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Sprint remains optimistic that its expensive investment in WiMAX, the high-speed wireless networking technology, will pay off in spite of the grave economic conditions now facing the industry.
The company celebrated the launch of its nine-day-old Xohm (pronounced “zoam,” like “roam”) WiMAX network in Baltimore today, site of the first such network in Sprint’s nationwide rollout.
A major part of recouping its multibillion-dollar investment on the network now comes down to getting customers using it. That makes it important for Sprint (NYSE: S) and its partners in WiMAX to ensure that there’s a ready supply of desirable, compatible devices.
As a result, today’s event — which included the ceremonial cutting of a telephone wire cord — served in large part to highlight new WiMAX notebooks and the companies’ efforts to promote devices with built-in WiMAX chipsets.
“In September, we celebrated the network launch. Today is all about the embedded model and the WiMAX chip,” Barry West, president of Sprint’s Xohm business unit, told an audience of media and Sprint’s Xohm partners. Sprint executives said eight new WiMAX laptops from major vendors are now available, with 20 more under certification review. The company and its partners also plan to debut a slew of additional, compatible devices.
Sprint, currently the nation’s third largest wireless carrier, is banking that WiMAX will boost its 51.9 million customer base. But the effort, a two-year, multibillion-dollar project, is arriving in the midst of the nation’s biggest financial downturn in nearly five years — a fact that has industry watchers even more closely scrutinizing the effort and weighing its chances for success.
Sprint’s not alone in spending big on the rollout, with partners including Intel, Google, Comcast and Time Warner Cable. Their plan ultimately calls for Sprint to move the Xohm network into a new, $14.5 billion joint venture being formed with Clearwire (NASDAQ: CLWR), a transaction currently under federal regulatory review.
While noting that Sprint’s activation last week of the WiMAX network came on what became U.S. markets’ worst day since “Black Monday” in 1987, Sprint CEO Dan Hesse said the economic turbulence would not deter the plan.
“We are optimistic that Clearwire will be approved this year, and our partners bring more than capital into it — though capital is a good thing to have right now,” Hesse said, drawing laughter.
During a later question-and-answer session, Hesse said Sprint and its partners in WiMAX have little to fear from the downturn.
“We can’t predict the future, but we are not seeing dramatic impact — though there has been subscriber impact on the business side with the banking industry,” Hesse said, adding that economics pose a greater financial threat to vendors in the wired telecom industry.
“The big concern is that more users are likely to cut the cord and keep the wireless service,” he said. “We are monitoring things very closely but I think the industry is relatively insulated compared to other industries.”
Devices on the way
Sprint’s Xohm mobile broadband WiMAX service marks a new business model, according to the carrier. Traditionally, wireless service has combined subsidized handset devices with service agreements. With Xohm, users buy WiMAX-enabled devices — notebooks, dongles and modems — independently at retailers such as Best Buy and Amazon.com.
[cob:Special_Report]Currently, there are Xohm-branded Samsung Express wireless cards retailing for $59.99, and ZyXEL modems for $79.99. Additional WiMAX devices arriving this year include a ZTE USB modem, Intel Centrino 2 WiMAX notebook PCs and the Nokia N810 WiMAX Edition.
During today’s event, Sprint executives said eight new laptops containing WiMAX chips are now shipping from Lenovo, Acer, Asus and Toshiba, with 20 more notebooks under certification review. Dell, Panasonic, Samsung and Sony are slated to add their offerings to the list in 2009.
The wireless carrier also said it plans to push out the industry’s first dual-mode 3G/WiMAX access device by year’s end. It did not elaborate on what kind of device it might be.
The arrival of a combined 3G/WiMAX device could be an important transitional product, as Xohm’s national network rollout won’t be completed for several years. In the meantime, users will be able to “downshift” in locations where WiMAX has yet to become available, Sprint’s executives said.
According to Sprint, customer response to Xohm has been stronger than predicted, though executives admitted that initial feedback has been mixed due to network glitches during build-out.
“There have been a very, very few who have said it’s not working, but the take-up rate is extremely encouraging and more than we expected,” West said during today’s event. He added that during the first four days after launch, the Xohm Web site received 30,000 hits from visitors, with many asking Sprint when the service was coming to their city.
West also explained Sprint’s rational for choosing Baltimore as a WiMAX launch site, drawing more laughter in noting that some colleagues said he was “out of my tiny mind.” The city’s vast amount of water, he noted, is typically not WiMAX network friendly.
“Baltimore is a challenge, and we wanted that challenge for the engineers — and it’s representative of American cities,” West said.
Following Baltimore — where the network is actually about three-quarters complete — Sprint plans to launch the network in Chicago and Washington, D.C., and is also developing networks in Boston, Providence, Philadelphia, Dallas and Ft. Worth.
