Q&A: Clearwire -- Sprint’s Barry West Talks WiMAX

In preparation for the July cover story on 4G services in the United States, xchange magazine spoke with Barry West, previously Sprint’s WiMAX chief and now president of the new Clearwire Corp., which is the result of Sprint-Nextel Corp.spinning off its Xohm mobile WiMAX division to the old Clearwire.

Clearwire has been investing in WiMAX in various markets across the country and holds the largest amount of 2.5GHz spectrum after Sprint’s share. xchange’s senior editor, Tara Seals, spoke to West about why the union makes sense and what’s ahead for the new company.

And click here for a Q&A with Clearwire CEO, Ben Wolff.

xchange: So tell me a little bit about the rationale behind the Sprint-Clearwire union, and why you decided to build this new company.

West: We’re in an interesting position where you have two units coming together with complementary assets. If you were to take a clean sheet of paper and design a new wireless company, there are several elements you’d want. One, you would want a lot of spectrum — the two of us together have the largest spectrum holdings in the United States. Two, you need access to the infrastructure to build the new network quickly — at Sprint, we have that. Then there’s the fact that you need funding, which in today's environment is challenging. This deal gives us that. And you’d want a good team to run it and create a lot of shareholder value. And you need access to customers, which through the cableco install base and Sprint’s subscribers, we have that. Throw in fairy dust and it's pretty nigh perfect.

xchange: There are a lot of folks involved in the venture.

West: I’ve heard comments like, there are too many cooks in the kitchen. But it’s the management team that’s in charge of designing services and the “where” and “how” of the way things are going to be. So that’s who’s in charge of the day-to-day operations, and we don't need consent for everything from the investors.

xchange: How does this deal help Sprint as an entity?

West: Sprint will now have access to both 3G and 4G services to compete with AT&T and Verizon and we’ll definitely have a distinct advantage over satellite. Plus, Sprint makes money out of the investment as well [Sprint took a 51 percent ownership stake in the new company].

xchange: 4G holds the promise of the open mobile Internet, which is something [Clearwire investor] Googlehas been championing.

West: Google definitely has the vision — and it is always on the leading edge of doing things. Google holds a great belief that the Internet should be available everywhere, and at a very low cost. You, of course, have to be realistic and make a return for investors, so the idea of free service is great as long as it’s paid for in some way. We’re working with the Android team, and benefiting from that innovation on the product side.

xchange: Speaking of which, tell me a bit about the device plan.

West: [Investor] Intel is committed to the embedded model, which we believe will ultimately win out. Intel plans to help WiMAX become embedded in everything that moves and some things that don't. Anything that needs a processor can be WiMAX-enabled, and that’s great news for Intel. Think of the possibilities: Why would a washing machine need WiMAX. Whenever things go wrong, you call up the repair people and they send someone out, but they can't be specific about when they come — they give you an all-day window. So then they turn up at half-past four in the afternoon to tell you the obvious — that things have gone wrong. Then you have to schedule another visit for them to order the part and bring it in.

Ultimately, you lose days of your life. Wouldn't it be wonderful to have the machine itself call the repair shop and say, this part is about to go or is broken, please come and install a replacement. So the repairman shows up the first time around with the right part.

xchange: How does this change the usage model?

West: When it comes to distribution, the embedded model is different than anything we've seen. Take Wi-Fi built into the laptop; it sees all the networks available, and you choose one and create a billing event. The neat thing is, the more embedded devices you own, the more you use the service. With WiMAX, the service is not just for one device. You may have a laptop, a navigation product, a mobile Internet tablet, and likely many devices monitoring various services. We'll know it's you and that you're using those services, across devices, which will kickstart service uptake. Take a digital camera, for instance — you’re not going to pay $60 per month just to wirelessly download pictures. But if you can offer something where you can take advantage of the chip in the camera as well as the rest of the devices, $60 doesn’t look so bad. Of course, that transition requires building a different set of back-office systems with the individual at the center of the service.

xchange: What does all of this mean for the cablecos?

