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Strategic Perspectives

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In the past couple of weeks, Sprint has introduced two ground breaking products - the MiFi personal hotspot and the Palm Pre.  There's no question that each of these products is exciting and each advances the Mobility Revolution.  My question is, which do you think is the most revolutionary?

 

As a Sprint executive who speaks at conferences, I occasionally get to borrow some of our new technology to take with me to show off.  Recently, I was able to borrow the Sprint MiFi 2200 for a long weekend.   What an awesome device.  If you haven't seen it, here's how I would describe it: 

  • Take a deck of playing cards and cut the deck.  The half of the deck in your hand is rougly the size of the MiFi (but the MiFi is lighter).
  • Crammed into this tiny package is the functional equivalent of your broadband router connecting you to your cable or DSL provider, and your WiFi access point.  The MiFi provides broadband connectivity via Sprint's EV-DO network, and provides a WiFi signal for up to five devices (computers, media players, game machines, etc.)
  • Push the power button once, and within seconds you're connected.  That's simplicity!


Click here for a more thorough description.

 

As I drove around town, my son was able to surf the web at broadband speeds.  When we went into a restaurant for breakfast, we brought our own broadband connectivity with us.  In my office, I was able to connect my iPod Touch (which I won't connect to secure corporate networks) to download some updates.  At home, when my main broadband connection slowed down, I quickly switched to the MiFi and was back to full speed.

 

In short, because I was so blown away by this device, I asked for a MiFi of my own as my father's day present.

 

I also had the chance to borrow a test Pre for about a week and similarly had a life changing experience.

 

The most obvious difference with the Pre is the full HTML support.  E-mails on my phone now look like E-mails on my desk.  Web pages on my phone now look like Web pages on my desk.  The real upshot for me was that I was now getting things done while away from my desk that I previously had to save until I returned to the office.  That's increased productivity!

 

The synergy feature synchronizing e-mail, calendars, and contacts from my work Exchange server, my gmail personal account, and my online social networks, was also impressive.  At one glance, I could see how my personal calendar overlapped with my work calendar.  My one list of contacts combined info from all the sources without any effort.  I still chose to view my inboxes separately so I could focus on work stuff during work time, but switching between them was simple.

 

If demand weren't so high, I similarly would be standing in line for my own Pre today instead of writing this post.

 

To me, the Mobility Revolution is about Mobility being integrated into all of life - into every product, every service, and every process - to as dramatically change how we interact with the world and do our jobs as the Internet has impacted our lives.  

 

In those terms, each of these products is revolutionary.  But which do you think is more revolutionary?

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Verizon recently introduced a femtocell product that is strikingly similar to Sprint's Airave, introduced many months ago.  Meanwhile, rumors are that AT&T is close to launching their femtocell product.

 

What's not to like about awesome wireless coverage at home?

 

Apparently, the pricing - that's what.  Many commentators are taking all three carriers to task for making customers pay to be able to use your cellphone with reasonable success indoors.  Some also make the point that, since femtocells are taking minutes off the network, carriers should be happy and that benefit should pay for the device.

 

So, what's the deal?

 

Before I get too far, let's do a quick review of how femtocells work.  A femtocell acts like a mini cell tower in your home.  You plug it into your broadband router, and then your cellphone connects to the femtocell instead of to the nearest "macro" tower.  Your calls get routed across the broadband connection back to the carrier's network for call completion. 

 

And the results can be life changing.  My dad's house is on a spit of land surrounded by water.  No matter what carrier you have, your best bet for having a wireless conversation is to sit on the washing machine in the laundry room.  Why is this the case?  Quite simply, for some reason (probably zoning challenges, especially given the challenging geography), no carriers have been able to build a cellsite close enough to provide reasonable in-building coverage (except in that one corner of the house).  So last fall I bought my dad an Airave.  When we were home at Christmas, we made some tweaks in location, and now the main part of the house has great coverage.  He hasn't yet, but he now could consider cutting the cord.  I've heard more dramatic stories of how people no longer need to run upstairs and out the front door to answer their phone.  These customers are thrilled with what the Airave has done for them.

 

But for others, especially in this economy, they look at what the carriers are asking them to fork over, and they cry foul.

