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Some palpable numbers: Air Transport World quotes US Airways president saying that usage averages below 5 percent of passengers on flights, and breakeven is above 20 percent. They only have the service on about 50 planes (their Airbus A321s), which lack power outlets. By only covering part of their fleet, as opposed to Delta which has full coverage on mainline planes, they may undermine patterns of usage that build up over time.
If the AT&T acquisition of T-Mobile is approved, does this lead to fiercer regional competition? There are plenty of small regional cellular firms that provide islands of access in specific metropolitan markets, some of them in several. Those, too, have been bought up by the big four in the last few years, but there are still plucky upstarts remaining, like Cricket.
Cricket has incredibly cheap service in its markets; you only pay through the nose when you travel. While many people travel far from home on a regular basis, there's a hefty number that don't need nationwide roaming. There's also Leap, MetroPCS, and US Cellular, to name a few. An AT&T spokesperson wants this conversation to happen, pointing out that 18 of 20 metropolitan markets have five or more cellular options. These aren't MVNOs (mobile virtual network operators) who resell network access, but rather competitive network operators who operate their own infrastructure or lease infrastructure from third parties.
The most significant difference between regional and national carriers lies in 3G networks and 4G plans. MetroPCS launched a 4G LTE service early, and the regional firms all have 3G data services and reasonable plans. Cricket's mobile broadband plan is $40, $50, and $60 per month for 2.5 GB, 5 GB, and 7.5 GB of usage, respectively. US Cellular includes 5 GB with its Data Plus offering for smartphones (including Android models). One calling plan is 450 minutes, unlimited texts, GPS navigation, and Data Plus for $70/mo. No national carrier has such a sweet deal.
I wonder if the availability of small and often cheaper competitors will spark more an interest among customers as they find themselves navigating plans from what would be the three remaining national providers. I expect the iPhone, iPad, and specific models of Android and Windows phones drive the national market more than smaller carriers would like.
AT&T's acquisition of T-Mobile lets it build a truly national, robust network at the expense of competition: It's a little dirty but barely a secret in modern mobile cell world that AT&T doesn't really have national 2G coverage, much less 3G. AT&T leans on T-Mobile to roam customers in a large number of areas in which AT&T didn't spend money to build out service. This stems from an agreement years ago when AT&T Wireless consolidated on GSM service, and T-Mobile was building out its initial GSM service. In 2004, the companies dissolved a cooperative agreement (when Cingular bought what was then AT&T Wireless), but roaming never disappeared.
This lack of coverage is why AT&T didn't offer feature phone or smartphone service in large parts of the country outside urban areas. While these were mostly rural—such as Montana—you'd also find missing areas in adjacent cities in some markets. Because AT&T, like other carriers, only allows a fraction of one's usage to be on domestic roaming, you had a lot of peeved would-be customers who now own a Verizon iPhone
T-Mobile provided roaming 2G coverage in a lot of those areas, even though AT&T spent billions in 2009 to acquire licenses Verizon Wireless was obliged to sell to clear its deal for Alltel, the number five US carrier at the time. Still, AT&T will benefit from having consistent national service if the T-Mobile merger is approved by regulators. It's not a done deal.
AT&T also gets the depth of T-Mobile's spectrum portfolio in dense markets where AT&T clearly lacks the ability to deliver service to the level needed, such as New York City's boroughs and San Francisco. It won't be trivial to integrate the networks, but many carriers co-locate equipment with tower and building owners. And if they maintain the current deal and roaming is no longer a for-fee arrangement, AT&T can instantly get the benefit.
Both firms aligned across the same technology. Not just GSM, although they're the only two national GSM in the US. But they both chose to push short term on faster HSPA: HSPA 7.2, which challenges EVDO Rev. A by a factor of two or more, and HSPA+ in a 21 Mbps flavor, which can challenge the low-end of Verizon's 4G LTE rollout service—but nationally, not just in the one-third of the country to which Verizon expects to offer LTE by year's end.
However, T-Mobile's path was limited. While it extolled the virtues of HSPA+, which squeezes into 5 MHz channels, it had no real ability to acquire the additional spectrum needed for wider channels to exploit LTE. AT&T and Verizon collectively spent billions to lock down most of the sweet 700 MHz spectrum over which Verizon has already started its LTE deployment, and that AT&T will use starting mid-year for its own efforts.
On the Wi-Fi side, T-Mobile effectively exited the hotspot market in 2008, although most people didn't notice. The firm was able to sign a reciprocal five-year agreement with AT&T for access, which allows T-Mobile customers to use AT&T's network at no additional cost or fuss. That was more important when AT&T's network was largely paid or required hoops to get free service. AT&T's Wi-Fi network now comprises about 21,000 locations, of which about 20,000 are entirely free McDonald's and Starbucks stores. Barnes & Noble is in there somewhere, too. The rest are hotels and a few airports.
The convergence of AT&T and T-Mobile's interests are fairly obvious. Verizon Wireless and T-Mobile don't line up because Verizon already has thorough national coverage with 2G and 3G (provably the best 3G coverage), and uses an incompatible 2G/3G technology in CDMA. While Verizon has a path to GSM in its 4G flavor, it will be using CDMA for 2G and 3G for many years to come.
