Sidecut Reports

Thanks to the fine folks at Oovoo (especially CEO Philippe Schwartz) who went out of their way last week to give us an in-person demo of the new mobile version of the company’s video chat application, which launched today for the Samsung Epic 4G and the HTC EVO 4G phones from Sprint. C/Net has a good recap of the program and some of the details of how it works. While Oovoo was nice enough to send us a demo phone pre-loaded with the app, we’ve been busy helping people play Santa so more thorough testing will have to wait.

While the proof of the application’s performance will be in the pudding — meaning how quickly it catches on in a world rapidly filling with competitive offerings — in my hands-on demo last week I did notice a telling feature that Oovoo was prescient enough to code into their app: An on-screen warning that alerts phone users if a slow network connection is hampering the video call. Since we were testing the app live in an area that kinda-sorta has 4G service and has spotty Wi-Fi, it was interesting that the best signal came from Sprint’s 3G network — and that the phone could tell us that fact.

The guess from our observation point here at Sidecut Reports is that accurate measurements of broadband speeds and capacity — and other attributes, like network latency — are going to rapidly move from the world of geek-speak to everyday conversation as mobile users expect more from the wireless networks they will depend more upon. Applications like Oovoo’s that help users understand what’s going on behind the scenes will go a long way toward easing frustration that will inevitably occur when connections are lost, interrupted or not even able to begin.

If you are waiting for your wireless carrier to provide such information, you may be on hold for quite some time. Among the major network providers, only Clearwire has seen fit to actually provide coverage maps with real-world data, like tower locations, to help consumers make accurate purchase choices. Verizon’s promise of “street level” maps for its nascent Long Term Evolution (LTE) 4G service is somewhat empty, since all it shows is varying degrees of “red” coverage in any live Verizon market, without any tower-location detail. And AT&T somehow sees fit to claim it is still the “nation’s fastest” mobile network on billboards in the Bay area, where two if not three other network providers are already demonstrably offering much faster services.

So — for the prospective mobile video chat customer, it’s buyer beware.

Our friend Evan Kaplan, the CEO of iPass, touched on some of the growing mobile workforce learning-curve in his talk at the GigaOM Net:Work conference last week, especially when Kaplan noted that mobile users are becoming more sophisticated, more demanding and more likely to consider mobile connectivity the norm and not an exception. Applications like Oovoo’s that not only exploit the ability to communicate while mobile but also provide in-depth information on network status are the kinds likely to win acceptance among the leading-edge user base, simply because the apps themselves are smart enough to help. That’s not enough, but it’s a good start.

It really is the best of times and worst of times for nascent national WiMAX provider Clearwire — even as the company reported record subscriber growth of 1.23 million new adds during the third quarter of 2010, it also reported 15 percent staff layoffs, market delays and other cost-saving measures to offset the company’s inability to secure new, necessary funding for its ongoing operations.

While the demand for the company’s 4G broadband services seems to be expanding — Clearwire now expects to finish the year with more than 4 million total subscribers, double the number the company projected at the start of 2010 — Clearwire’s complex ownership structure and bootstrapped funding model have led to a poker-game type battle over how and from where the company might secure additional funding. Even though Clearwire has attracted billions in funding, from its inception in 2008 to some additional billions last year, its costly, rapid buildout of more than 60 WiMAX markets along with revenues just starting to materialize has left the company staring at a funding tank approaching the “E” mark, with no friendly filling station in sight.

Unlike last year, when majority owner Sprint stepped up to finance Clearwire, 2010 saw some public disagreements between Sprint and Clearwire execs over Clearwire’s operations. Though never confirmed, the difference in strategic opinions may have been partly behind the resignation of Sprint CEO Dan Hesse from Clearwire’s board earlier this fall, and not a small part of Sprint’s reluctance to commit additional capital to the Clearwire cause.

According to CEO Bill Morrow, the company is still considering all options for new funding, including selling Clearwire stock, adding more debt, or selling or renting some of the company’s wireless spectrum holdings.

But with no deal secured yet (and only enough cash on hand to last until mid-2011 at best), Morrow and Clearwire have made some “painful decisions” to control costs, including firing 600 employees and delaying retail market launches in Denver and Miami. Clearwire is also delaying a retail launch of its own-branded WiMAX smartphones, a device plan Morrow had promised earlier this year. According to Morrow Clearwire has also formed a “special committee of the board” to consider further strategic options, the kind of language that sometimes hints at an outright sale.

We’ll try to boil down Clearwire’s possible strategies and options over the next few days, but in the meantime there are some hard numbers from the quarter that are worth considering more closely — including the previously predicted flip to having more wholesale customers than retail customers, a business model we have previously noted is good, not bad, for Clearwire. With 1.1 million new wholesale subscribers added in Q3 (most, no doubt, via sales of Sprint’s 4G-enabled smartphones, the HTC EVO 4G and the Samsung Epic 4G) Clearwire now has 1.83 million wholesale subscribers and 1.01 million retail subscribers, and expects to finish 2010 with more than 4 million subscribers on the network.

While impressive, even Clearwire admits that the wholesale subscriber numbers are a bit inflated since almost half of the “subscribers” are people who bought a 4G phone or device in an area where there isn’t any WiMAX services yet (most likely these are Sprint EVO or Epic customers who just wanted a cool phone, which works on Sprint’s nationwide 3G network as well). But with a million retail customers and almost a million wholesale customers as true 4G users, Clearwire is evidently answering an untapped customer demand that by all market predictions appears poised to grow rapidly.

Whether or not Clearwire survives as an independent entity to tap into that future remains to be seen, depending on how well Morrow & Co. can negotiate with the prospective suitors, a list that could include current investors like majority owner Sprint or new entrants like T-Mobile. “We are at a unique inflection point in the company’s history,” Morrow noted at the end of the company’s financial conference call Thursday. But how the next chapter is written may be the most interesting part of all.

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.