 

Reportedly, Verizon is charging $249 for their femtocell, but with no additional monthly charges.  All usage, though, does count against the customer's wireless plan.  Sprint charges $100 for the Airave, and then charges $5 - 20 per month to use it.  $5 simply for better coverage.  $10 for better coverage and unlimited in-home calling for a single Sprint phone (minutes don't count against your plan).  $20 for unlimited for multiple phones.  Pricing hasn't yet been disclosed for AT&T's forthcoming device.

 

So, there are three fundamental issues here:

 

1. Why are the carriers making me pay for this thing?

2. Why is Sprint charging me a monthly fee to use it?

3. Don't the benefits to the carriers cover the cost already?

 

Starting with charging for the device...  If we assume for a second that the device actually costs the carriers pretty close to the price that Verizon is charging, then that's a pretty big cost the carriers need to cover.  For a carrier to be able to give the device away, it would need to believe it was gaining ~$250 in benefits some other way.  If you assume that a customer will use the femtocell for 2 years, the carrier needs to receive a little over $10 in benefit each month.  Before launching Airave nationwide, Sprint performed market trials for several months.  Suffice it to say that gaining that level of benefits wasn't found to be possible.  (A bit more about that in the third point...)

 

So, why does Sprint charge a monthly fee?  In our trials, we found that most folks weren't going to shell out ~$250 for a femtocell.  (Who knows, maybe Verizon will be successful and we'll be able to revisit that conclusion.)  We believed that we needed to get the upfront cost down to less than $100.  But, that meant having to recoup the remainder of the device cost over the life of the customer using it.  The only way to accomplish that was by charging a monthly fee.

 

But why can't the benefits of moving minutes off the macro wireless network pay for the device?  In short, because there simply aren't enough femtocell users in the near term to really make a difference.  In reality, the cost differential between a single call going over a femtocell versus our macro wireless network is virtually zero.  The cost from the handset to the tower isn't meaningful.  The real meaningful cost comes in the cost of building and operating the cellsite itself.  The more subscribers we have in an area, the higher these costs because we have to operate more channels, but these are big steps of cost driven by lots of subscribers using our network.  A single subscriber switching to femtocell makes zero impact on our current cost.

 

Only if lots of subscribers switched to femtocells would it have a meaningful impact on our costs.  If we could start shutting down some channels or even entire cellsites, or better yet, not even have to build the cellsites in the first place, then we'd be talking about measurable savings.  Unfortunately, we're a very long way from having femtocell adoption anywhere close to having that kind of impact.  And even if we did, we'd still need to provide coverage for when people leave their homes and start walking or driving around the community.

 

Bottom line, for now anyway, moving traffic off the macro network and onto femtocells doesn't help at all in covering the cost for the femto devices.

 

That doesn't mean that we don't see the positives of helping our customers achieve great coverage in their homes.  And apparently our competitors see those positives too.  We think our approach to pricing is the best compromise that makes it affordable for both Sprint and our customers to enjoy these positive benefits.

 

What do you think? 

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Last week at CES, Palm introduced a new mobile operating system and the first device to use that OS. 

 

According to Palm's CEO, Ed Colligan, WebOS has been designed from the ground up to support developers.  However, it was the user experience that seemed to excite so many.  The software supports all of the cool features in the latest hot smartphones (multitouch, accelerometers, full web browsing, etc.) but there are a few characteristics that seem really new and exciting.  One is the concept of "cards" with true support for multiple applications running at once and simplicity in moving between them.  A second is what Palm calls "Synergy" - the integration of data between multiple applications, especially web-based apps (Facebook, Google mail/calendar, etc.).  A third is universal search.  In short, the operating system seems powerful and intuitive (a very hard combination to achieve).

 

The hardware innovation ain't too shabby either.  The 3 megapixel camera isn't unique, but it's cool.  Built in speaker is nice.  Replaceable battery - what a concept...  Slide out keyboard overcomes the objections from folks like me that touchscreens just don't cut it for heavy e-mail use.  But the really really cool new feature from Palm in the Pre is the touchstone wireless charging unit.  Now that's cool.  (Note, the touchstone is a separate accessory that won't come in the box with the Pre.)

 

So Palm has done an incredible job designing a buzz-worthy device and we at Sprint are very excited to be Palm's exclusive U.S. launch partner.

 

But, the critical question is, what will it take for the Pre to become a market success?  What do you think are the critical steps that Sprint must take to successfully launch the Pre? 

