David Haskin

Sprint-Clearwire WiMAX deal proves no act of courage goes unpunished

By David Haskin
July 19, 2007 8:11 AM EDT

Sprint and Clearwire will team to provide nationwide mobile WiMAX service, which is yet more proof that, in business, rarely do courage and vision go unpunished. 

 

In simple terms, Sprint had the vision and resources to develop a bold if risky plan to roll out mobile WiMAX nationally.  The Clearwire deal highlights how Sprint's shareholders and Wall Street analysts lost their nerve.

 

Certainly, Sprint is in a world of hurt.  They have been losing cellular subscribers rapidly and have not been turning anywhere near the profit of their competitors.  Even worse, there didn't seem to be any vision of turning that problem around.

 

But Sprint's proposed use of a ton of spectrum inherited when it acquired Nextel for a $3 billion nationwide WiMAX network was, at first blush, brilliant.  None of its competitors could hope to match Sprint's mobile WiMAX network, both in terms of performance and coverage.  The competitors simply don't have the spectrum. 

 

Mobile WiMAX should provide far superior performance than the cellular operators' 3G networks and Sprint has said it would charge less.  In simple terms, mobile WiMAX would give Sprint at least a two-year lead over its competitors in terms of providing fast wireless broadband access.

 

Even more important, Sprint has said it would be an open network.  By contrast, Sprint's cellular competitors think the world is clamoring for walled-garden closed networks with overpriced service plans.

 

In other words, while risky, there was a very good chance Sprint's bold WiMAX plans could succeed wildly.  True, we don't know yet, really, whether the world desires mobile WiMAX, but if Sprint played its cards right, the value proposition for both enterprises and consumers would have been compelling. 

 

But Sprint's shareholders and Wall Street analysts were in near revolt.  These nervous nellies feared that Sprint would not get enough return on its $3 billion WiMAX investment.  The deal with Clearwire lessens Sprint's risk, although it certainly doesn't eliminate it.  But it also can't help but lessen the potential upside.

 

There will still be a nationwide WiMAX network, which will start to be widely available about a year from now.  And Sprint will still be a leader in this new technology -- that doesn't change because of the Clearwire deal.  But it is a reminder that courage and vision are rarely rewarded by Wall Street.