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Sprint’s Xohm and Backhaul Bottleneck
Sprint is blaming a puny backhaul network and a paucity of backend bandwidth for some of the delays with its cursed, WiMAX technology-based Xohm network, which will offer broadband speeds over wireless when it goes live later this year. They might not be alone, as carriers worldwide would have to deal with the problem of a T-1-based backhaul network. AT&T and Verizon say they’ll be fine, that they’ll have ample capacity, but then they aren’t likely to have a nationwide 4G network for some time, so who knows.
A few weeks ago, after having a conversation with John Roese, chief technology officer of Nortel, about 4G Wireless, I came away with the conclusion that as 4G wireless broadband spreads, the biggest bottleneck — and thus the biggest opportunity — will be backhaul. Roese pointed out that bandwidth demand per base station will be closer to 2 Gigabits/second. The solution, experts say, is running fiber to as many base stations as possible.
The Hidden Cost of Unlimited Plans
To say that unlimited wireless plans lead to increased usage of voice minutes and data is obvious, our friends at Techdirt remind us. They argue that the real upside is “new applications and services that simply weren’t possible before,” much like how the move away from a “pay-per-hour solution” helped the Internet bloom. Good point! On the flip side, the wireless carriers are having to hustle to upgrade their backhaul infrastructure.
“What we’re seeing with the Simply Everything product from Sprint and with the rest of the industry is that the increase in unlimited data and voice plans exponentially increases the backhaul requirements of 2G and 3G networks,” Craig Cowden, Sprint’s vice president of cable/VoIP and access strategy, commented during a panel at CTIA Wireless 2008 in Las Vegas, Telecommunciations Magazine reports. As a result, the company is working on getting cable companies and Ethernet-over-copper service providers to switch away from the now archaic T-1 connections to higher speed pipes. In other words, for carriers — unlimited plans do come with a plan.
Sprint’s own activist investor
Add a vocal Carl Icahn-style activist investor to the long list of issues Sprint needs to tackle in 2007: build WiMAX, fix the Nextel integration, cut workers, coax back those high-end customers . . . now also figure out how to manage press-friendly pissed off shareholders.
The Wall Street Journal published an article this morning about disgruntled investor Ralph Whitworth, who’s investment firm reportedly owns a $500 million stake, or almost 1%, of Sprint (Reuters report here). Whitworth wants changes at the recently poor performing carrier, including less spending on capex and a sale of its fiber-optic network and long-distance business.
The interesting part is that Sprint hopes its WiMAX network will help with its lagging numbers behind Cingular and Verizon Wireless. And Sprint plans to spend around $3 billion on the rollout.
But Whitworth sees WiMAX as “a drain on the company’s overall cashflow” and “too speculative an investment,” according to an unnamed source in the WSJ. (In double PR talk that could easily be Whitworth himself.)
Sprint’s shares actually rose 2.97% (and rising) today, likely as a result of the report. That could mean the street agrees with the uncertain WiMAX assessment, or just that Sprint needs more drastic changes. Or likely both. (For what it is worth, the rise in shares means Whitworth’s firm’s $500 million stake went up to $515 million - after the story appeared.)
Interestingly Sprint actually sees its WiMAX investment as less of an investment than it would make on other forms of network upgrades. Sprint says it will overlay its WiMAX network onto its 3G network at one tenth the cost of what it takes to build out its 3G network. I’m not sure capital expenses are Sprint’s issue, just spending money on networks (Nextel, WiMAX) that might have integration issues, is a bigger problem.
Sprint’s Lil WiMAX Details
CTIA 2007: If Sprint’s mobile WiMAX network weren’t the first of its size and kind in the U.S., we wouldn’t be following its future rollout details like paparazzi mob Britney Spears. But it is, so we will.
Sprint named a dozen or so more markets for its WiMAX rollout and the chosen vendors for each location, and also announced some new hardware partners. Sprint now has 19 markets announced for network vendors Nokia, Samsung and Motorola (see details below the fold)
We talked with Atish Gude, Sprint’s senior VP of mobile broadband operations at Sprint’s CTIA press conference, and asked him if the company had talked to Clearwire about any roaming deals or if he could envision such a partnership. He said he thought Clearwire’s technology was far from having a mobile element yet, and though the companies had had some preliminary talks, there was nothing meaningful to announce.
The details:
- Motorola will build out Chicago, Detroit, Grand Rapids, Indianapolis, Kansas City and Minneapolis.
- Samsung will develop Baltimore, Boston, Philadelphia, Providence and Washington D.C.
- Nokia will take care of Austin, Dallas, Denver, Fort Worth, Portland, Salt Lake City, San Antonio and Seattle.
- There are now 19 markets named for the WiMAX launch — Hopefully the Bay Area will fall in there somewhere, sometime soon.
- Samsung will develop PC cards for WiMAX and dual EVDO/WiMAX.
- ZTE Corporation will supply WiMAX devices including PC cards — express and USB — as well as modem products.
- ZyXEL Communications will develop modem products.
EVDO Rev A: Live in the USA
It was about a month and a half ago that Verizon Wireless made its EVDO Rev A network official, announcing the first markets and a Rev A USB card. Now the company says it will offer a Rev A ExpressCard, the V740 by Novatel Wireless for $179.99 with a new 2-year customer agreement or $229.99 with a new one-year customer agreement.
