Sprint and Clearwire - It had to be - Network Future?

Now that Sprint will acquire the remaining 50% of Clearwire that it already did not own, what does this say about the near term and future?  While there are many stories about the financial side, most industry insiders knew that the Clearwire acquisition was a strategic imperative. Back in October when Sprint moved to take more control, I offered some thoughts  on why Sprint's long term control of Clearwire made sense. Much of the logic is rooted in the long term network strategy.

Network Vision

Sprint's network strategy hasn't changed since 2010 with the introduction of its Network Vision.  Many analysts derided the price tag and its hosting positioning but today, Sprint's bet seems to have turned out well.

When Sprint announced Network Vision in 2010, it seemed a bit presumptuous that 2.5 GHz was included into the spectrum chart especially since Clearwire had not committed to the effort and especially Sprint did not control any of that spectrum.  Clearwire had its own separate network deployment strategy with capital already sunk in specific markets using WiMAX to power Sprint's 4G data play. 

In order to expand markets, it was logical that Clearwire take advantage of Network Vision but that didn't happen. Executive tensions (between Sprint and Clearwire), the need for Clearwire corporate independence and lack of capital to expand contributed to stalling the grand Network Vision execution.  With the urgency to stay in the LTE game against wireless competitors, Sprint worked with Clearwire on specific markets to deploy the TD-LTE flavor in specific 'high data tonnage' markets.  It was clear, Clearwire would provide the complement to Sprint's near term PCS-based LTE strategy.  

Fast forward to 2012, what has changed?  The answer - Softbank.  Though the Softbank-Sprint acquisition approval is scheduled for mid-2013, Softbank's $3.1B bond purchase in October freed Sprint to make specific strategic moves beyond Clearwire in the form of US Cellular subscriber and spectrum acquisition in November. 

Back to the 'new' Sprint network,  surprisingly, the network slide hasn't changed.  To Sprint's credit, they're executing on their vision.

But what has changed is a bit more detail specific to LTE.  Today's 800 MHz band primary is envisioned for voice. With better in-building penetration properties, having voice is still the 'bread and butter' revenue bearing service.  800 also hosts the soon to be discontinued iDEN platform. Eventually 800 will also run LTE with VoLTE.  However, 800 LTE is more than 2-3 years away. The near term LTE solution is in the PCS band. But with only a 5 X 5 deployment and also running 3G, the analyst community questioned whether this could handle increasingly high-data usage especially in light of an unlimited data service proposition. 

Enter TD-LTE and Clearwire

To address high data use, Sprint engaged Clearwire in a data offload arrangement.  Rather than a national TD-LTE view, Sprint would identify specific high-data tonnage markets for Clearwire to buildout its TD-LTE. The concept: with plenty of 2.5 GHz spectrum, Clearwire (and Sprint) could address subscriber [retail and wholesale (think data MVNOs)] capacity and still offer a speed differentiation. Yet with an independent Clearwire, Sprint clearly had no control of its future. Therefore, it was a strategic imperative for Sprint to take over Clearwire.   Sprint also had to act as the financial community was advocating Clearwire sell "excess" 2.5 spectrum to raise cash.  This flies in the face of any network planner as history has shown that spectrum always appreciates and the overused 'spectrum is the lifeblood of a network' adage still holds.

Two "2.5 GHz Dollar" Questions 

Assuming that the Clearwire acquisition goes through, will Sprint expand or accelerate the original Clearwire deployment plan?  I say yes, they have to eventually.  Whatever the TD-LTE markets previously agreed upon, it only address specific high density markets.  To offer a broader coverage story that rivals competitors, Sprint will need to show a bigger TD-LTE footprint.  It's taken for granted that a data-offload (of PCS LTE) strategy is still in play.  

