Sprint Rescues Clearwire

Sprint has agreed to pay up to $1.6 billion to struggling wholesale wireless provider Clearwire over the next four years, ending the near-term threat that Clearwire could run out of cash to operate its business and possibly enter bankruptcy.

In large part, that is why Clearwire has made interest payments totaling $237 million on its first-priority, second-priority and exchangeable notes which were due Dec. 1, 2011, and which had been in danger of default by Clearwire.

The deal includes possible pre-payments for LTE services and potential equity investments. Sprint has committed to providing additional equity funding to Clearwire in the event of a future Clearwire equity offering. If Clearwire raises new equity between $400 million and $700 million, Sprint will participate in the offering on a pro rata basis up to $347 million, consistent with Sprint’s current voting interest of 49.6 percent on the same terms and conditions as other participating companies. 

The agreements modify prior wholesale pricing agreements and provide Sprint with unlimited access to Clearwire’s WiMAX network. Under the terms of the agreements, Sprint will pay Clearwire a total of $926 million, approximately two thirds of which will be paid in 2012, for unlimited 4G WiMAX retail services during 2012 and 2013, subject to certain conditions.

The agreements also establish long-term usage-based pricing for WiMAX services in 2014 and beyond. Sprint will have access to Clearwire’s WiMAX network through at least 2015.

Sprint plans to continue selling WiMAX devices with two-year contracts through at least 2012 and support those devices through the life of the contract.

In addition, the agreement provides Sprint competitive pricing for re-wholesaling by Sprint of WiMAX services to third parties as well as increased pricing flexibility for Clearwire’s own wholesale business.  

Dan Hesse, Sprint CEO says the deal “provides Sprint improved pricing, allows us to continue to provide WiMAX 4G services to our customers today and to new customers in the future and provides additional LTE capacity to help complement our ‘Network Vision’ strategy and meet our customers’ growing data demands.”  Sprint funds Clearwire

In October, Clearwire reported that it was discussing the possibility of skipping an interest payment on debt it owes. While the WiMax network isn’t the future of Sprint’s Long Term Evolution strategy, it’s essential, at least for the moment, for supporting millions of Sprint 4G customers.

As part of the deal, Clearwire agreed to keep its WiMax network operational until 2015, which will give both companies time to build out their own LTE high-speed network.

The financing from Sprint gives Clearwire $926 million for unlimited network use for 2012 through 2013. The remaining financing is a prepaid fee for Sprint to use Clearwire’s LTE network, which should be available by June 2013.

Some had speculated that Sprint might be better served to let Clearwire go into bankruptcy, then buy the assets. But that approach would not automatically allow Sprint to secure the spectrum Clearwire now uses. The latest infusion of capital gives Sprint a better bridge to its own LTE future, at the very least.

Verizon to double data amounts for 4G smart phones

Customers buying smart phones running on the Verizon Wireless Long Term Evolution 4G network will get double the data buckets for as long as they keep their level of service.

For example, someone who subscribes to the 2GB for $30 plan will receive 4GB instead. For $50 you can get 10GB instead of 5GB, and for $80 you can get 20GB instead of 10GB per month.

Existing customers (those who have upgraded their service or purchased a 4G smartphone within the last 14 days) will have to request the change. Verizon to double data amounts for 4G smart phones

Verizon Wireless apparently says the bigger data plans will stay in effect so long as users keep a smart phone plan.


The nice thing about a brand-new wireless network is that, at first, there aren't too many customers to clog up the pipes, allowing service providers to do these sorts of deals. 

Sprint Accelerates Network Vision

Sprint CEO Dan Hesse says "Network Vision is coming along so well, we've accelerated from three to five years to just three years." Investors might be concerned about the timing of capital investment, as the acceleration means "we'll be spending more money sooner."

But Spring doesn't really have time to delay the full transition to a flexible network that will allow Sprint to light its Long Term Evolution network faster, as well as support additional LTE bandwidth it might wholesale from partners, as well as sell capacity to LTE customers.

Sprint Accelerates Network Vision

Verizon API Will "Turbo" Mobile Broadband

Verizon will publish an application programming interface that could allow mobile consumers to "turbocharge" the network bandwidth their smartphone apps use, presumably for a small additional fee.

"I think one of the things that you could do is guaranteed quality of service," said Hugh Fletcher, associate director for technology in Verizon's Product Development and Technology team. 

"One of the things that we are right now is very democratic in terms of allocating spectrum and bandwidth to users. And just because you request a high quality of service doesn't mean you're gonna get it. [The network] will try to give it to you, but if there's a lot of congestion, a lot of people using it, it won't kick people off," said Fletcher. Verizon API To Give Apps 'Turbo'

The network optimization API will likely expose attributes like jitter, latency, bandwidth, and priority to app developers, Fletcher said. 


Despite expected complaints from some network neutrality advocates, there is a reason such an API might provide clear value to end users. Some of you might be using 3G or 4G networks, using different air interfaces, to use interactive cloud applications. If you do that often enough, on many networks, you will have discovered the experience problem caused by latency. 


Where older GPRS or EDGE data networks featured round-trip latencies in the 600 millisecond to 700 msec. range, LTE networks feature round-trip latencies in the 50 msec. range. 


One of the important elements of a cloud-delivered application experience is latency performance, even though we most often think of "bandwidth" as being the key "experience" parameter. 


