Can Sprint afford a WiMAX flop?

Company may take hit if WiMAX fails to catch, but other strategies are out there

For a carrier that is just starting to recover from massive losses to both its subscriber base and its profitability, the thought of Sprint failing to capture the early 4G market is none too pleasant.

Is Sprint finally rebounding?

And yet Sprint today finds itself in a precarious position in the 4G market, despite the fact that its WiMAX network is by far the fastest mobile data network available on the market. The latest setback came this week when it was learned that the EVO 4G, Sprint's flagship WiMAX device, has faced major delays of when it will ship as manufacturer HTC has run into problems securing sufficient supplies to make more phones.

More ominously, it seems that WiMAX has lost to LTE in the battle to become the dominant 4G wireless data standard. According to a 2009 IBM survey of telecom companies, 67% of operators said that LTE was critical to their future success while only 8% of operators surveyed said that WiMAX was critical to their success over the next five years, with a 54% majority saying that it was not critical to their success.

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For a carrier that is just starting to recover from massive losses to both its subscriber base and its profitability, the thought of Sprint failing to capture the early 4G market is none too pleasant.

Is Sprint finally rebounding?

And yet Sprint today finds itself in a precarious position in the 4G market, despite the fact that its WiMAX network is by far the fastest mobile data network available on the market. The latest setback came this week when it was learned that the EVO 4G, Sprint's flagship WiMAX device, has faced major delays of when it will ship as manufacturer HTC has run into problems securing sufficient supplies to make more phones.

More ominously, it seems that WiMAX has lost to LTE in the battle to become the dominant 4G wireless data standard. According to a 2009 IBM survey of telecom companies, 67% of operators said that LTE was critical to their future success while only 8% of operators surveyed said that WiMAX was critical to their success over the next five years, with a 54% majority saying that it was not critical to their success.

And finally, Sprint has had to look over its shoulder all year at rival carrier Verizon, which plans to start deploying its own 4G LTE network commercially by year-end. If Verizon is successful at getting its network off the ground and attracting customers who long for high-speed wireless broadband, it could erase much of the competitive advantage Sprint earned by being the first U.S. carrier to launch WiMAX commercially.

"If all goes as planned, Verizon should have 100 million PoPs [points of presence] covered and Clearwire should have 120 million PoPs covered," notes IDC analyst Godfrey Chua. "So while Clearwire got a head start, Verizon over the last year has kicked things into high gear."

A switch to LTE?

But if Sprint's WiMAX offering fails to catch fire, can it still remain competitive in the mobile marketplace? The answer is yes, although it will take some further investment and a new overarching strategy for 4G mobile.

The most obvious way for Sprint to remain competitive in the 4G realm will be to build out an LTE network that can complement the WiMAX network that it currently buys wholesale access to from its partners in Clearwire. The reason that Sprint will have to build out a separate LTE network rather than building one on spectrum currently used for WiMAX is that the WiMAX spectrum may not be compatible with the LTE equipment used by most other carriers.

"Clearwire spectrum is all TDD [Time Division Duplex] and the large volume of LTE equipment is FDD [Frequency Division Duplex]," says Forrester analyst Charles Golvin. "So even if Clearwire opts to make this change, there will not be compatibility with other LTE networks. Any switch to LTE needs to be understood in this light."

But while any build-out of a separate LTE network will certainly prove costly, ABI Research Analyst Phil Solis says it could give Clearwire and Sprint a "best of both worlds" advantage where they could offer both technologies under the same 4G banner, supplementing LTE coverage for places where WiMAX coverage is weak and vice-versa.