Sprint Nextel is engaged in pursuing three separate standards. iDEN, used by Nextel, is still in use, despite the firm's best efforts to migrate users to CDMA. Sprint's core 2G/3G network is CDMA. Its 4G plan was to get WiMax deployed early and extensively, which was furthered when it acquired Clearwire with its separate spectrum licenses and operations. That didn't pan out. WiMax needed a much faster deployment, and the money wasn't there to do it. WiMax is an also-ran technology cell mobile; it will have great niche uses and might be the most appropriate technology in some countries. But LTE will rule the Asian, European, and North American markets. Sprint Nextel has also not completed a multi-billion-dollar requirement to migrate public-safety networks to new frequencies in exchange for new spectrum. They are far overdue, and that ugly situation shows no sign of completion to my knowledge.
The real question is whether the Justice Department, FCC, and FTC will allow a merger to take place. There's no benefit to consumers from this merger, reducing competitors from four to three. Sprint Nextel arguably has no good plan for long-term viability, and a deal for Verizon to acquire it might be allowed to avoid bankruptcy, which wouldn't benefit the market (although Sprint could shed massive debt, union contracts, and likely federal obligations which would prove what everyone said when the public-safety spectrum swap was allowed years ago under FCC chair Kevin Martin.)
T-Mobile's plucky upstart nature has gained it over 30m customers, and allowed it to nip at the heels of the big three, likely saving customers billions of dollars a year collectively. The FCC and Congress never intended initially for a few carriers to win. Anti-regulatory and pro-incumbent fervor has led to a situation where there may be only two viable national carriers: AT&T and Verizon Wireless.
Boingo Wireless gives us a peek under the kimono: It's rare to get hard, audited, under-threat-of-government-rules numbers in the Wi-Fi hotspot industry. Now we have some. Boingo fired up its operations in 2001, and has taken over nine years to reach profitability under accounting (GAAP) rules. The firm has nearly $35m on hand, which means that on a non-GAAP basis, they've been putting money into the bank for years.
The firm took in $46m in revenue in the first nine months of 2009 ($66m for the year), and $59m in the first nine months of 2010. In 2010 up to 30 September, Boingo made $5.3m after tax and before accounting munges. Boingo's closest public competitor, iPass, saw $171m in revenue but a $13m loss in 2009; iPass's revenue has declined slightly in each of the last several quarters, grossing $117m in the first nine months of 2010, losing $3m on that. iPass offers a suite of roaming and remote-office services, as well as hotspot aggregation.
But what I'm most interested in, of course, is subscribers and sessions. Page 31 has the detail. The company has 191,000 monthly subscribers, nearly 10 percent of which cancel a subscription each month. Boingo charges $10/mo in the US for laptops and $8/mo for mobile. The international subscription is much higher, but there's no breakout between US and international accounts. A 24-hour pass is $8.
The filing reports 5.8 million sessions from Jan. to Sept. 2010 (all subsequent numbers I rely on use that period of time). The revenue from subscribers was $17m, making the average monthly subscription fee $7.50 ($17m/191K subscribers). That seems off and must be due to 30-day trial subscriptions and other promotions. It also indicates a low percentage of international subscribers, which would skew the number much higher.
Revenue from single-use sessions is $13m, which would indicate well over 150,000 yearly single purchases, most of which I'd suspect are in airports. Boingo operates paid Wi-Fi and most of the largest airports that charge for service; the company also gets fees for managing Wi-Fi at some airports.
The wholesale number is fairly staggering at $25m. This comes from outfits that resell Boingo's service under their own name (so-called "white label" service), and mobile carriers like Verizon. Boingo, without mentioning Verizon, attributes $3m in this period from "a mid-2009" acquired wholesale customers. Verizon is providing a reasonable, but not substantial amount of wholesale revenue.
The figures show for-fee Wi-Fi to be much more robust than I'd suspected. Many other firms have come and gone trying to make money selling Wi-Fi as aggregators, airport operators, and other incarnations. Wayport was bought by AT&T, and the majority of AT&T's Wi-Fi is now at venues that charge nothing for the privilege.
The challenge for Boingo is to continue this expansion. Mobile service must be a large component of its growth based on average subscription price, and the clear necessity for mobile users to have easy mobile access. AT&T certainly gave Boingo a gift by switching from unlimited 3G plans for new subscribers as of last June to metered service plans. At $25/mo for 2GB with a smartphone or slate, and $10/GB for overage, an $8/mo hotspot plans sounds positively cheap as a cost-conservation measure.
Boingo will trade under WIFI on NASDAQ, a move that strikes me as slightly odd since the firm doesn't own the trademark to that. Perhaps stock tickers are exempt from that issue.
Disclaimer: None of the analysis in this post is intended as advice on whether or when to purchase or sell Boingo stock. I am not a stock analyst nor trader. I own no shares in Boingo and have no intent to buy shares.
