show Wall Street and their investors that the technology works."
Small footprint
The other big problem for Xohm is that it's limited in terms of footprint. So far, the company has only launched a network in Baltimore. More cities will soon follow, including Philadelphia, Chicago, Washington, D.C., Providence, R.I., Boston, and Dallas. But even then, the service will only be available in a handful of cities. And when people in those cities venture to the suburbs, they won't be able to access the network.
Sprint has talked about leveraging its 3G network to augment coverage until WiMax is ubiquitous. It's also teaming up with Clearwire in a joint venture to combine WiMax assets in an effort to jump-start deployments. But right now it doesn't have an extensive footprint nor does it offer roaming between the WiMax network and the cellular network.
And because mobility is dependent on network coverage, it's unlikely that the mobile aspect of Sprint's WiMax network will appeal to more than a niche audience.
Sprint recognizes this reality. And its long-term vision is to create a ubiquitous 4G network that will provide wireless broadband to all kinds of portable devices, including everything from digital cameras to music players to portable gaming devices.
Several large companies such as Intel, Nokia, and Motorola have thrown their weight behind WiMax. And they promise to launch new components and devices to support the technology. But so far, devices with WiMax have been few and far between. Nokia has announced the N810 "Portable Internet Tablet," and Samsung has announced a WiMax-capable Q1 Ultra Premium Mobile PC. And Intel will soon be including WiMax in its chipsets. But so far there is not a critical mass of WiMax products in the market.
Like Sprint, EarthLink also lacked network coverage. But it did have an abundance of devices able to access its Wi-Fi network, such as laptops with embedded Wi-Fi and the Apple iPhone. And yet these devices weren't enough on their own to drive demand for the service.
The other major problem facing Sprint as it rolls out more of its WiMax cities is the fact that the economy is in utter shambles. Not only does it make it less likely that consumers will spend more on broadband services. But more importantly, it will likely mean that Sprint and its soon-to-be-partner Clearwire won't be able to access capital necessary for finishing their network.
Entner speculates the companies will need at least an additional $2 billion in 2009 to build the network.
"In a market that is over 80 percent penetrated, it becomes difficult to convince investors and creditors to give you money, especially in a market like the one we're in now," he said. "If the economy and the credit markets don't improve, there's a healthy chance that this whole project will die."
That said, Entner believes that Sprint's big picture vision is correct. Consumers want faster wireless connectivity. And they will gobble up whatever bandwidth capacity they are offered. The problem is that Sprint has to give them a compelling enough reason to spend money on WiMax instead of subscribing to increasingly faster cellular services. For example, AT&T says it will soon offer 7Mbps downloads over its 3G HSPA network next year. And Verizon has big plans to roll out its 4G network in a few years.
"I don't think it's a forgone conclusion that Sprint's WiMax network will be dead within a year," Entner said. "But it has an extremely tough road ahead of it, absolutely. They cannot afford any hiccups."
Marguerite Reardon has been a CNET News reporter since 2004, covering cell phone services, broadband, citywide Wi-Fi, the Net neutrality debate, as well as the ongoing consolidation of the phone companies. E-mail Maggie.
I am one of those Laptop users, and for 4 years I was a T-Mobile subscriber, and about a year ago I purchased a wireless card from Sprint for Internet Access. Initially I kept my T-Mobile subscription active, but once the card proved reliable I discontinued the T-Mobile account, and now use Sprint for all my mobile needs. The freedom to chose where I wanted to work was worth the extra $40 that I pay to sprint for the card. Now I am not limited to just coffee shops etc.
I think that as more business travelers realize this type of freedom the wireless networks like sprint are offering will increase in popularity, and pricing will be less of an issue, and reliability will increase in importance.
My only complaint about my EVDO card is that speeds are inconsistent, and something on their network seems to prevent the transfer of medium to large files.
That said, if they want penetration into the home broadband market they are going to have to come up with some better incentives... I can get Comcast Triple play and pay only $33/mo with free cable modem and install. I'm not going to shell out $80 for a proprietary WiMax modem for a slower, less reliable service that might not be there in a year to save $8/mo.
You cannot claim WiMax to be a failure 2 days after going live. It's in a test market right now, but once they go live in other major cities and we start to see 4g phones, then you will see much more interest in WiMax.
I'm currently a Sprint customer and own an Instinct, well actually as of this week, I am now on my 3rd Instinct because of how often they crash, lock up, freeze and reset. If anything is doomed to fail with Sprint, it will be Sprint itself. They are horrible at customer service, they don't care about the customer experience, they are horribly slow at releasing updates and fixes, they have no idea how to communicate information back to the customer. It's no wonder they are in last place in nearly every category. The one big thing they have going for them are the Simply Everything Plans. Those are fantastic and kill any plan on any other carrier.