 

(Up front, let me note that Sprint can't afford to make everyone's dream come true, so especially around pricing decisions, we likely will be constrained in what is possible given economic realities.  Therefore, you might focus your comments on things like marketing, sales, distribution logistics, communicating with customers, developer support, customer care, etc.)

 

Thanks!

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Earlier this year, Sprint announced a huge (and complex) deal to merge our Xohm WiMax business with Clearwire.  The new company would receive $3.2B in funding from strategic investors including Intel, Google, Comcast, Time Warner Cable, and Bright House Networks.  On Friday, the deal was completed.  The company has also announced that their Mobile WiMax services will be branded "Clear."  Ben Wolff, Clearwire's CEO said Clear "is a natural choice because it is a simple, commonly used word that has significance as it relates to communications services and, of course, it is part of our corporate name."

 

But why is this transaction such a big deal?  And why does it make sense for everyone?

 

Let's start with the folks that really matter - the customers.  The Clearwire deal means that 4G services will be available in a growing number of markets starting NOW.  4G is true broadband IP, truly mobile.  WiMax has performance characteristics that are "just like" landline broadband services (multi-megabit bandwidth, very low latency, open all-IP networks, etc.) - supporting all the things you're used to doing on your previously tethered broadband connection.  WiMax has all the additional benefits of being truly mobile - location awareness, personalized to you, and always-with-you/always-on (even at 70MPH).  Who at Buzz About Wireless can't appreciate that?

 

Sure, other carriers are talking about offering 4G services in the future, but don't expect that future to arrive before 2010 at the earliest.  This deal makes 4G a reality now!

 

So, why does it make sense for Sprint?  Prior to the announcement of this deal, Sprint's WiMax rollout was generally considered to be at risk.  The main reason was because of the huge amount of capital required to build a new 4G network.  Since WiMax really is a new technology, rolling out the network requires a complete new network build, not just an upgrade to our existing network.  The cash required for that buildout had to compete with all the other areas of Sprint for funding.  Could we afford to build the 4G network and improve customer care, roll-out exciting new handsets, build IP-based convergence solutions, improve network coverage, introduce Ready Now, develop One Click, etc?  Maybe, but it would be hard.  This deal allows Sprint to focus all of our capital decisions on our core current generation business.

 

The beautiful thing about the deal, though, is that it still gives Sprint a huge 4G jump on our competitors.  Sprint will be the only wireless carrier selling Clearwire's 4G services.  Our customers will be able to enjoy our full portfolio of CDMA, 3G, iDEN, and Wireline offers PLUS 4G WiMax services through our existing sales channels.  It's like enjoying your cake and eating it too.

 

So what about the original Clearwire?  Why does it make sense for them?  Clearwire had pieced together a substantial portfolio of spectrum, but even so, what they had was far from nationwide.  Sprint's equivalent spectrum holdings in the 2.5 GHz space were very complimentary, providing a nationwide footprint with unmatched capacity.  Wolff said "We are the underdog. There are other much larger companies that aspire to do what we do. While they will get there sooner or later, we have some advantages that will give us a pretty healthy lead. A lead that can’t be overcome by simply being bigger. Perhaps, most important is our spectrum holdings. Clearwire now has more spectrum available for 4G services than all of the national wireless carriers combined.”

 

But building that network and selling services aren't easy either.  The strategic investors provide Clearwire with $3.2B in capital that will go a long ways toward building a nationwide network.  Just as important, the existing customers and channels represented by Sprint, Comcast, Time Warner, Bright House, Google, and Intel will also be critical in filling that high capacity network with revenue-generating traffic.

 

And what about the investors?  Why is this deal a win for them?  Clearwire represents an open Internet business model which enables each of the strategic investors to accomplish their business goals around WiMax.  For each, those goals are a little bit different, so structuring an agreement that satisfies all those needs has been a masterstroke.  Congratulations to the team for pulling it off.

 

So, what do you think?  Is this deal the win-win-win-win that I've portrayed it as?  I look forward to your reactions!

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I serve on Sprint's Executive Steering Committee for Corporate Social Responsibility.  Today, we had one of our regularly scheduled committee meetings and I must say I'm really impressed with everything that this company is doing to make the world a better place.