Some might say the key benefits will be for gaming apps, but many of us can assure you that other interactive apps, even those not intrinsically dependent on "real time" protocols, can suffer from mobile latency. Latency issues

Clearwire to Stop Selling Sprint 3G

Clearwire has stopped offering postpaid plans to new customers and will no longer sell dual-mode WiMAX/3G devices that use Sprint's CDMA network. Sprint, for its part, says it will not sell Clearwire WiMAX phones after 2012. Clearwire dumps Sprint 3G


The moves clearly point to a shift by both carriers to Long Term Evolution. Sprint's shift away from WiMAX, and Clearwire's shift away from 3G both mean each carrier is free to emphasize Long Term Evolution services expected to be offered on both networks as the "preferred" 4G network, going forward. 

Sprint Nextel Corp. says it will stop selling phones and other devices compatible with Clearwire Corp.'s network at the end of 2012, as it switches customers to its own Long Term Evolution network. 


It is possible to paint the picture as a sign of deteriorating relations between Sprint and Clearwire, but a shift to 4G and LTE is the real meaning of the changes. Sprint is carving out LTE capacity from its own 3G spectrum, while Clearwire needs to build an entirely new LTE network using spectrum it might otherwise devote to WiMAX. 


Also, as Clearwire shifts away from a dual role as both a wholesaler of capacity and a retail brand, it has to be cognizant of what its wholesale customers want, and Sprint, Clearwire's top customer, clearly is signaling it wants LTE plus CDMA to be the preferred "dual mode" approach it prefers. 


The irony is that Sprint owns a majority of Clearwire. Sprint to halt WiMAX sales

Cable Deal for T-Mobile USA?

With the Justice Department having filed suit to block the proposed AT&T purchase of T-Mobile USA, what is T-Mobile's plan if the deal falls through? It doesn't appear that T-Mobile USA actually has had a "plan B." But many speculate that if the AT&T acquisition is blocked, it will also signal that Sprint will not be allowed to buy T-Mobile USA, either.

That will leave T-Mobile USA in a tough position, as it needs spectrum to launch Long Term Evolution, and will emerge from the merger process weakened in the retail market.

Bernstein Research senior analysts Robin Bienenstock and Craig Moffett say the most likely scenario is not a Sprint merger but a spectrum deal with cable operators Comcast and Time Warner, both of which own spectrum T-Mobile USA could use to launch LTE services. The cable operators could monetize their spectrum and provide backhaul services.

To the extent that cable operators sell a wholesale service, they might then use T-Mobile USA rather than Clearwire. That would be more bad news for Clearwire.

Cable Deal Could Be T-Mobile 'Plan B

Is "4G Plus DirecTV" a Viable Alternative to FiOS?

Verizon Wireless seems to be cooking up an out of market “video plus broadband” plan, working with DirecTV. During its recent quarterly earnings report, Fran Shammo, Verizon Communications EVP said that the company was working on such an effort.

“You're going to see that come in the fourth quarter with the what we now call the Cantenna, which is not a commercial name obviously, but it's the antenna that we actually trialed with DIRECTV, which was extremely successful,” said Shammo.

Some will legitimately wonder whether that approach might even wind up being used in some Verizon markets where FiOS has not already started to be deployed. LTE plus DirecTV

There are some significant Verizon markets including cities like Boston, Buffalo, N.Y, Baltimore and Alexandria, Va. where FiOS construction has not started.

The obvious new question is the rational approach Verizon should take to upgrading its fixed-line network. There isn’t much doubt about optical access media being more resistant to some weather-related impairments than copper networks, nor is there much doubt that new optical facilities cost less to maintain than older copper networks.

But the business question is how much incremental investment ought to be made in the fixed network,  if video and broadband services can be provided using the wireless network. One might rationally argue that the cost of maintaining the fourth generation wireless network is lower than the cost of maintaining the FiOS network.

Obviously, if that is true then the avoided capital investment in new optical facilities is significant as well. That isn’t to argue that fixed and wireless networks are in any way equivalent in terms of absolute bandwidth. But there is a financial question.

If the expected revenue and operating cost advantage of FiOS, compared to 4G, does not provide the optimal financial return, then a wireless solution might be the most-rational way to invest new capital.

The problem is that voice is a negligible contributor to incremental revenue on a FiOS network, while video, though an important contributor of revenue, is not such a great contributor to profits. That leaves broadband, and revenue upside is tough.

That is not to say fiber to home facilities are unimportant, merely to say that they might not be the best use of capital for a provider that also is investing heavily in mobile broadband.

In fact, there is an interesting bit of data in the latest report from Akamai on global Internet usage. The global average fixed-line connection speed was 2.6 Mbps, and the global average peak connection speed was 11.4 Mbps.

Looking at mobile broadband connections, average connection speeds on known mobile providers ranged from 5.3 Mbps down to 209 kbps, while “average” peak connection speeds ranged from 23.4 Mbps down to 1.2 Mbps.

The interesting observation is that wireless broadband has the higher peak speeds, about double that of fixed line connections, with a variable “average” speed that in some cases also is twice as high as fixed-line connections, though such sessions are highly variable. When mobile broadband is slow, it is an order of magnitude slower than fixed line connections. Global broadband speeds