There are two questions in my mind that Sprint need to address.  First, a broader future question is when Sprint will exploit the national 2.5 GHz coverage.  With a national footprint, Sprint ensures a richer wholesale platform and deeper capacity.  Sprint strategy guys have likely played this scenario out.  With less than ideal propagation (relative to 800 (and 700)), small cells and associated backhaul will play a prominent role (read more capital).  The second is more of a technical question.  When will Sprint take advantage of its potential speed advantage. With aggregating spectrum, Sprint can position speed and unlimited as a marketing differentiator much like Verizon Wireless' coverage.  Of course the answer is when the TD-LTE ecosystem commercially supports this on the infrastructure and device side.

Stay tuned for more Sprint moves in 2013. 

DISH Has Terrestrial Approval - now what?!

Now that the FCC has approved terrestrial use of DISH's 40 MHz of spectrum (2000-2020 MHz and 2180-2200 MHz), what are its options?

1. Build it out - it's capitally intensive to build out a national network so a wireless carrier partner is necessary.  Why a carrier? It's in their core competency to implement and run networks.  Sprint is in the best position to meet DISH's wireless buildout goal with its Network Vision (spectrum hosting capability) strategy.  Stating the obvious - having a carrier such as Sprint host allows DISH to bring services up quickly and minimize a huge self-built price tag.

2. Sell the spectrum - getting money in the short term is always desirable.  But as the industry has seen, spectrum will always appreciate.  Yet there's been precedence for this. Spectrum Co (cable companies) sold its AWS spectrum to Verizon Wireless. They realized an appreciation in the base price from when they bought it in 2006.  More important aside from the money, cable companies (Cox, Comcast, Bright House and Time Warner) has strategic wireline and wireless possibilities with Verizon/Verizon Wireless.  With this in mind, DISH could cut a sale deal and wholesale at favored rates from the buyer. Presumably, the spectrum buyer will be a wireless carrier. Sprint would make the most sense.

BUT........
 

Don't forget the devices that will run on the DISH spectrum. Device and chip makers haven't exactly created product yet to meet this need. There is a ramp up time to incorporate it into the product portfolios. It doesn't happen overnight - look at the time in which Sprint/Clearwire announced TD-LTE 2.5 GHz support to when devices will have that band and technology incorporated.  This is a factor in both the above scenarios.

Let's see what DISH does......... 

Why Sprint + DISH Makes Sense

Today's Bloomberg report  suggesting a possible deal where Sprint hosts DISH's spectrum is logical. While DISH has held this spectrum for some time, they have yet to throw services on it. DISH needs a mobile component as all their fixed line rivals (e.g., AT&T, Verizon and Cable Cos) have or will have mobile capability.  The media and industry speculation with Google in mid-November has yet to materialize.

Keeping Up with Competitors

From a fixed line view, these competitors are pushing for subscribers being able to access content in any device (i.e., smartphones, tablets, PCs, TVs, cars?). Of course the service provider will love to upsell an alternate access medium to customers. While DISH is a capable satellite provider, it has little experience in the terrestrial side. A national buildout of their MSS spectrum would be capital intensive and outside of their core competency. 

Enter Sprint

Sprint's big bet in their 2010 Network Vision strategy that hosting spectrum would be an element of its wholesale strategy. There was much promise as then cable company (SpectrumCo)  partners had a near national AWS footprint and Clearwire needed a platform to expand to new markets. So far, only the nearly defunct LightSquared was the only shortlived spectrum hosting deal. Therefore, any spectrum holder who needed to bring up service is fair wholesale game.  With the Softbank cash infusion,  Sprint has publicly stated that it has the flexibility to do more things.  Aggressively courting DISH and hosting MSS spectrum should be a no-brainer despite any previous tension on MSS spectrum interference with with Sprint PCS operation.

Possibilities

It's an inevitability that MSS will run LTE. If MSS bands were to increase Sprint's LTE capability beyond their 5X5 channel implementation, a wider LTE band helps Sprint LTE capacity allowing Sprint's Unlimited data proposition to extend. Speed is another factor in which channels can be aggregated to provide a fatter LTE pipe.  

A DISH deal allows for a long term alternative (and a lever) to being locked in with Clearwire's TD-LTE. At a minimum, a DISH+Sprint PCS/MSS LTE pipe complements  any data offload.