Sprint, Clearwire and Friends Unite to Save WiMAX - Finally

| May 9, 2008 | Wireless Infrastructure | Competitive Intelligence Report

| Analysts: Peter Jarich, Virginia Lee

Current Perspective: Positive/Neutral
Vendor Importance: High
Market Impact: High

Event Summary

May 7, 2008 – Sprint Nextel Corporation and Clearwire Corporation announced an agreement (subject to approval) to combine their next-generation wireless broadband businesses to form a new wireless communications company named Clearwire that will focus on the deployment of a nationwide U.S. mobile WiMAX network. The new company also received an initial investment of $3.2 billion from Intel Corporation, Google Inc., Comcast Corporation, Time Warner Cable Inc., and Bright House Networks.

Analytical Summary

• Current Perspective: Slightly positive on the creation of an independent national WiMAX service provider through the combination of WiMAX businesses from Sprint and Clearwire along with investments from strategic partners. The move answers questions as to how Sprint will finance its WiMAX build-out while helping to push WiMAX forward as a mobile broadband reality…and a stronger competitor to any future LTE development. Sprint’s need for added WiMAX support, however, still tarnishes WiMAX’s image while the operator’s existing 2G, 3G and WiMAX headaches could yet weigh upon the new Clearwire.

• Vendor Importance: High to Sprint and Clearwire because the new arrangement provides necessary funding and spectrum to deliver a nationwide 4G mobile broadband service. Although Sprint could have gone it alone, the joint venture raises Sprint’s credibility in the marketplace by squelching rumors concerning the viability of its WiMAX plans while providing the funding and channels necessary for a robust launch. What’s more, as a larger – more likely to be successful – service provider, the new entity should enjoy better leverage with existing and future vendors.

• Market Impact: High on the WiMAX infrastructure and broader WiMAX markets. Though emerging market applications are driving momentum for mobile WiMAX, Sprint has become perhaps the highest-profile example of WiMAX as a mobile broadband technology (something close to the vision for 4G). While WiMAX will move forward without the operator, Sprint’s ability to stabilize (and expand) its WiMAX build-out is important in supporting the market and helping to make mobile WiMAX look good.

Recommended Competitor Actions

• WiMAX equipment vendors not currently on the Sprint supplier list have a new opportunity to break into the operator’s network plans. Despite being initially excluded, vendors such as Alcatel-Lucent, Huawei, Nortel and Alvarion have proven their WiMAX prowess. These vendors need to get in early, pitch their value and make the hard sell.

• NSN should take this opportunity to further prove out the value of its Apertio acquisition. It is one thing to serve as the user database for Sprint’s XOHM but quite another to add in support for the new Clearwire’s cable company partners (integrating subscriber data that is located outside of Sprint’s network). If NSN can pull of this feat, it will not only justify the value of Apertio to Sprint but to other would-be customers.

• Starent needs to vie for a part of the Clearwire ASN business. Supplying HA functionality into Sprint’s XOHM was a nice win, but could be attributed to the vendor’s role in Sprint’s 3G network. As Clearwire moves forward on its launches, this role becomes less meaningful. It also, however, gives Starent a new opportunity to pitch its ASN capabilities and prove its capabilities to other WiMAX players.

• Cisco should leverage existing relationships with the cable companies to push itself into the Clearwire network. While it’s unclear how involved the cable investors will be in Clearwire’s network rollout, they will want to ensure that their networks play well with the new WiMAX network. Cisco’s played an important role in their networks. It might be a stretch to expect that this could help Cisco sell WiMAX base stations into Clearwire, but even selling core network kit could help to demonstrate the many ways Cisco can support WiMAX operators.

• Where backhaul issues are at the heart of Sprint’s delayed XOHM launch, microwave vendors should make a push for more of its business. Existing partners such as FiberTower clearly have had a difficult time supporting the operator’s network requirements. With tremendous financial support, the new Clearwire now has the funds to support buying its own links. Microwave vendors should take advantage of the situation.

• Verizon Wireless should focus on moving more aggressively with its LTE plans. The operator will now be under pressure to get the 4G technology up and running on its network in order to compete with the Clearwire mobile WiMAX network. As such, a succinct strategy defining how Verizon Wireless will be moving towards bridging the gap between its current mobile broadband access offering and the promise of LTE becomes even more important.

Recommended End User / Customer Actions

• End users need to be mindful that mobile WiMAX service will not be available overnight from the new Clearwire. The operator not only has to continue to build-out the network but also contend with integration issues. Even though the pairing of Sprint’s XOHM business and Clearwire appears smart, bringing the two organizations together will affect service roll-out.

• Enterprises should consider engaging with Sprint (and Clearwire going forward) now, as mobile WiMAX could be good for supporting enterprise applications. Mobile WiMAX promises to extend high-bandwidth services out to rural and suburban areas and bring better QoS to the Internet. As a result, remote users should gain access to full enterprise applications on laptops versus a subset of apps received on mobile devices over the cellular network. Clearwire, for its part, should be interested in courting enterprise users to jumpstart usage of the new network.

• Following along on the business case for enterprises and mobile WiMAX, enterprise users need to specify their requirements for the network. What type of services will be necessary? What types of devices need to be available? Are they different from current mobile devices offered for cellular networks? These demands will be important for establishing and driving forward the ecosystem surrounding the Clearwire network.

• Other operators need to be careful to understand deployment models for mobile WiMAX. Most mobile WiMAX deployments around the world will not be fully mobile; relying on WiMAX to deliver fixed and portable services. This focus, however, will impact the WiMAX ecosystem in terms of device availability and device features. LTE looks to be focused more on fully mobile services, but here timing could be an issue.

CLIENTS ONLY

Competitive Positives and Concerns

Recommended Vendor Actions

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