Beating the WiMAX Drum

I spent two days at NXTCOMM last week and that was more than enough for me. It seems the show is still hurting because of the split in 2006. The conference track I spoke at, WiMAX Strategies, was nontheless a good event. Many major industry players are present and the room was packed with more than 150 people. An opening keynote from Barry West, CTO of Sprint Nextel and President of Sprint 4G, and a closing keynote from Scott Richardson, the newly minted Clearwire COO, more than made up for the absense of the WiMAX Forum.

It was the same witty and convincing Barry. He went through many aspects of Sprint's WiMAX plans. Most were reiterations of previous announcements. Being the gaming guy, I cannot help but reporting that he talked about Webkinz, a virtual world set up for marketing Ganz toys to kids. The point he was making was that his grand daughter starts touching the web at a very early stage and her toys have Internet identities. Some of the key remarks Barry made include the following:

• Handoff is still an issue but it will be fixed soon with collaborations among vendors.
• WiMAX is not another voice network. It’s a true broadband network.
• Sprint will be very interested in leveraging its knowledge of its customers and generating “upside revenue” from the Web (the NTT DoCoMo model of some sort?).
• 3G technologies are not affordable for the volume of data demanded by mobile broadband and Mobile WiMAX delivers 10 times of 3G economics.
• Sprint will soft launch in Q4 2007 and then commercial launch in April 2008 to cover more than 100M pops in 35 markets before the end of 2008. In 2009+, it will focus on success-based build out and support a suite of embedded CE devices.
• The key focuses of Sprint’s new model are embedded devices, mobile Internet usage models and applications, and elimination of subsidies.
• Mobile carriers face new challenges with the new business model. They need to identify people as customers, instead of handset. There will be new identity management and authentication issues. For instance, one person might have multiple devices connected to the network.
• Back office is very important to manage the new business model and the myriad of devices and Sprint is spending a lot of time fine-tuning its back-office technologies.
• In responding to my question about the iPhone, Barry said that iPhone is a great device but it does not have true Internet connection. He won't say whether the exclusive 5-year AT&T/Apple contract will prevent the emergence of a WiMAX iPhone in the next five years.
• LTE will be a great technology but it is 3 year late.
• Mobile WiMAX will lock up CE devices (it’s real estate). If CE manufacturers already embed WiMAX, why should they spend another $15 to integrate other mobile broadband technologies.
• Mobile WiMAX chips currently cost about $25-45 and need to come down to under $15.

Scott Richardson also delivered a very good keynote and he leaked some interesting information about their progress. Since his Intel years, Scott has been involved in the WiMAX industry for a long time.

• DSL replacement is not Clearwire's strategy. Clearwire will support mobile and portable devices and even bundles of devices. The model will be similar to Sprint's.
• Clearwire's spectrum covers 223 million people and 85% of the pops are from the top 100 markets. It’s currently expanding into Tier-1 market, including Seattle and Honolulu.
• Clearwire currently charges $25-50 for the residential gateway service (768kbps to 3 Mbps guaranteed and up to 1.5 M-6Mbps). The ARPU is around $35.
• In Q3/Q4, Clearwire will launch its PC Card service. The price will be $50-60 for 1-1.5 Mbps.
• Subscribers can add VoIP for another $29.99.
• In markets Clearwire has operated for more than 12 months, it achieved 10% penetration in 18 markets, 7-9% in 4 markets, and 5-6% in 5 markets. The highest penetration is in Boise, Idaho, currently 20%.
• One in five Clearwire customers are subscribe to another ISP. This indicates Clearwire's services offer additional value prosposition. In May, 69% of Clearwire’s new subs either switched from Cable (40%) or DSL (29%). Only 27% upgraded from dial up, compared to 59% in Q1.
• Clearwire will turn the corner at 300,000 subscribers (EBITDA positive?).

There is no question that besides Ericsson, all the major vendors are sold on WiMAX. Now it's up to Sprint and Clearwire to prove to the world that mobile WiMAX will become a major piece of the mobile broadband pie. Our forecast predicts that by 2012, mobile WiMAX will account for 8% of global mobile broadband subscribers.