Late last week when Sprint-Nextel announced their 3G femtocell, I was taken back.  Sprint decided to change its strategy from charging for femtocells access to instead giving these devices away for free.  Providing free femtocells was the viewpoint I believed was most beneficial for wireless carriers when I discussed this topic in depth in my femtocell research paper.  When the retention of a subscriber cost along with the cost due to additional mobile usage is factored into the equation, in many situations the cost savings to a wireless carriers easily pays for the femtocell hardware.  While Sprint-Nextel probably didn’t use my research, it is good to know that others agree with my findings.  Keeping with similar viewpoints, a recent survey on the Wireless Industry website, FierceWireless.com, asked viewers which technology they believed would be used to offload data traffic in the future.  In my paper I argued that Wi-Fi offloading was the ideal solution once 4G networks were launched, and that femtocells were only a temporarily solution due to their complexity and cost.  Only 24% of respondents believed that femtocells were the solution, further bolstering my findings in my paper.  Until 4G networks are widespread, femtocells are the solution and it will be interesting if other wireless carriers follow in Sprint’s footsteps.

It has been over three years since Apple released the iPhone.  Back in 2006, I was impressed with the iPhone but I didn’t think it was such a game changer especially given its high price.  Looking back I was wrong, since it has taken three years for another competitor to emerge than can actually compete with the iPhone.  After numerous of devices claiming to be iPhone killers, only one actually provides the ease of use and features than made the iPhone so popular.  Palm surprised the world at CES 2009 with the announcement of the Palm Pre.  Reviews have praised the phone, especially its WebOS operating system.  Sales of the Pre haven’t been steller, but I believe this will change as the device is released worldwide and people learn more about the phone and its capabilities.  The important aspect is that Palm is doing all the right things as it reintroduces itself in the Smartphone arena.   Palm has both a CDMA and GSM version of the phone which allows the phone to be marketed to almost all cell phone users worldwide.  In the US, CDMA is extremely popular with both Verizon Wireless and Sprint supporting the technology.   When Sprint’s exclusivity contract expires, Verizon Wireless will at last have a phone to rival that of the iPhone.   This is huge since Verizon Wireless is the largest wireless provider in the US and can increase customer awareness of the Palm Pre far better than Sprint.  Additionally Palm is coming up with a cheaper version of the Pre called the Pixie.  This is important since there is huge demand for Smartphone’s at low prices.  Currently Smartphone are hovering in the $100 to $200 range, but once a Smartphone can break under $100, their popularity will explode.  Few companies have tried going after the lower end Smartphone market, and Palm’s approach could provide it with crucial gains in market share.  While Palm might be late to the game compared to the competition, it has shown that it has the right stuff to make a large impact in the market, just like it did with its Palm Pilot.

Sprint-Nextel’s stock has plummeted in the last year and now can be had for under $3 a share.  The market cap of the company is now under $7 billion and it has been losing money for the last couple of quarters.  Sprint-Nextel has many issues with the largest being the high rate of customers that are leaving for other wireless providers.  While these are large problems that need to be fixed, the net worth of the company without any customers is worth significantly more than its current market cap.  How is this possible?  The answer is the network and spectrum that Sprint-Nextel owns.  Many in the wireless industry believe Sprint-Nextel’s ownership of spectrum in the 1900Mhz and 2.5Ghz bands to be worth easily tens of billions of dollars.  This is just the FCC licenses without the cellular network which would cost many more billions to replicate.  This leaves Sprint-Nextel as an exceptional buy for any company wanting to get into the wireless arena.  The wireless arena will continue to be the hot ticket far into the future as today’s generation expects the Internet to be mobile.  It would be much cheaper for a company such as Google to buy Sprint-Nextel than to deploy its own network.  While the world economy is just beginning its journey through a black hole which will probably last many years, the opportunity to pick up a company at a fraction of its value in a high growth and evolving industry is very very rare.

Sprint-Nextel finally looks like they have a plan to be successful. This week they announced they are going to partner with other companies including Clearwire and Google to deploy their WIMAX network. There were also rumors about Sprint trying to sell the Nextel brand which they spent billions to buy just a couple years ago. These are good signs because it shows that Sprint has a plan for its different networks. Sprint’s is currently running two, and soon to be three, separate networks. If Sprint could offload Nextel then it wouldn’t need support the Nextel network which is very costly to operate.

Sprint has been recently focusing a great deal of attention on its new WIMAX network, but this isn’t where their issues lie. Sprint needs to fix the problem associated with it current cellular network. Dan Hesse, Sprint-Nextel’s new CEO, seems to be making major strides in improving the brand’s image by improving customer service. Sprint needs something to differentiate it from its big rivals. Cool phones aren’t the answer and neither is a $100 everything plan. Sprint needs to embrace what the young generation wants: internet everywhere. If Sprint offered unlimited data access on all their plan’s they could win over a huge number of customers. The young generation wants to check Facebook on their phones but current data costs for most carriers are prohibitive. Teens have a huge influence, and if they tell their parents they want to switch to Sprint because it offers free access to the internet, many parents would be willing to do this. Sprint should require all of it’s phones to support EVDO and come with a good browser such as Opera Mini. Even if you get a “free” phone you can still surf the net, something that no other carrier would be capable of. A large change is needed if Sprint is going to win new customers in a saturated wireless market.

Sprint for sometime now has been working on deploying it’s 4th generation network based on the 802.16 standard commonly known as WiMAX.  WiMAX was supposedly to be the next big thing after WIFI, but this has yet to play out.  This has led to many in the telecom industry to doubt if WiMAX will ever be a viable technology.  AT&T and Verizon Wireless have decided to not go with WiMAX for their 4th Gen network but instead LTE.  While we can debate WiMAX vs. LTE all day long, a large issue looms for Sprint: RF propagation.  Sprint is deploying WiMAX in the 2500Mhz spectrum, which is extremely high compared to other cellular spectrum’s which run in the 850Mhz or 1900Mhz.  Why does the frequency matter?  Well going back to physics, waves with higher frequency are absorbed more easily by the air and objects in the way of the signal.  In simple terms, the higher the frequency the shorter a signal can travel. Verizon Wireless in most markets broadcasts their voice (1xRTT) on 850Mhz while their data (EVDO) is on 1900Mhz. In many areas you can get on a signal on the voice network but no signal on the data network. The easiest way to fix this is to output at a greater amount of power, but this is an issue since this would drain a cell phone battery much quicker. The more logical solution is to add more cell sites, but this is very costly to the network provider. Sprint is advertising WiMAX as a mobile broadband solution, but if you are inside a building with your laptop, good luck getting a signal. WiMAX at 2.6Ghz will be operating at an even higher frequency than what the most common form of WIFI operates at. Many people have enough trouble getting a signal in their house only a hundred feet away from WIFI access points, let alone a mile or two away from the cell site. While WiMAX will be operating with more power than WiFI, having a signal travel miles at 2.5Ghz is still going to be a very hard task. AT&T and Verizon Wireless are deploying their 4G network in the 700Mhz spectrum which will allow their signal to easily propagate at double the distance of Sprint’s. I am currently a Sprint customer and have enough issues receiving service at 1900Mhz, I can’t imagine what service would be like at 2500Mhz. Is there any hope for Sprint? I would like for the WiMAX deployment to be successful, but it is pretty hard to argue with physics.