It was too good to last: Virgin Mobile's remarkable $40 MiFi plan with unlimited service will no longer be so remarkable. That $40 bought you unlimited data on Sprint's core (non-roaming) 3G network. Service lasted 30 days, an neither a contract nor cancellation fees were involved. The revised terms, for new plans activated starting 15 February, will throttle your usage after you pass 5 GB within the 30-day period. (The MiFi is a portable cellular router that shares a mobile broadband connection with up to five devices via Wi-Fi. The plan requires separate purchase of a MiFi from Virgin Mobile for $150.)
Just as T-Mobile implemented with their 5 GB, no overage charge plan several months ago, Virgin Mobile will restrict throughput to a low level (probably 50 to 100 Kbps, based on other carriers' actions worldwide) for the remainder of the period. You can immediately purchase another $40 plan, however, to reset the clock.
I assume Virgin Mobile came to the same conclusion that other carriers did. It's likely that up to the 97th percentile of users consumes under 5 GB, that two percent eat 5 to 20 GB per month, and 1 percent consumes tens or even hundreds of GBs. While Virgin Mobile could cancel such accounts, it's not a reliable way of restricting usage and causes hard feelings. Virgin Mobile also certainly did not want to put in overage charges because it's a fully prepaid plan.
Because Virgin Mobile was the lowest cost, I'm also assuming heavy-data users, being mauled with overage fees from Verizon Wireless or Sprint/Clearwire (on the 3G side of the 3G/4G hybrids they offer now), migrated to Virgin Mobile.
Virgin could change the plan's name to "5 GB or 30 days, whichever comes first," which would be like AT&T's iPad plans. But it's perhaps a little kinder than that, offering the throttled rate so you're not suddenly cut off or having to pay the meter right away.
Could Qualcomm be angling for more Apple business with Atheros purchase? A not-so-idle thought popped into my head. Apple has sold over 100m iOS devices (iPhones, iPads, iPods touch), and sells 10ms of Macs each year. It sells unknown millions of base stations. Apple has routinely purchased wireless networking chips from Atheros and Broadcom, although it appears that iOS devices are all Broadcom-based.
With a move into CDMA technology, if Apple releases a Verizon Wireless iPhone, Qualcomm may have preemptively offered a one-stop shop for chips. It's also possible Apple's design specs already require Qualcomm and Atheros chips, and Qualcomm stepped in to take advantage of the likely tens of millions of ViPhones that will be sold this year.
Qualcomm isn't the only firm that could provide CDMA chips for a Verizon iPhone, but with its CDMA and GPS portfolio coupled with Atheros Wi-Fi, Bluetooth, and GPS product lines, it could be well positioned.
(I have never doubted Apple continuously updates an engineering model of a CDMA iPhone to show Verizon and possibly Sprint. Whether the company has a production-ready model in place, and is gearing up for a launch is unknown. I suspect that the only reason Verizon doesn't have an iPhone is that Verizon won't agree to Apple's requirements. There's no technology limit here at all.)
Giant mobile chip maker buys wireless networking behemoth: It's a mark of how long I've been covering the industry that I remember when Atheros was a plucky startup, defending its alternative encoding proposal for 802.11g by citing distances the standard could reach in the warehouse the company owned (and used for testing). Ah, it's come a long way to this deal in which Qualcomm has had a $3.1b tender accepted.
Qualcomm makes most of its money from mobile chips and associated patent licenses. The firm's big trouble aren't its finances, but the fact that it doesn't have a terrific path towards future growth of its core technologies. Qualcomm developed, licenses, and sells chips and systems for CDMA, the technology Verizon Wireless and Sprint Nextel (on Sprint's network) employ in the US. CDMA is in use by hundreds of millions of subscribers worldwide. But GSM is in use by billions.
Worse, Sprint and Verizon both chose paths other than Qualcomm's 4G vision: Sprint acquired a majority interest in Clearwire, which uses WiMax, while Verizon opted for LTE, the dominant GSM-evolved 4G flavor that will be deployed worldwide. Clearwire may eventually swap to LTE as well.
Qualcomm recently sold the spectrum it acquired for a kind of mobile television broadcast system called FLO that never took off. I was always dubious about broadcasting when the future was clearly narrowcasting. Qualcomm bet against the ability to delivery unique streaming video on demand in large quantities. The jury is still out on that over 3G networks; 4G has to be designed to make this practical. (Qualcomm received over three times its purchase price for the FLO spectrum from AT&T—$1.9b—which will use it for LTE, but still took a loss when FLO development and deployment is factored in.)
Qualcomm's purchase of Atheros makes perfect sense, as it gives the company an instant strong position in Wi-Fi, Bluetooth, and other related technologies, as well as relationships with most of the major networking vendors and computing manufacturers, including Apple. (Apple uses Wi-Fi and Bluetooth chips from a few vendors, but I believe Atheros and Broadcom remain dominant.)
However, it's worth recalling that Qualcomm also bought Airgo (in 2006), the pioneer in multiple-in, multiple-out (MIMO) antenna system technology when Airgo was at the height of its success in the industry. Airgo disappeared without a trace as a unique technology line, although its clear the patents were sucked into the corporate maw, and some MIMO techniques found themselves built into other products.
Clearwire is digging in: The company, majority owned by Sprint, is shaving expenses. This doesn't bode well. With aggressive competition for 4G services from AT&T and Verizon Wireless, cutting back seems to make less sense than trying to double down. Clearwire is laying off 15 percent of its staff and delaying new markets and handsets.