Quit the Sprint hate train you misinformed bandwagoner. I love when people are unable to formulate their own opinions these days.
Now just think about the amount of infrastructure required to bring that citywide WiFi online. Every three blocks an antenna. Compare that to WiMax and we're talking a lot fewer antennae to maintain, on the order of 100x less.
In comparison to 3G, WiMax has better throughput, and is priced similarly. Cricket Wireless has similarly priced plans with lower throughput for wireless broadband.
Those fixed broadband prices are limited to initial pricing, and all require package deals. I can not understand the reason why people duplicate service with their landline phone and cell phone service. Likewise that so-called triple-play from Comcast is a pure waste of money. The DSL pricing also requires phone service - a big drawback for someone like me that has given up both cable and landline phones for an all-wireless lifestyle.
Incidentally, if Clearwire doesn't get WiMax operating soon, I'll probably end up going with Cricket's HSDPA without contracts.
@Randy549 - isn't that kind of a duh? Rural might be receptive, but the per subscriber acquisition costs are going to be much higher, not to mention build-to-use ratios. Economies of scale. Go where the people are.
Earthlink was doomed from the start because it committed to deploy the network using a Tropos Mesh product, that out of the box was limited to dual radios that could not provide the Broadcast and Backhaul functions cost effectively in any true Broadband Wireless network. In short in order to provide the coverage needed in the Philly market the provider had to deploy 3 to 4 times as many Mesh Nodes/sq mile as planned in the business model. In addition it proposed an unrealistic Free type service offering to some subscribers, attempting to appease Digital Divide advocates.
Whereas Sprint has a solid cost model in place, has extensive experience in modeling a Service and is able to deliver serious broadband services in designated coverage areas, they will succeed as set providers begin releasing new handheld and portable devices. They will use these new networks to test the various vendors Base & Customer devices and eventually standardize on one or 2 sources.
The only limitation I see in Sprint and Clearwires long term plans is their dependance upon the 2.5Ghz spectrum which will show its limitations when these folks try and extend these network into distant suburbs and rural markets-Foliage and select structures will kill this spectrum.
What these folks and WiMAX needs to be competitive with future 700Mhz LTE networks, is a means to deploy either AWS-1, 700Mhz or the new White Space (Unlicensed) spectrum networks.
Jim A
Once coverage is as good as the 3G networks this is going to be a great option for anyone traveling or rural areas with no wired broadband.
speed tests and info on using XOHM in other cities:
http://www.4ginfo.com/
I don't think the Earthlink analogy applies to Wimax.
"In practical terms, WiMAX would operate similar to WiFi but at higher speeds, over greater distances and for a greater number of users. WiMAX could potentially erase the suburban and rural blackout areas that currently have no broadband Internet access because phone and cable companies have not yet run the necessary wires to those remote locations. "
ALSO:
A WiMAX tower, similar in concept to a cell-phone tower - A single WiMAX tower can provide coverage to a very large area -- as big as 3,000 square miles (~8,000 square km)
Even if the cost of each Antenna around $10m ( I have no idea how much each cost, just a number), covering 100 Big cities will only cost $1B which is not bad. Sprint already has the fibers running and owns the towers. So the cost should not be that bad.
Also do not forget that people will like the mobility of this device because they will save money by not paying to two provider for the home service and their Star bucks (T-mobile) service.
"In practical terms, WiMAX would operate similar to WiFi but at higher speeds, over greater distances and for a greater number of users. WiMAX could potentially erase the suburban and rural blackout areas that currently have no broadband Internet access because phone and cable companies have not yet run the necessary wires to those remote locations. "
ALSO:
A WiMAX tower, similar in concept to a cell-phone tower - A single WiMAX tower can provide coverage to a very large area -- as big as 3,000 square miles (~8,000 square km)
Even if the cost of each Antenna around $10m ( I have no idea how much each cost, just a number), covering 100 Big cities will only cost $1B which is not bad. Sprint already has the fibers running and owns the towers. So the cost should not be that bad.
Also do not forget that people will like the mobility of this device because they will save money by not paying to two provider for the home service and their Star bucks (T-mobile) service.
It may take some time to catch on in the over-regulated duopoly that exists in North America, but no way WiMAX will fail as a standard in the marketplace. Have you missed all the emerging world markets where wireless will be the norm? Do some research and read between the lines and you will see that this is Intel's next big play for the new term future.
Everything, from "Atom" on is geared for this push for ubiquitous computing. Google also backs this
technology, and Craig McCaw is behind it with Clearwire and a host of other industry leaders as investors in WMAX.
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by jamworks
October 4, 2008 9:32 PM PDT
- As 3G cell phone users gradually die of brain cancer, or automobile accidents, WiMax will play a major role in the home.
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