VIENNA, Va.-Barry West believes so strongly in it that he’s got it as the personalized license plate on his sports car: Xohm. It’s the commercial brand for Sprint Nextel Corp.’s WiMAX effort and, as West explains, “Xohm is about a new business model.”
Adds West: “It’s Internet 3.0.”
West, head of Sprint Nextel’s WiMAX business, made his pitch for Xohm (pronounced “zoam”) last week during Sprint Nextel’s “Technology Summit” here. The event brought together the carrier’s top executives for an in-depth look into all corners of its business.
“We’re ready,” explained Gary Forsee, Sprint Nextel’s CEO. “It’s time that we give you a straightforward view of the product roadmap.”
A relatively rare event in the world of wireless carriers, Sprint Nextel’s conference laid bare much of the carrier’s plans for the future. Sprint Nextel showed off a number of previously unannounced devices (see sidebar), and gave details on its plans for billing, push to talk, iDEN and-the topic that generated by far the most interest-WiMAX. The carrier even detailed the marketing names it rejected for its WiMAX service, which included “Outjack.”
“That kind of detail is pretty surprising,” said Peter Jarich of Current Analysis. “And I think it’s needed.”
The conference followed Sprint Nextel’s sluggish second-quarter results. Although Sprint Nextel boasts of its advanced network and services, the carrier’s customer metrics continue to drag compared with its larger competitors Verizon Wireless and AT&T Mobility. Thus, the conference was Sprint Nextel’s opportunity to sooth investor worries (intent reflected by the number of financial analysts from major investment banks in attendance).
Xohm on display
The highlight of the event was Sprint Nextel’s fully functioning Xohm demonstration, which was supported by “a herd of COWs” outside the building, noted West.
The demonstration outlined WiMAX in a consumer and enterprise setting, and was designed primarily to show off the technology’s network speeds. One station featured a laptop running four high-quality video streams simultaneously over the network. Although Sprint Nextel execs refused to conduct real-time speed tests, the carrier promised its Xohm network would support speeds of between 2 and 4 megabits per second, with peak speeds of up to 10 Mbps.
“We have a mobile broadband network at least two years ahead of any other service provider,” promised Sprint Nextel’s Forsee.
As for the hardware, Motorola Inc. showed off a commercial, book-size WiMAX desktop modem, as well as a prototype WiMAX PC card. Also on hand was a dual-mode, CDMA/WiMAX prototype PC card from an unnamed manufacturer that was the size of a disposable camera. Nokia Corp. and Samsung Electronics Co. Ltd. promised WiMAX-capable computer tablets, and showed off Wi-Fi versions of the gadgets to give an idea of the form factors.
“The pieces are coming together,” explained Current Analysis’ Jarich, adding that the demonstration gave evidence that Sprint Nextel’s equipment partners are fully behind the carrier’s effort.
Xohm business model
Aside from the hardware, Sprint Nextel executives also offered a glimpse into the Xohm business model. The carrier will essentially take a Wi-Fi aggregator approach to the network, selling open access on a subscription or session basis.
Devices for the network must be certified for their WiMAX connection-a chore Sprint Nextel will initially take, but which it plans to offload to WiMAX testing firm AT4 Wireless Inc.-but Sprint Nextel will not control connections to its network. Instead, users will be able to purchase access via a Web-based interface, and will not have to activate their device like current cellphone users must do. Thus, Sprint Nextel will not subsidize the devices.
Users will be able to buy access to the network through subscriptions, or can simply conduct select WiMAX sessions. Although Sprint Nextel executives didn’t provide details, the business model essentially will support both standard monthly laptop Internet connections as well as one-time sessions, such as e-mailing photos directly from a WiMAX-enabled digital camera.
In order to properly bill for such uses, Sprint Nextel said it is moving to what it calls its “unified billing platform,” which will serve as a single billing system for all the carrier’s subscribers. Sprint Nextel said all its new subscribers currently are being added to the platform.
West explained that Xohm will launch with PC cards initially, but said WiMAX will be embedded in additional devices as time goes on, including laptops, digital cameras, portal music players, video recorders, GPS devices, and other electronic gadgets. Sprint Nextel promised that its equipment partners have committed to a total of 50 million devices with embedded WiMAX technology by 2010. Carrier executives said WiMAX chips initially will cost $20 each, but will rapidly decrease to between $5 and $15 per unit.
Interestingly, Sprint Nextel CFO Paul Saleh said Sprint Nextel expects a “very small” portion of its WiMAX revenues to come from advertising, an assumption likely due to Sprint Nextel’s previously announced teaming with Google Inc. for a Xohm portal.
“We have a revenue-sharing agreement with Google where we get the larger share,” said West.
Financial projections
In order to make its promises more concrete, Sprint Nextel offered a number of specific WiMAX financial projections. By 2010, the carrier expects Xohm to generate $2 billion to $2.5 billion in revenues, and 80% of those revenues will come from new lines of service. Sprint Nextel said Xohm will be positive for operating income before depreciation and amortization in 2010, and will start generating free cash flow in 2011.
As for capex, Sprint Nextel said it will spend about $2.5 billion to build out its select WiMAX markets through the end of next year, and after that will follow a “success-based” network buildout. Sprint Nextel estimated that expanding the network to its planned 125 million pops by year-end 2010 would cost a total of $5 billion.
Interestingly, Sprint Nextel executives took head-on the inevitable issue of the upcoming 700 MHz spectrum auction.
“The great thing about 700 is that it goes a long way,” West said. “The problem with 700 is that it goes a long way. We have a huge capacity advantage.”
West said that while 700 MHz has better propagation, 2.5 GHz spectrum provides a lot more capacity. While initially it takes two to three times as many cell sites to cover the same area with 2.5 GHz compared with 700 MHz, 10 to 15 sites are required at 700 MHz for the same capacity as one Sprint Nextel WiMAX site at 2.5 GHz.
PTT and iDEN
“It may not be as sexy as the WiMAX stuff next door, but it’s an incredible opportunity for our company,” said Sprint Nextel CMO Tim Kelly, in discussing the carrier’s plans for push-to-talk technology.
The carrier announced it will brand all of its PTT offerings under the “Nextel Direct Connect” brand, regardless of whether they run on its CDMA or iDEN network. The announcement portends Sprint Nextel’s plans to launch Qchatbased PTT services over its CDMA2000 1x EV-DO Revision A network next year.
The service will allow all Rev. A PTT phones to conduct walkie-talkie conversations with all legacy iDEN-based Direct Connect phones. “Nextel is not a service, it’s an application and feature set,” Kelly explained.