So both Verizon Wireless and Sprint are rolling along with Rev A. The speeds listed on the left are from a live test that Om did on Sprint’s Rev A network in San Francisco. How do the rollouts stack up? Here’s the latest info:
Sprint Nextel: According to Sprint’s most recent figures their Rev A network covers “125 million people.” They are aiming to cover the entire EVDO network (which they say reaches 209 million people in the U.S.) with Rev A by the end of the year. Sprint offers five Rev A computer cards.
Verizon Wireless: As of March 1, Verizon says its Rev A network covers 135 million people. According to Telephony Online the Rev A rollout is already moving beyond that, and will cover the company’s 200 million plus EVDO footprint before the end of the year. There are two cards, the V740 Express Card and the USB720 that currently work on EVDO Rev A network.
WhyMAX?
The day is approaching where average consumers will want a true web-browsing Internet-style experience on mobile devices. It might not be anytime soon, but it’s coming nonetheless. For wireless carriers who are now trying to get subscribers to access mobile data over 3G it is both a blessing and a curse — as many have pointed out too many subscribers that might tune into (and upload video to) a truly-mobile YouTube on cell phones could clog a 3G network pretty fast.
What does that mean? Carriers have to upgrade their networks, and are now making the tough and expensive decisions about which way to turn for 4G (I know, it seems like we just got to 3G!). Does a carrier keep upgrading its 3G network and aim for what the telco world calls “long term evolution” (LTE) — 4G network technology from the cellular world which is many years from prime time? Or do carriers start building alternative data-specific networks with technology like mobile WiMAX that is available now?
Carriers are making different decisions based on a variety of factors: How competitive their 3G footprints are, how much spectrum do they own that can be dedicated for mobile WiMAX, and how they anticipate the growth of data-hungry mobile web subscribers. WiMAX is the wireless word of the year, in no small part to Clearwire’s not-so-smooth IPO efforts and Sprint’s (overly?) ambitious network buildout.
While the success of WiMAX is by no means assured, it is becoming a more attractive choice for certain carriers. Mobile WiMAX might be argued as not officially 4G, but it is a precursor. That’s why time to market is the biggest reason why carriers are starting to look seriously at mobile WiMAX. WiMAX is at least two years ahead of LTE in market time, writes ABI Research analyst Ian Cox in a recent report.
For a third place U.S. carrier like Sprint (which is also losing important post-paid subscribers) the company needs to do something sooner rather than later. As this article points out, Sprint needs to do something aggressive to stay competitive with CDMA-leader Verizon Wireless:
Being the smaller player means Sprint has no leverage to pressure Qualcomm, the mother of all sources of CDMA technology, to help it build a network more advanced than Verizon’s. In short, following the conventional CDMA route could leave Sprint stuck permanently in Verizon’s shadow. — VOIP News
Even the CEO of Vodafone recently pointed out at 3GSM that mobile WiMAX is now a major player for future wireless broadband networks, based largely on time to market, according to Seeking Alpha.
Mr. Sarin admitted that LTE is far from being implemented, let alone standardised, and astonished his audience by suggesting that LTE may not even be supported by Vodafone in the future. – Seeking Alpha
Vodafone even has some WiMAX bets in countries like France, Bahrain, Greece, Malta, New Zealand, and South Africa.
Another reason carriers are considering mobile WiMAX is that it is being touted as a cheaper (in some ways) technology to building and upgrading 3G networks. Dan Lockee, an analyst at Pyramid Research, wrote recently that WiMAX spectrum has been significantly cheaper than 3G spectrum, and “in some cases, WiMAX spectrum has been less than one-thousandth of the cost of 3G spectrum for a given geographic area.” Though, he also points out that WiMAX spectrum will get more expensive as more regulators release lower frequencies to be used for mobile WiMAX.
When comparing infrastructure to infrastructure, deploying mobile WiMAX networks is often thought to be cheaper than deploying 3G networks, though currently, ABI’s Phil Solis says the costs are actually about the same:
“what many companies in the industry are finding out is that the costs are approximately the same when comparing apples-to-apples (including, or not including, site acquisition, towers, other equipment, and backhaul for both 3G and WiMAX). This is not to say that it will remain this way, but just that at this point in time, mobile WiMAX deployment costs are on par with 3G deployment costs.”
Thinking about costs also depends on what networks carriers have already built and how they are upgrading. The costs are varying depending on the degree of the upgrade. Solis says that when Sprint makes its cost comparison claims, it is comparing the addition of mobile WiMAX to its existing 3G infrastructure:
“Existing base stations will be used (and some new ones added), other existing equipment at the site, and the existing backhaul. So what Sprint is really saying is that it will be overlaying mobile WiMAX onto its 3G network at one tenth the cost of what it takes to build out its 3G network. In other words, Sprint is greatly expanding its access speeds and capacity above and beyond 3G, and is doing so with a marginal increase in cost (a 10 percent increase).”
WiMAX might have lower costs and be ready now, but a lot of carriers are still aiming for LTE. ABI says network operators will invest a total of almost $18 billion in LTE capital infrastructure over the period between the end of this year and 2014.
There’s a lot of choices for carriers as they are forced to become mobile broadband suppliers and not just voice networks. While it’s not clear which one will be the “right” choice in the long run, we’re likely to see some pick WiMAX as the right choice for right now.