Sidecut Reports

Before we take a little end-of-summer break here at Sidecut Reports, a quick recap of some of the 4G news breaking this week:

CLEARWIRE’S MYSTERY MARKET REVEALED: Credit to the always-digging Tricia Duryee at mocoNews.net for uncovering an SEC document that shed some more light on Clearwire’s announced announcement next week. Of course yours truly speculated somewhat correctly when asked earlier about the pending news. Still would like to hear more about Clearwire’s WiMAX phones, though!

METROPCS LTE COMING IN SEPTEMBER? That is the word on the street, with services in Las Vegas and perhaps Dallas/Fort Worth, according to various reports. Without pricing and data-cap information, however, it’s hard to get too excited about any LTE plans or try to compare them to the WiMAX-based 4G services now being sold by Clearwire, Sprint and partners. Still, the more 4G the better, we say!

VERIZON’S POCKETSPOT ADS — GOOD! Caught some of the new Verizon TV ads this week, specifically the ones touting the “pocketspot” capabilities of the new Droid phones from Big Red. While you could quibble about how fast five people might use up the 5 Gb monthly limit on Verizon 3G data plans, the ads are well done and explain the Wi-Fi “cloud” feature very well with some special-effects cloud magic. Just a small hint of what could be forthcoming in the way of 4G marketing from a company with admirable assets in that department.

Welcome Sidecut Readers to the audience participation segment of the blog! Seriously, we are starting a bit of a new tack here and with an amazing amount of industry experience amongst our readership, we have a few questions to ask, the answers to which will surely interest us all.

More about the “new tack” later; for now we are simply requesting that you answer the question in the simple poll below — namely, tell us who pays for your phone. If you feel limited by the responses please let us know with an email to kaps at sidecutreports.com; otherwise stay tuned and we will parse the results later this week. Thanks for your help!

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The reviews are in on the latest WiMAX smartphone, the Samsung Epic 4G, and they are resoundingly good — meaning that Sprint and its partner in WiMAX Clearwire should have another winner on their hands when the Epic goes on sale Aug. 31. For industry watchers, that date should set a clock ticking on when we might see the first mass-market Long Term Evolution-based smartphone available in the U.S., from big LTE backer Verizon: Will it be Aug. 31, 2011 before we see a Verizon-branded LTE smartphone? Or later? And what does that year-long lead mean for WiMAX’s shelf life?

Given the design complexities that an LTE smartphone from Verizon will have to overcome — namely, multiple radios for different frequencies for LTE upstream, downstream, and 3G and Wi-Fi connectivity — it’s probably safe to bet that LTE smartphones will arrive later, rather than sooner, than the oblique “mid-2011″ deadline Verizon is now publicly stating. And yes, we know that Samsung is planning to release a “LTE smartphone” for MetroPCS in Las Vegas maybe later this year. But one phone for one market does not a national competitor make. It’s interesting for sure, but in any WiMAX vs. LTE entree-provider comparison the MetroPCS offering is sort of a side dish.

Put aside for the moment the kerfluffle about whether or not Clearwire and Sprint will move to LTE in the future, since it’s not something that will happen anytime soon. Instead, start thinking about what will happen in the next 12 months, when Sprint and Clearwire get to keep selling all the HTC EVO 4G phones and Samsung Epic 4G phones they can get their hands on, while Verizon tries to explain why you need to buy an LTE data card and a Verizon smartphone, with limited-download more-expensive data plans for both.

Almost a year ago, I was of the opinion that WiMAX providers needed a snazzy iPhone-like smartphone, if for no other reason than to get the point across. You can market all you want, but what says faster broadband better than a cool phone that can also act as a Wi-Fi hotspot? As I said then, WiMAX folks needed a cool handset to help them spread the message:

What the WiMax industry really needs? A snazzy WiMax-enabled smartphone that can do the talking for them.

Now, the HTC EVO 4G and the Samsung Epic 4G seem to be doing just that. If this device lead can stretch to next summer, will consumers really want WiMAX to go away?

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We’ll break down and unpack the news as we get more info during the afternoon, but the big news from Clearwire today is on two fronts: One, a huge surge in new subscriber adds that had the company adding another million projected subscribers to its yearly predictions; and two, announcement of technical trials of Long Term Evolution (LTE) technology, the same technology that big cellular providers like Verizon and AT&T will use for their forthcoming 4G services.