Clearwire had already said it was testing LTE, the alternative to WiMax. WiMax's chief advantage was that it was available long before production LTE gear, and could take advantage of broad channels that Clearwire and Sprint had available in spectrum they'd acquired. LTE is now coming to market, and will be the dominant 4G flavor worldwide, while WiMax has developed into a useful niche technology that could retain double-digit marketshare even when LTE is the powerhouse.
However, how can Clearwire redeploy in the middle of a cash crunch? Especially with $2b in debt and other obligations becoming due in 2011, as Stacey Higginbotham reports.
Virgin Mobile's unlimited, no-contract data plan seems to have rattled AT&T's cage: Virgin back on 23 August announced a change in its no-contract plan options. Instead of four tiered plans, the highest offering up to 5 GB used within 30 days (on Sprint's network) for $60, there would be two: a $10/10-day/100 MB option and unlimited 30-day usage for $40.
That so undercut the rest of the market, I was wondering if there would be any response. Verizon has long offered a one-day $15 data pass, which always seemed overpriced to me since the market it was trying to reach were those with otherwise inactive 3G cards or MiFis.
AT&T's response appears to be a modest rejoinder. Three tiers: $15 for 100 MB used within a day, $30 for 300 MB used within a week, and $50 for 1 GB used within a month.
What AT&T doesn't seem to still realize is that Virgin Mobile's deal can be paired with a $100 MiFi (no contract), meaning that a few months of AT&T-priced usage would be outweighed by cost savings and flexibility. AT&T doesn't offer a MiFi-like device, and thus service is limited to laptop cards and notebooks.
It's a step in the right direction, as was AT&T's change to metered 3G broadband with reasonable overage charges for heavier users.
Devicescape will offer SoftGPS, another way for device makers to obtain coordinates for mobile equipment on the go, GPS or no: I've written before that Devicescape and Skyhook Wireless are two of my favorite companies in the back-end Wi-Fi space because what they do is so clever. Both have been around for years; both are seeing the payoff for consistently working towards intelligible goals. And both rely on their software or data being used by other firms.
Of course, they're now in competition for some of the location services dollars. It makes sense. Skyhook Wireless bootstrapped itself into the Wi-Fi positioning business through brute force driving. It still uses driving as a primary component in how it provides fairly precise latitude and longitude based on an analysis of Wi-Fi network IDs and the corresponding signal strength around a device.
But Skyhook also gathers data, massive massive amounts of data, from mobile devices, largely smartphones. Each time a smartphone snapshots a network environment and sends that information to Skyhook, the company not only replies with GPS-like data, but it adds the collected information into its databases to refine, update, or expand its knowledge.
Devicescape thus finds itself in a similar footing. Without having fleets of wardriving trucks, Devicescape does have its software installed in millions of devices worldwide, and gathers the same kind of snapshots. The company has also collected the information and positions of millions of hotspots. This information put together leads inexorably to the desire to make money off it. You don't collect a billion (or 10 billion?) pieces of such information without wanting it to generate some cash in return.
The demand for location services is extremely high now that the pieces are in place by many content providers to deliver general and specialized information relating to where you're precisely standing. That ranges across simple mapping, navigation and directions, advertising, yellow page-like business data, and augmented reality (where information is overlaid on a live video stream of your surroundings, for instance).
While the focus has been on smartphones and other cellular devices, that may be misplaced. In most such devices, GPS (and, most of the time, Assisted GPS) provides primary information with Wi-Fi and cellular triangulation a secondary or supplementary factor.
But what about the thousands of current and future mobile doodads that won't have a GPS chip, but for which location is a useful component? That's where Devicescape and Skyhook will contend. And Devicescape has an advantage there.
Devicescape has relationships with many hotspot networks and the software that allows authentication to free and open networks. That means Devicescape's SoftGPS will likely be able to connect to its back-end servers quite a lot of the time, where Skyhook will be relying on a network connection made by the user, or a 2G or 3G cellular data connection.
Both companies can offer "deferred" lookup, too. That's what I get with my Eye-Fi cards, the SD camera cards with Wi-Fi built-in. The Eye-Fi (with the right model or add-on subscription) captures Wi-Fi scans along with photos. When you use its software to transfer photos, a Skyhook lookup happens and adds geotagging (EXIF metadata) to the images.
I tend to disagree with my colleague Om Malik, who writes at this GigaOm site that Devicescape "may find itself outgunned" in competition with Google and Skyhook, while contending with Apple and Nokia no longer needing to outsource for such Wi-Fi-based information. (Apple recently stopped using Skyhook in its iOS: neither the iPad nor iOS 4 uses that firm's data.)
Rather, the market for location is expanding, and not everyone wants to be in bed with Google, nor will Skyhook have the right mix or technology for each potential customer. And, Om omits the fact that Google has agreed to be or is prohibited from collecting Wi-Fi data from Street View in many countries, although Android-based location collection is likely unimpaired.
The addition of Devicescape to the Wi-Fi location market seems like a clear win for everyone but Skyhook, which now has to contend with a potentially strong and savvy competitor that knows plenty about device-level driver and OS integration. For manufacturers, service providers, and customers, there will likely be a faster pace of devices knowing where we are.
