Sprint Rescues Clearwire; Remember, This ‘Failed’ Duo Still Leads 4G Market Race

With today’s news about Sprint agreeing to provide $1.6 billion in operating funds to 4G network partner Clearwire, it looks like the death of their pioneering high-speed wireless network will continue to be highly exaggerated.

I would normally spend more time arguing this point, but — with a new project on my hands — I will remain brief here. What I would like to see out of those who cover topics telecom, however, is more sticking to the facts on the ground and less glib comments that only serve to cloud the picture.

Fact: When it comes to 4G subscriber market share in the U.S., the Sprint/Clearwire team is still far and away the leader, with somewhere close to 8.5 million 4G device activations by Sprint. I only say “somewhere” because Sprint does not disclose its 4G subscriber numbers, and while Clearwire does report its 4G wholesale numbers — which are almost entirely from Sprint — it won’t offer an exact number. But it’s close enough. In second place is Verizon, whose 4G LTE network just celebrated its first-year anniversary. At the end of Q3, Verizon had by its own count just 3.1 million 4G devices activated. Sprint, meanwhile, has activated approximately 5.2 million 4G devices so far this year, and had about 3.3 million activated during 2010.

It is also a fact that Verizon has already far surpassed Sprint and Clearwire in terms of markets served, but I would say that even that number (Verizon is in close to 180 4G markets by its own reporting, while Sprint and Clearwire serve 81 at last count) is cloudy, since Verizon doesn’t disclose how thoroughly each “live” market is built out. From personal experience I can tell you that Verizon’s LTE buildout in the San Francisco/Silicon Valley area has a long way to go before it reaches the “red cloud” coverage the company claims on its website. But when it comes to the 4G scoreboard, markets don’t matter as much as paying customers — which is why I strongly disagree with people like this who claim that Sprint and Clearwire have “squandered” their 4G lead. They may be making a big mistake by not building out their network, and they may pay for that in the future. But right now, the facts say that Sprint and Clearwire are still the 4G leaders.

Opinion: Some people who follow the industry like to see Sprint and Clearwire’s choice of WiMAX as a radio technology a mistake. GigaOM’s Stacey Higginbotham, who covers this market as well as any reporter anywhere, steps into this territory by calling the use of WiMAX a “failed bet.” I would say, that’s also ignoring the facts. When the companies launched their network, WiMAX technology was the only “4G” choice available — LTE equipment and devices weren’t ready yet. And what’s often forgotten, overlooked or not well known (even among those who claim to be experts) is that there were some pretty severe use-it-or-lose-it rules governing the wireless spectrum that Clearwire and Sprint had.

So their choice was — use WiMAX, or give up the business opportunity. While there will certainly be a price to pay for having to switch to LTE as that technology becomes the mainstream choice, it’s not like Clearwire wasn’t prepared for this outcome. Nobody really listened, but the company did always claim it was “technologically agnostic” and would go with the leader if the market dictated so. Since WiMAX and LTE share many of the same technology underpinnings — most importantly an all-IP networking base — Clearwire won’t have to rip, replace, or completely change its infrastructure to add LTE to the mix. Routers, switches and other back-office gear should work just as well with LTE as WiMAX. And with all the spectrum Clearwire has, it doesn’t need to replace its WiMAX network — it can simply run the new LTE networks side by side.

In the meantime, Sprint and Clearwire get to collect monthly payments from 8.5 million-plus customers, which they never would have had had they waited for LTE to mature. Since Verizon launched LTE in December of 2010, it has yet to beat Sprint for 4G device sales in a quarter — again, hard to see how the choice of WiMAX is a “failed bet.” It was the right choice at the right time, it gave a startup a leg in the world’s most uncompetitive industry, and it may be the thing that allows Clearwire and Sprint to compete into the future since it didn’t cost them billions in lost infrastructure. I would opine it was a pretty smart bet, because it gave the duo an early-days lead that they still enjoy. And by not losing the spectrum due to unuse, it probably means billions were saved, which may be reaped in the future either as a base for new business or even in a spectrum sale. I’d call that a smart long-term bet, not a failed one.

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