 

Consider just some of our activities around the environment:

  • Sprint has made a significant commitment to reducing greenhouse gasses by 15% over the next 10 years and is the only wireless carrier to join the EPA's Climate Leaders program

 

  • Sprint has recycled more than 15 million phones and has set a goal of recycling an old phone for 90% of the new phones it sells

 

 

  • 75% of the electricity for our corporate headquarters campus comes from wind energy and we've set a goal of getting 10% of all of our energy from renewable sources by 2017

 

  • Sprint has reduced it's IT-based power consumption by 70%

 

Clearly, these are good things to do.  The right things.  We need to continue to step up our performance as good corporate citizens of this earth.

 

But do they matter to you, our customers? 

 

And would you be willing to change the way you buy wireless if it could have a positive environmental impact?  For example, would you be open to leasing your cellphone instead of buying it, so that carriers like Sprint could responsibly manage the disposal of your old model when you upgrade?

 

Leave a comment with your feedback on how much "green" efforts impact your decision when choosing a wireless carrier and how open you are to changing your habits to help us.

 

Even better, leave a comment with your ideas for how Sprint could be doing even more to help the environment.

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Last week I was in Dallas with one of our sales teams.  RIM was also in the meeting, providing an update on the device roadmap.  Everyone was pretty excited about the new Blackberry Curve for the iDEN network. 

 

Why were we excited?  True, it's a long overdue update to the iDEN Blackberry portfolio, but the big buzz was about WiFi.

 

What's so special about WiFi? 

 

Nextel created the business mobile applications market in 2001 with Java-based handsets and access to location data.  Because of that business applications leadership, Nextel quickly became the industry leader in business mobile data adoption.  However, the Nextel iDEN network didn't provide the most speedy data connections, even for 2001.  By the time of the merger of Nextel and Sprint, most carriers were moving to true 3G networks with significantly more bandwidth than iDEN.

 

One of the beauties of the combination of Nextel and Sprint was the combination of Nextel's leadership in business applications with Sprint's leadership in mobile data networks.  That promise is becoming more real all the time, with the company's Nextel Direct Connect service on the CDMA network.

 

But millions of business users are still on the iDEN network and aren't rushing to move to CDMA.  And that's where the new Curve fits in.  It provides all the expected Blackberry functionality, plus all the benefit of the huge portfolio of business applications for the Nextel network, and high speed data networking via WiFi (in addition to traditional iDEN data networking).

 

So, what do you think - is this a great new product (and why)?  Or is it ho-hum (and why)?

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On Friday, Sprint announced third quarter financial results.  We are pleased with our customer satisfaction improvements, churn improvements, positive free cash flow, and the improved position of our debt obligations.  However, media reports generally did not focus on those items.  Instead, headlines announced either our loss of customers or our financial operating loss (or both).

 

We believe we have a solid plan for returning Sprint to positive performance and establishing a differentiated position in the market.  However, I'd love to hear your ideas for what Sprint should be doing.  Please respond with your constructive comments.

 

Our plan for returning Sprint to positive performance has three key components.  First, we must improve the customer experience, reducing calls to care and improving customer churn.  Second, we must make the Sprint brand stand for something meaningful in the marketplace.  Third, we must improve overall profitability.  A key component of this is to focus on the customer segments that are most profitable for Sprint to serve.  For us, that focuses on customers who want to do more than just talk - who appreciate the value represented by our Everything plans and who are excited about Sprint's capabilities and value for more than just talk, and thus are likely to stick with us as we create our differentiated future.

 

That differentiated future is all about data.  We believe that mobility promises much more than just voice and we want to be the wireless network of choice for those who want to do more than just talk.  Yes, voice is important, but in today's mobile world, voice quality and coverage are mere table stakes.  We are focused on helping customers to enjoy everything that mobility has to offer.  This reflects itself in our "Everything" pricing plans, in powerful devices like the Instinct, in the One Click user interface which makes it easy for feature phone users to do more than just talk, and in our Ready Now program where we give customers a head start in using all of the features in their new handset.

 

What do you think?  Are we focused on the right things to return the company to positive performance and are we focused on the right differentiated future?  I look forward to hearing your thoughtful suggestions.

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I'm a long time Windows Mobile user.  In fact, I switched from the Palm Pilot to the Palm PC, back with Windows CE was in its infancy.  I made a brief return to the Palm OS when I came to work at Sprint and our Windows portfolio was nascent to say the least.  But once the PPC6600 became available, followed by the PPC6700, I was back in the Windows Mobile fold.