AT&T's quarterly update on Wi-Fi sessions fails to mention that most of its locations have free or nearly-free service now: AT&T has very nicely released statistics on the use of its "20,000+" hotspots for some time. It's handy for those of us who write about the business to get some concrete numbers. In the first quarter of 2010, usage was almost 500 percent higher than the year-ago quarter: 53m sessions in all.
But the press release mentions only half of the reason for this increase, in my estimation; more data might belie that. McDonald's switched from a modest for-fee model ($3 for two hours) to fully fee-free in January 2010. This was well advertised, and I can't help but believe it's part of the push. As I wrote in January, "These numbers will completely explode in 2010 Q1, I predict."
At the same time, Starbucks switched from its complicated usage plan for stored-value card owners to far simpler model. In the old system, which aged out in December 2009, you received 30 days of usage (two consecutive hours per day limit) after each purchase or value addition to the card. The company initially announced a change that would keep that limit and add a minimum initial state in which five purchases were needed before activation of the free offer.
But the company got smart and made it simpler. Now, any Starbucks card holder who has made any purchase or loaded value can register the card and get free two-hour-a-day service indefinitely.
Starbucks and McDonald's represent somewhere north of 18,000 of the more than 20,000 hotspots in the network. Neither firm is mentioned in the press release, nor does the word "free" appear. Barnes & Noble's 700+ locations with free Wi-Fi provided by AT&T is also omitted.
I don't mean to be hard on AT&T about this; it's actually a marvelous thing that its major two venue partners wanted to make Wi-Fi more freely available. But it also simultaneously reduces the benefit of an AT&T subscription or service if you can get most of the network for free. Airports, hotels, and other premium locations remain for-fee.
Of course, the other big factor is the continuing increase in users who qualify for free access on all domestic locations as an add-on. In the fourth quarter of 2009, AT&T had 27m qualifying DSL, fiber, remote business, and smartphone subscribers. Three months later, that number is 32m. The vast portion of those subscribers are likely new iPhone purchasers, given that the company is bringing more customers over to that phone from other carriers or other phones; the company said broadband and laptop card subscribers increased only 278,000 to 17.5m, which means that they added nearly 5m wireless subscribers to this pool.
As the company noted in the press release, 69 percent of connections in the last quarter came from smartphones and what it describes as "other integrated devices" (I'm not sure what that category is and it's not defined--the B&N Nook?), up from 35 percent in the same quarter in 2009.
Virgin America's CEO says airline sees 12 to 15 percent of passengers using in-flight Internet access across airline: As I keep saying, VA has just 28 aircraft (all Airbus A319 and A320s) and flies just 100 scheduled routes per day. However, this number reported by Joe Sharkey in his New York Times travel column is quite useful.
Virgin America's passenger traffic isn't available; it ranks below the top 10 airlines' by passengers that the Bureau of Transportation Statistics reports on monthly. The airline's two Airbus types can carry either 125 or 150 passengers, although configurations can reduce those counts. The airline did report an 81 percent load factor in the fourth quarter of 2008.
If I take a lot of variables into account, let us assume that VA flies roughly 110 people on average on each flight each day given the capacity and load factor. That's about 330,000 per month or 4m per year. (In contrast, No. 10 carrier SkyWest put about 1.4m passengers on its aircraft in each of January and February of this year.)
With average use of 12 to 15 percent across the airline (about double that on San Francisco routes), that should mean on an average day between about 1,300 and 1,700 people use the Aircell Gogo Inflight Internet service. Virgin America has the full current range of pricing: $10 for flights under 3 hours, $13 for three hours or more, $8 for handheld devices, and $6 for red-eye flights. Let's put the average price at about $9, given that Virgin flies a number of shorter flights on the Western seaboard.
So: $9 times 1,300 to 1,700 users equals $12,000 to $15,000 per day, or $4.4m to $5.5m in gross revenue per year. Assuming $100,000 per plane for installation costs and a variety of minor ongoing maintenance costs, that's not a bad ROI. It's unknown what the airline/Aircell split is. Even if the split is 50 to 75 percent to Aircell, the deal isn't bad for VA, which--if this rate of usage persists, and ostensibly increases--has a fast payback, an additional revenue stream, and a customer stickiness tool.
The real question will be, of course, if Delta with over 300 aircraft planned to be equipped by third quarter would see a similar usage rate across the fleet. The numbers wouldn't be bad. Let's assume Delta, with a broader passenger base, might have 8 percent usage, a third to a half less use than VA.
Delta carries about 5m passengers per month (although this includes travelers on some smaller planes that aren't scheduled to get Internet service). 5m times 8 percent gets you about 400,000 users each month or $3.6m in gross revenue per month or $43 million per year. This offsets what should be $30m in installation costs (300 planes times $100,000).
In comparison, Delta brought in $177 million 2008 from baggage fees, although the airline added a $15 fee for the first checked bag late in 2008, which will push revenue up quite a bit.
These numbers are based on a lot of supposition, I'll allow. Still, it's the first time the veil has slipped on anything to do with actual usage rates.
