Why Sprint has no choice on mobile WiMAX

It's becoming ever-clearer that Sprint has no choice but to develop its nationwide WiMAX network. If it doesn't, it could be swept away by its bigger, more deep-pocketed competitors. Here's why.

First, let's talk about revenues and subscribers. Cingular (now AT&T) and Verizon Wireless both reported big growth in the fourth quarter in terms of both wireless revenue and new subscribers while Sprint's fourth quarter results showed roughly a third of the subscriber growth and flat revenues and profits. Sprint's problem, besides botching its technical integration with Nextel, is that it just doesn't have the resources to compete against its bigger competitors.

Perhaps the biggest issue, though, is the huge swath of spectrum it is using for its mobile WiMAX service. The FCC has decreed Sprint must use this precious spectrum or lose it, which would essentially mean giving the spectrum to its competitors. In that light, the $3 billion it is spending on the WiMAX network is relatively trivial. If Verizon and/or Cingular get their hands on that spectrum, Sprint's ability to compete will become far more difficult. So even if it doesn't succeed with WiMAX, it is worth the gamble for that reason alone.

Will Sprint's WiMAX effort succeed? I've been talking to a lot of folks about this and people on both sides of the question feel very strongly. "They're on drugs," one consultant recently told me. Another suggested they'd have to work hard to fail.

I spoke with a Sprint executive at some length at CES a few weeks ago and the company seems to be in the process of developing the right attitude. They know they can't price and package the mobile WiMAX service like they do with cellular service. But they still seem insistent on having a multi-tiered pricing scheme -- one price for basic coverage and other prices as you add WiMAX-enabled devices to the mix.

Sorry, but when you buy DSL or cable coverage, you can connect all the devices you want. Sure, a premium can be charged for the mobility Sprint will offer with its WiMAX, but to have complicated multi-tiered pricing schemes runs counter to what people expect and will run into serious resistance.

Having said that, I still believe that if Sprint delivers the speed and quality it has promised (some believe that's a big if) and if it provides simple, one-level pricing between standard DSL/cable and 3G service -- say, in the $40 to $45 a month range -- they could have a hit on their hands. However, if they remain adamant about multi-tiered pricing, I'm not sure I like their chances.