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.
Like EarthLink, Sprint is targeting incumbent cable and DSL providers with its service. The big difference is that it’s also offering mobility. But…most people subscribing to the service will likely only be as mobile as they can be with an air card plugged into their laptop.
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.
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.
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.
Reardon overlooks three things:
- Value: Twice the speed of cellular at half the cost.
- Convenience: No 2-year “contracts”, with day passes available.
- Bandwidth: Cellular companies won’t have 120MHz available, now or in the future.
A “pick two for life” WiMAX option covers two different WiMax devices for $50 a month — for the life of your service. Cellular costs $60/mo (with a 2-year contract) for half the speed.
What Intel did with Centrino in 2003, they’re doing with WiMAX in 2008. Clearwire plans on covering 16 million people next year, 140 million POPs by 2010 (pdf) and should be cash positive in 2011-2012.
WiMAX was engineered for this job, unlike “city clouds” built using unlicensed Wi-Fi. AT&T won’t have LTE for 5 years, according to AT&T’s Hank Kafka, VP of Architecture. And where will it get spectrum?
WiMAX penetration rates are based on real-world developments that result in an order of magnitude cost reduction over cellular. After an expensive, system-wide forklift upgrade to LTE, cellcos will remain bandwidth constrained and without indoor penetration. Integrated WiMAX/Wi-Fi chipsets, on hundreds of millions of laptops and handhelds, will go indoors seamlessly. Cheaper. Faster. Better.
WiMAX may have the biggest impact outside the United States.
BSNL has deployed WiMAX across 10 cities in India, with the help of SOMA Networks, and aims to cover 16,000 to 18,000 rural villages by the end of 2009 while Indian telco Tata is rolling out a $1 billion WiMAX network in 15 major cities. By 2012, the Indian government hopes to link 500m citizens to the internet via more than 100m broadband connections and devices, the bulk of them wireless. Some analysts predict 21 million WiMAX subscribers in India by 2014, about the same as the predicted number of U.S. WiMAX subscribers at that time.
More than half the 6.6 billion people on Earth use cell phones, a billion or so connect to the Internet, but only 400 million people have broadband connections. WiMAX expects to thrive in developing nations while U.S. 3G subscribers have grown 80 percent to 64.2 million during the past year. WiMAX expects to get a big piece of that growth and has a 3-5 year technology lead.
Embedded Wi-Fi chips could end up in almost a billion consumer electronics devices by 2012, according to market researcher In-Stat. In-Stat said the fastest-growing embedded Wi-Fi segment is mobile handsets. By 2011, dual-mode cell phones will surpass PCs as the largest category of Wi-Fi devices, according to In-Stat.
Clearwire, Sprint, Cable and Google are going for the kill. I believe they will succeed. I don’t own any tech or telecom stocks, but I think WiMAX was the best move Sprint (and Intel) ever made.
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