Or will Clearwire remain standing while the Sprint 2G/3G firm goes under? Sprint's latest revenue and earnings are pretty horrifically bad. The company has been shedding operations and divisions for years like a rapidly falling balloon trying to heave off ballast to stay aloft. The company spun off its wireline division as Embarq; its 4G network portfolio and operations to the new Clearwire, of which it owns 51 percent; and now may throw 5,000 to 7,000 workers an Ericsson group to handle cellular network management.
You don't take your core operational responsibility and outsource it and expect to survive, I'm afraid. Sprint runs a perfectly fine network, but by outsourcing to Ericsson, it shifts the objective to Ericsson producing a profit at a specific quality level rather than having operational quality be a core company mandate. (This is no knock on Ericsson, which could be a firm of superstars. It's just that Ericsson's interests aren't aligned with Sprint's.)
The Associated Press, as most accounts do, ignores Sprint Nextel's continued failed migration of public safety networks to new frequencies, a multi-year failure allowed by the FCC, and for which Sprint still has billions in reserve to pay for--but also an uncapped liability. At some point, it's possible that the number of remaining networks and the cost for buying new gear and moving public-safety systems will swamp the company more than its negative earnings and drop in postpaid subscribers. I'm always stunned when I don't see this mentioned, because it's a constant weight on the company's future.
It's possible that Sprint could disappear or be absorbed into Verizon, the only company with compatible CDMA network technology, and that would leave the WiMax division potentially on its own, or with a new majority owner that wouldn't allow it to thrive.
Because we didn't have enough on our minds on election day, the FCC met and made three relatively massive decisions: Let's start with white spaces. I have been avoiding posting too much about the topic, because it's mindbendingly boring to the average reader or businessperson who is more interested in technology or developments when they happen, not when they're discussed ad nauseum. The gist of the white spaces proposal is that computer industry giants want television channels that are unused in specific markets to provide assurance of a lack of interference among adjacent channels.
Microsoft, Google, Intel, HP, and many others covet the space to use for high-speed wireless networking for broadband and wireless LANs. Over short distances, rates rival 802.11n Wi-Fi speeds; over longer distances, speeds will likely be closer to 10 Mbps. The expectation is that the frequencies, way down in the 54 to 698 MHz range, would have enormously superior propagation characteristics when coupled with higher power limits than Wi-Fi's 2.4 GHz or 5 GHz deployments. With adaptive scanning required to avoid stepping on licensed users, the white spaces technology would likely be much more resilient than Wi-Fi, too, as well as having a larger span of channels on which to choose to operate.
The National Association of Broadcasters, representing owners of TV stations and networks, protested that regardless of how well designed devices were to avoid interfering with TV signals, it was inevitable that they would. Dolly Parton surprisingly entered the fray--nearly a la Wi-Fi patron Hedy Lamarr--on behalf of the wireless microphone industry, which has a licensed low-power use for theater and performance.
The FCC voted 5-0 to move forward. Manufacturers would still be going through tightly controlled FCC certification and testing for their devices, and one imagines the NAB will be watching very closely as well.
The FCC also voted 5-0 to approve a WiMax merger/spinoff that allows Sprint Nextel to reorganize its Xohm broadband operation into a new firm that would be merged with Clearwire's assets and be named Clearwire. The new operation already has billions lined up from Google, Intel, and cable operators to invest. The Justice Department already gave its general go-ahead, too.
This move sets the stage for a real battle among all broadband providers: it will force AT&T and Verizon to move quite aggressively to use the new 700 MHz bandwidth they acquired (and plan to deploy GSM-based LTE over, even though LTE is still officially in the lab, not in production); and for wireline provides like AT&T and Verizon, as well as Comcast, Cablevision, Qwest, and all the rest, to rethink pricing, speed, and services that Clearwire enters. If WiMax pans out as a viable third or even fourth pipe into the home, other broadband options in the same markets will be cheaper and faster.
Finally, in the least-interesting part of the news, the FCC voted to approve, with Dems partially dissenting--procedural thing, it appears--to allow Alltel to be acquired by Verizon to create the biggest U.S. cell carrier. Alltel was the largest of the smaller carriers, as it were, providing service in areas that the major carriers often overlooked. The Alltel acquisition is partially an infrastructure play that reduces Verizon's roaming costs while expanding its customer base.
Starbucks informed me that it, AT&T, and T-Mobile have signed a memorandum of understanding about the free Wi-Fi kerfuffle: T-Mobile filed a lawsuit a few days ago against Starbucks stating it wasn't involved in discussions about its network carrying free loyalty-awarded Wi-Fi via AT&T's authentication system. Now the three companies are apparently making nice.
The statement from Starbucks reads: "T-Mobile, AT&T and Starbucks have entered into a memorandum of understanding to resolve their disputes and are committed to providing a high quality WiFi experience for customers, including Starbucks Rewards Customers, at Starbucks locations nationwide."
My interpretation is Starbucks said, oops, our bad, and they're figuring out the dollars and cents. Sometimes companies move too rapidly. T-Mobile is a quasi-jilted suitor, although they get something out of AT&T transition, too, so they're not likely to cut any slack.
Reuters confirms that AT&T confirms the statement. I separately confirmed with T-Mobile that the statement is accurate as well.
