the standards debate

When Sprint and Nextel Communications announced early this year that they were merging, most of the attention lavished upon the deal by industry watchers concerned the consequences of combining the existing mobile networks and customer bases of the two carriers, rather than the batches of unused spectrum at 2.5 GHz that each company owned.

In the days leading up to completion of their merger, Sprint and Nextel weren't talking much about their separate plans to pursue use of their existing 2.5 GHz spectrum to provide a broadband wireless service with mobility. But, with the merger now a done deal as of late last month, that spectrum will be the subject of much conversation.

“It's not the number one issue, but it is in the top three or four things that people want to find out following the completion of the merger,” said Peter Jarich, analyst with Current Analysis.

One obvious reason for the interest is that the combined Sprint Nextel now holds about 80% of the 2.5 GHz spectrum in the U.S., following Nextel's acquisition of MCI's spectrum in 2003. The other cause for curiosity is that the companies announced separate plans for broadband wireless trials within two days of each other in June — and right up until the merger, neither had shown signs of backing off.

With the completion of that merger, the clock is ticking on the FCC's requirement that Sprint Nextel have 15 million customers using its 2.5 GHz spectrum or risk losing it. Within six years, they must have 30 million customers on their combined spectrum, said analyst Lindsay Schroth of the Yankee Group.

“This is important, not just for Sprint and Nextel but for the whole industry,” she said. “Sprint has sat on that spectrum for years now. There is an effort to try to harmonize that spectrum around the world, and the merger is very important to the industry in general on that front because the merged company controls so much of that spectrum here.”

“Thirty million subscribers within six years — that's a lot of people,” Jarich said. “As a merged company, they have 45 million subscribers, so that's a major chunk of what they already have. They are going to have to have a specific plan to get there.”

Based on their vendor announcements, it's clear both companies have a sense of urgency on how to use the 2.5 GHz spectrum. Nextel will begin a trial of IPWireless' 2.5 GHz technology in the Washington area in the third quarter of this year, working with a vendor whose technology — TD-CDMA — is not based on the developing WiMAX standards but is based on UMTS and is deployed today.

Availability is one advantage for IPWireless, whose system is also being deployed commercially by T-Mobile in the Czech Republic and Orange in France.

“Despite all the hype around WiMAX, the definition of mobile WiMAX hasn't been finished, and commercially available Mobile WiMAX is in the 2008 timeframe,” said Jon Hambidge, vice president of marketing for IPWireless. (The 802.16e standard, the basis for Mobile WiMAX, is expected to be ratified by the IEEE in the third quarter of this year.) “We are a pure packet-based technology designed as an IP version of 3G. We're not talking about putting a product together and running a trial, we're doing a commercial deployment.”

Meanwhile, Sprint is working with Motorola to develop, test and then trial technology based on the IEEE's 802.16e standard. Since that engagement was announced earlier this summer, Motorola officials have consistently characterized it as a partnership between the carrier and vendor. “We will be installing at Sprint sites a product that is much earlier in its development cycle than normal and then learning with Sprint how it works, how it should work and how we can get it to market more quickly,” said Paul Sargeant, director of marketing for Motorola's MotoY4 products. “The goal is to get the product to market more quickly. We will be shipping our first solution based on 802.16e in second quarter of next year.”

Such tightly focused vendor/carrier partnerships are more common elsewhere in the world, particularly Asia, but aren't the norm in the U.S.

“I can't think offhand of any others,” Schroth said. “But when you think about the WiMAX Forum and the questions that have been raised about timeframes slipping, the question is whether you should rely on them to get a [802.16e] standard finalized and get the test specs complete enough that you can use them for testing.

“Motorola is saying they aren't going to rely on [the forum], they are going to make sure their customer has a solution in 2006 and then give them a software upgrade to the standard,'” she added.

Sargeant said the early-stage product that Motorola will be developing with and installing for Sprint is what the vendor calls a “light infrastructure solution.” It will take advantage of some technology already developed as part of the vendor's existing Canopy broadband wireless product line for 3.5 GHz spectrum. The Canopy product is available in most of the world — with the exception of the U.S. — where the 3.5 GHz spectrum licenses have been awarded by regulators.

By getting its 802.16e product into the field more quickly, Motorola can begin to tackle the real-world issues that the lab environment can't always replicate, Sargeant said.

“This will be the first time that there has been deployments of fully mobile broadband, and there are a lot of things we need to learn about mobility in the broadband environment — like how to efficiently manage handoffs,” he said.

Despite the different technology paths Nextel and Sprint are taking at the moment, the goal in either case is to deploy technology that operates in the 2.5 GHz band, provides reliable mobile broadband service and delivers the economies of scale required for the mass market. The question is, which approach is more likely to achieve those goals?

There are inherent risks either way, Jarich said. 802.16e Mobile WiMAX is a much-hyped technology eagerly anticipated and already supported by many large carriers and vendors. But, it also is the commercially unproven sucessor to a technology — 802.16d Fixed WiMAX — that itself is just about to begin commercial deployment.

“We are seeing companies push [802.16d Fixed WiMAX] solutions with the promise of an upgrade to ‘e’ when it's available, just to launch the stuff and get going with ‘d,’” Jarich said. “The people pushing ‘e’ have to make sure they don't get left out.”

On the other hand, Schroth believes many of the so-called software upgrades to add the mobility functionality and coverage of 802.16 e to the previous version will wind up requiring a hardware change as well, which most operators want to avoid.

The ultimate decision at Sprint Nextel could also come down to which corporate culture survives in tact.

“Sprint has always been more in favor of standards — it's in their DNA,” Jarich said. “Nextel will build a business model around whatever scale there is, they will use what works. It's a very different mindset.”

The challenge to pushing ahead with the IPWireless approach will be getting to scale, the analysts agreed.

Hambidge believes Nextel could leverage its brand awareness among corporate clients to develop a high-quality mobile broadband wireless service that would have immediate traction in the corporate world. “The most obvious would be things on high-end corporate mobility solutions,” he said. “Already today you could deliver a service that delivers over a megabit anywhere you are in the service area.”

In general, analyst Jarich doesn't believe that a major wireless carrier having two solutions going forward is a good thing because of the general confusion and the additional challenge that kind of situation poses to reaching economies of scale. For now, that is an issue Sprint and Nextel can mull over, as both technology projects remain at early stages.

But, there is one level on which the multiple approaches are an asset — they show the FCC that Sprint Nextel is serious about using the 2.5 GHz spectrum and could help ward off any thoughts of taking it back, should the company fall short of the ambitious requirements to hit 15 million customers in four years.

In some cases, the FCC has backed off pre-merger requirements that it imposed on other major deals. That's what the agency did with SBC Communications' acquisition of Ameritech, which was supposed to generate out-of-region competition by SBC that never materialized.

“You have to think, even if they only get to 10 million customers, that's a lot of people using the service, and the FCC wouldn't want to end that,” Jarich said. “Obviously, they have to show they are trying. The question is how hard do they have to try?”