West: They have really established a relationship with a strong base of people who know and like the services they provide, which are VoIP, access to Internet and televsion. Their customers can really relate to them on content. If they can take that and provide it to you on a mobile basis, that’s a tremendous opportunity to expand their market. The cable industry has been serving America with entertainment for a number of years, and now they can leverage all that experience into new revenue.

xchange: Whenever you talk about open access, there’s always the possibility that the service provider becomes a dumb pipe. How can that be avoided when it comes to WiMAX?

West: You, the individual, become the center of everything that happens. We as the service provider know where you are and your preferences and can provide you with information that you want. It’s also an opportunity to upsell other services, like location-based services, entertainment, even voice. Essentially, we can walk customers up the value chain, and that is a great opportunity. The Internet experience will happen on more devices and new devices, so the mobile experience happens in new ways in new places. So although the access is affordable, we will layer on services that will take advantage of all the smarts that go along with the IP high-speed access.

xchange: Is that a sea change in terms of consumer thinking?

West: The concept of opt-in is clearly important. But I think people will be willing to make that transition to opting in for personalized services as they realize the information won't be exploited. Take, for example, localized search; if you’re in Baltimore and want to find a local attraction, or if you want to find out what's around you, you can get that information pushed to you from local entertainment businesses. In the future, there will be Web cams, so people can look in and see what's happening in the bar down the street, so you can see if it’s a place you’d like to be. It will take a little bit to get from here to there. But it’s equivalent to the early days of cellular service, when people didn't want to give out their number because getting calls was too expensive. Once affordable calling came, that fear went away.

xchange: What are some of the challenges or obstacles that you guys are still thinking about when it comes to building out this vision?

West: We're actually pretty set, you know. There are the straightforward logistics of rolling it out and building awareness. When you build a network, it's important to load it quickly. The first customer is a very expensive one. But with Sprint’s 50 million subs and that of the cablecos to leverage, we’re expecting to load the network quickly.

As for the technology, it’s very real and it's here. Samsung, Motorola and Nokia have pledged to drive that embedded model. Nokia, in fact, showed off the first WiMAX Internet device at CTIA. Now, we’re just going through the logistics.

Some of the claims for these future wireless generations are unrealistic. For any small device to do 100mbps over any reasonable distance — that just isn't going to happen and that's down to physics.

xchange: There’s still an awful lot of EVDO and HSPA out there still being built out. Also embedded Wi-Fi. And not everyone needs 4G speeds after all. Look at the iPhone's popularity and it's just EDGE.

West: Around the world there are about 140 operators we’ve met with since we announced we're going down the WiMAX route, and we’re closely collaborating with them, so it will be a bigger initiative than just this one network. Anyone would go to it anyway because of the lower cost per bit to deliver services. 3G is actually very expensive considering the coverage right now; it will take a long time to lower the cost per bit. The economics and the timing of a change-over to 4G is what every operator needs to consider. But regardless, the technologies will coexist for a long time.

xchange: Where do you see the prospects for the business market?

West: Enterprises are in the can't-wait-for-WiMAX mode. Because unlike Wi-Fi-cellular dual-mode schemes, once you leave the office environment WiMAX can have the same facilities out on the public network as you have on the office LAN. The part that's underserved in the business market is really the SOHOs, which just can't afford the same connectivity as an enterprise. A T1 is a heavy commitment to a small company. Now, they’re getting better than T1 speeds by simply signing up for WiMAX.

There’s also an opportunity for service providers to wrap around services for the smaller companies that the enterprise takes for granted. I think we'll see a mushrooming of support companies offering support services for smaller businesses. Enterprises call their IT departments. Small businesses have to take computers in to a shop, which is a big cost in terms of valuable business time. Now, thanks to true broadband, maintenance and repair can be done over the air; support companies can just take control of a remote computer and fix it. There will be all sorts of interesting opportunities.

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