The LiveTV division of JetBlue will assume Verizon Airfone's operations, which includes 100 towers with communication gear in the US: While Airfone ceased commercial operations in 2006 following their giving up early in the bidding for plum spectrum won by AirCell, they still have governmental and corporate ("general aviation") customers. JetBlue's LiveTV won the smaller of two licenses (1 MHz); AirCell won the 3 MHz auction. AirCell built its own network (an expansion of previous general aviation service), and is launching very shortly with Virgin America and America Airlines.
Ostensibly this purchase allows JetBlue a faster and simpler path into operations. Whether it's worth it to JetBlue is hard to tell, except that they will likely be marketing this service to other airlines as a differentiator. It will be lower bandwidth than AirCell, but could be likewise cheaper and used for shorter-haul flights.
Verizon notes some of the technical details of their service's business status on a FAQ for their corporate customers, which has an oddly large amount of business detail. Verizon was obligated within two years of the end of the auction for the spectrum they occupied with their very inefficient narrowband analog service to cease operations on those frequencies. That date is about now (the certification of the auction results was close to two years ago), and Verizon clearly worked out the details to allow current customers to maintain continuity through the spectrum vacation and into JetBlue's hands on January 1.
As I noted a few days ago, a few sources had already tipped me that JetBlue's test aircraft with Wi-Fi onboard and email was using the ancient Airfone network, which is capable of slow dial-up modem speeds, rather than using the 1 MHz which could conceivably carry over 500 Kbps of data in each direction per plane.
MetroFi will sell its networks, but plans to shutter if there are no buyers: Ah, folks, the trifecta has arrived, and I'm nothing but sad about it. MetroFi's chief Chuck Haas emailed me this evening with the news that his firm has decided that they will sell their networks in nine cities, including their first cities in the Bay Area (Cupertino, Santa Clara, and Sunnyvale), and their largest muni deployment in Portland, Ore. If no buyers emerge--including the cities in question--Haas said that MetroFi would have a shutdown plan for gradually unlighting the networks. Update: Portland has been offered its network for $894,000; the city is "considering it."
MetroFi was one of the three most prominent pure play metro-scale Wi-Fi firms, if you count EarthLink's municipal wireless division as a separate operation, and Kite Networks, which was a subsidiary of a larger telecom firm. Each company had made a unique network hardware choice--MetroFi, SkyPilot; Kite, Strix; and EarthLink Tropos plus Motorola--and each had a sort of specialty. Interestingly, a fifth firm, BelAir powers Toronto (a small but super-fast Wi-Fi network) and Minneapolis (the only putatively completed large-city Wi-Fi network), and will be behind Cablevision's nearly $350m New York Wi-Fi plan.
MetroFi was the only major firm to back ad-supported no-fee access, coupled with paid, no-ads service, and higher tiered commercial offerings. They built mostly smaller cities, with Portland being their only real big city win. The firm began with the notion of building Wi-Fi out gradually as a way to provide broadband in communities that lacked service, with no municipal involvement. That plan required sparser networks and typically a home signal booster designed by SkyPilot. (Kite mostly focused on the Southwest; EarthLink on big cities.)
EarthLink was in many ways largely responsible for the mess that all Wi-Fi providers found themselves in last year by offering to build Philadelphia's network back in 2005 at no cost to the city--in fact, paying the city and the local utility fees. That set the stage for nearly all the RFPs that followed where, if EarthLink were a bidder or the city was aware of the alternatives, the notion was that no city dollars would be spent, even if taxpayer money wasn't "at risk"--that is, even if a city could save money by switching current line items in their telecom and data budget to a wireless network.
Haas noted via email that MetroFi has been working towards anchor commitments by cities for nearly two years, but the inertia of those early networks led municipalities to reject those options. In Toledo, where MetroFi had negotiated an anchor commitment, a change in administration led a new mayor to retreat from the plan.
Is there a future for metro-scale Wi-Fi? Yes. With thoughtfully constructed, outdoor-focused deployments centered on municipal purposes, with public access a secondary issue, it seems like these networks could still provide an inexpensive way for relatively high bandwidth compared to the alternative of cell data networks.
However, that advantage is likely short lived in larger markets. The near-future certainty now that there will be multiple provides offering wired broadband speed service starting later this year with Sprint/Clearwire's WiMax, and continuing through into 2012 with significant network buildout by Verizon and AT&T in several bands (including their new 700 MHz holdings).
While Sprint/Clearwire is talking about 120m to 140m homes passed by 2010 with their network, obviously focusing only on major markets, many of the 700 MHz licenses purchased by AT&T and Verizon carry buildout requirements with penalties. So cities outside the top 100 population markets and rural areas will still see some benefit. In those mid-tier markets, there's also the 3.65 GHz band for shared licensed use, which is a model that Azulstar is pursuing with new WiMax deployments, as I wrote about recently.
Competition will likely push the cost of mobile broadband far below its $60 per month 2-year contract rate of today, which then would beg the question why a city or county with good commercial coverage would need to build its own Wi-Fi network. There are still plenty of reasons to build dedicated, first-responder 4.9 GHz public safety networks, of course.