On the new subscriber side of things, as we predicted Clearwire benefited from a huge surge of network adds from its wholesale partners, most likely Sprint Nextel which had sellout success with its HTC EVO 4G WiMAX smartphone launch in June. For the quarter, Clearwire added 722,000 net new subscribers, with 595,000 of those coming via wholesale channels and another 127,000 added via Clearwire’s own retail sales efforts.

Clearwire now claims 1.7 million subscribers on its network, 752,000 of which are wholesale customers — meaning that by the end of the year, the company may have more wholesale customers than retail. The interesting twist to the wholesale number from Q2 is that more than half (52 percent) of the new 4G customers live in markets where Clearwire’s services aren’t even yet available — meaning that people are either buying 4G products like the EVO simply because they like the device, or they are buying hybrid 3G/4G devices and using them for travel to WiMAX markets. Back in February, Clearwire had seemed a bit optimistic when it predicted it would have 2 million subscribers by the end of the year. Wednesday, Clearwire CEO Bill Morrow said the company now expects to have nearly 3 million network subscribers by year end.

On the LTE side, Clearwire’s tiptoe into the LTE waters became a full-scale immersion Wednesday, when the company said it would conduct multiple technology tests with a partner list that includes Huawei, Samsung and chip maker Beceem. While Clearwire CEO Bill Morrow said the company remains “committed to WiMAX” for its current network buildout plan, expect most followers to take Morrow’s claim that Clearwire could conceivably launch LTE services with “real-world download speeds of between 20 Mbps and 70 Mbps” and match that up against the expected 5 Mbps-12 Mbps speeds forthcoming from Verizon’s LTE services later this year.

We will break down each and every facet of all the news today — buried inside the list of announcements was another wholesale contract with small-business service provider Cbeyond, and Morrow’s contention that Clearwire might look into selling some of its licensed spectrum to help fund the company’s ongoing expansion plans.

While we don’t even have time to dig into Clearwire’s financial numbers — our 30,000-foot view says that revenues and ARPU don’t mean so much right now since the company is so early in its deployments and strategic agreements — it seems clear from the rapidly growing subscriber adds that Clearwire is making the kind of hay it needed to, if it wants to have any chance of competing directly with the larger cellular providers when they ramp up their massive marketing and infrastructure spending machinery.

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There’s no shortage of media coverage of Sprint’s earnings report from earlier this morning, with the highlight being a sort-of unexpected return to positive net subscriber adds. All in all, it was a pretty good quarter for Sprint, and here we’re going to focus on the comments made about Sprint’s 4G performance, via the WiMAX network services it resells from partner Clearwire.

Though Sprint didn’t break out any exact numbers, its introduction of the first WiMAX smartphone, the HTC EVO 4G, was a big win, with many markets sold out of the device and plenty of positive reviews for the Android-based offering. According to Sprint CEO Dan Hesse, the EVO 4G “exceeded our expectations” on several levels, including not just sales and reviews but in what he called “record” low return numbers for the device.

Hesse also said that HTC EVO 4G users exceed in another category — smartphone data usage. In response to a question later in the call, Hesse said that HTC EVO 4G users consumed “three and a half times more data than our other smartphone customers,” a statistic that reflects Clearwire’s and other operators’ observations that users with more bandwidth tend to use more data.

While some reports have pegged Sprint’s EVO sales at around 300,000, we may get a clearer number when Clearwire reports its numbers next week (since Clearwire will report the exact number of wholesale 4G subscriber gains, of which the EVO customers will be a big part). “We wish we could get more [phones],” Hesse said on the conference call. HTC, Hesse said, is working on the problem presumably as fast as it can. (The call even featured one analyst/fanboy who couldn’t resist telling Hesse that he had just purchased his own EVO 4G, just before complaining about the battery life.)

On pricing, Hesse said in response to a question that the $10 premium fee Sprint was charging for 3G/4G devices like the EVO didn’t seem to slow down any purchase plans. “We could sell a lot more if we had them,” Hesse said. Of the $10 charge, he added, “Customers see the value. I don’t think it’s an impediment.”

While Hesse didn’t supply any information about what Sprint and Clearwire might do with their network beyond the year’s end — he pretty much dodged several questions about Sprint/Clearwire financing and ownership relations — he did say that 4G was a big priority for the remainder of 2010, a year when Sprint, Clearwire and the WiMAX partners will still have the 4G field mainly to themselves. Next on the table for Sprint is the availability and pricing announcement for the already announced second WiMAX smartphone, the Samsung Epic 4G, as well as expected market launches in the “mega markets” of Los Angeles, New York and San Francisco. “Regarding the second half of 2010, 4G will be an increasingly important element of our performance,” Hesse said.