I've always described Wi-Fi on a metropolitan scale as the best, worst technology. The best, because everyone has Wi-Fi in their laptops and increasingly in handhelds and gadgets. The worst, because the technology is absolutely not designed for the purpose, unlike CDMA and GSM evolved cell standards and mobile WiMax.
It's possible that in the long term, looking five years out, that Wi-Fi on a metro-scale will only be needed in small towns, odd markets, and for highly particular purposes. Or, perhaps in a bit of irony, where companies like Cablevision feel Wi-Fi is necessary to retain the loyalty of their highly wired customer base.
Why don't service providers tell you what it costs? In this mobile post, I inveigh against the practice of hiding one's prices coyly, like the menu at an expensive restaurant.
Cablevision will offer free Wi-Fi to its customers across a swath of New York: The company will spend an astounding $350m over two years--roughly $100 per customer--to put in service that they peg at offering 1.5 Mbps downstream rates. Broadband subscribers to their Optimum Online broadband service, which has rates of 15/2 and 30/5 Mbps. Others will pay for access. The company has 3.1m cable customers in New York.
This is the first large-scale Wi-Fi network announced that had no public/private component to it. While Verizon once said they'd blanket New York City with payphone-based Wi-Fi nodes, that never materialized, and it was unclear how seamless the coverage would ever be. This is a full-blown metro-scale network that's not beholden to any political interest, and which can likely use mounting rights already available to Cablevision. (In the past, I've said this, and folks have said that franchising agreements would exclude additional mounted equipment of this kind. Years later, I have to say I've never found anything to support that opinion, but welcome more documented information in the comments.)
The idea is for Wi-Fi to act as a mobile broadband component for Cablevision, to dilute the impact of the Sprint/Clearwire deal announced yesterday. While cable companies rarely compete in a given territory, the Sprint/Clearwire joint venture will make it easier for a customer to get home and mobile broadband and voice from one company, and then turn to another firm for video. This buys Cablevision a quadruple play (voice, video, data, mobile broadband) with a future quintuple play by adding (as they say they will) voice over Wi-Fi service.
Sources indicate that BelAir equipment will be used, which makes sense given BelAir's release nearly three years ago of a cable-plant compatible Wi-Fi node designed essentially for precisely this contingency. This is a nice win for BelAir, which will likely be selling somewhere north of 15,000 nodes based on the coverage area and service described. BelAir gear also powers Minneapolis, the only successfully completed big-city Wi-Fi network in North America.
Sprint seemed awfully clever when it navigated a public safety deal and gained new spectrum as part of its acquisition of Nextel: That's all unraveling now. The FCC and the courts are saying that a 26-June-2008 deadline for vacating its 800 MHz holdings in favor of public safety groups would hold even if the new users weren't on the band. The delays for new users getting on the band are reportedly Sprint's, given that it had the responsibility for this migration.
Nextel had splintered holdings in the 800 MHz band that were difficult to administer, and caused verifiable interference with (and vice versa) splintered public safety spectrum in that band. Sprint agreed to pay the estimated multi-billion-dollar cost of getting new equipment to public safety agencies in exchange for a hunk of spectrum that they wouldn't have to buy at auction from the FCC. The cost for a whole set of swaps, migrations, and givebacks was $4.8b, but there was technically no limit on how much Sprint would have to pay for public safety migration--as much as it cost is the true limit.
Last August, the Wall Street Journal did a lengthy update of the 2005 deal, explaining that the effort was vastly behind schedule, and was vastly underbudgeted, too. One county in Pennsylvania estimated that its costs could run $18.5m to $150m, with the low number far above Sprint's own estimates.
It would be seemingly unfair to allow Sprint's delays in moving fire, police, and first responders off the band to also delay Sprint's requirement in vacating the band. We'll see how the FCC chooses to respond. It could cost Sprint billions and further accelerate the loss of Nextel customers, because Sprint would lose a number of active iDEN sites.
They have no one to blame but themselves. Sprint's management has blundered through this merger for years. They kept separate Kansas and Virginia headquarters, failed to produce high-quality dual-network devices, gave few incentives for Nextel customers to move to Sprint's dominant CDMA network, bled employees, and botched this migration.
Now Sprint did have the problem of needing to help move incumbents in the 1.9 GHz spectrum it received and the 800 MHz spectrum it was giving up. The articles on this court decision don't note whether Sprint's 1.9 GHz network is free and clear, nor whether Sprint had been working for the last three years to get its Nextel users to get dual-band handsets that would work with the new frequency.
With the WiMax plan also on the table, Sprint was basically committed to building or rebuilding and supporting four network architectures: CDMA (for 2G), EVDO (for 3G), WiMax (for 4G), and iDEN (for 2G).
Sprint is in the position where it may variously be sold (to Deutsche Telekom to merge with its T-Mobile USA division, which would add both GSM and UMTS/HSPA to the mix!), sell off its Nextel division (to a public safety venture headed by Cyren Call), and/or spin off its WiMax division or form a broad venture with Clearwire to build and market it.
Update: Oh, yeah, and Qwest walks away from Sprint partnership, switching to Verizon Wireless as its partner. Qwest spun off its cell division years ago, and has no overlap in its wireline territory with Verizon.