 

But just over a year ago, I decided to try out the Blackberry that my co-workers were constantly trying to sell me on.  I went with the 8830, and at the time, my impressions were very favorable.  I was amazed with how easy it was to learn the OS (a far cry from either Palm or WM), and messaging-centric interface made it very easy to engage with e-mails, texts, voice mails, missed calls, etc.  The solid integration with Outlook/Exchange alleviated my fears of switching from Microsoft.  I was quickly hooked.

 

Now, a year later, my plan allows me to upgrade, so what new device do I choose?  Do I go for the Curve?  Or do I wait for the Curve on iDEN?  Or maybe I hold my breath and hope for a killer new RIM device on Sprint's network? 


None of the above.  Instead, I kicked the Crackberry habit and returned to the Windows Mobile fold. 

 

What gives? 

 

The big deal for me was software.  Yeah, there's lots of software available for Blackberries, but it sure seems a lot harder to find, and more expensive.  And too often, after I'd download and install something, I'd find it just didn't work very well on the 8830.

 

Yeah - it all comes down to that for me - compelling software, worry free (can I squeeze "instant" in there somewhere?).

 

So that explains the return to Windows, but why the Treo?  What about the super hot Touch Diamond?  Well, my experience with the PPC devices (when I wanted to do something quick and not slide out a keyboard) told me that a pure touch screen interface would kill me.  Okay - then how about the Touch Pro?  Nope, sliders just don't do it for me either. 

 

I guess I can chalk my need for a keyboard on the front of the device up to lingering effects of the Crackberry habit.  And that's not the only thing.  The 8830 got me hooked on doing everything with menu keys, so now I rarely touch my Treo screen - instead working the D pad for all it's worth.

 

So, now that I've made the commitment, am I happy with the choice I'll live with for the next 11 months or so?

 

Yeah, I am.  I like it.  I don't love it, and I wouldn't call it addictive, but there's not much to dislike either.  The 800W is a solid phone with the familiar Windows interface and a huge selection of software available (including a bunch for free).  But, being the gadget freak I am, I'm already keeping an eye out for the great new phones Sprint is bound to introduce between now and this time next year.

 

What do you think?  Did I make a decent choice?

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For my first post on this blog, I wanted to start with a piece that sets the tone for the kinds of comments I’ll make over the coming weeks and months.  I’m a big believer in how mobility can revolutionize the world (I’ve even have written a book on it).  To set some context, I’m sharing here a framework for thinking about what needs to happen.  I know this is a long post filled with stuff (especially Sprint-specific stuff), but bear with me.  I won’t always be this verbose.

 

Lately, when I’ve been talking to groups, I’ve used the simple structure of explaining how we, as an industry, need to invest to make mobility instant, compelling, and worry free, if mobility is going to have the kind of revolutionary impact on society as previous technologies (e.g. the Internet and the PC).

 

For Sprint, it’s really easy to point to specific investments we’ve made in each of these areas to understand exactly what I mean.

 

Instant
Obviously, mobility has always been about doing things NOW, not when I get somewhere.  But, we need to continue to invest to make that instant-ness even more compelling. 

 

Clearly, Sprint is the long time leader in instant communications with our Nextel Direct Connect sub-second push-to-talk capabilities.  Our announcement last week that we are committed to continued investment in this infrastructure, is a great example of how we’re investing in the instantness of mobility. 

 

But an even bigger investment is our big bet on WiMax, the industry’s first (by far) fourth-generation mobile broadband technology.  Our Xohm unit has already launched WiMax commercially in Baltimore, with more cities on the way.

 

Finally, instant is meaningless if there’s no network coverage, and the hardest place for carriers to achieve excellent coverage is inside your home (raise your hand if you want a celltower built in your backyard).  Sprint has introduced the industry’s first femtocell technology under the name of Airave to provide perfect coverage over a 5,000 square foot area inside your home.

 

Compelling
But, even with great networks, if all we’re going to do is talk on our phones, then how will mobility have a real impact on society?  We DO expect that mobility will become fully integrated into every aspect of our lives.  But guess what, carriers like Sprint aren’t going to be the ones to imagine every possible way for that to happen.  For mobility to become truly compelling, we need to enable independent developers to create outstanding capabilities that work on our great networks.

 

Sprint has long been the leader in enabling mobile developers.  Next month we will host hundreds of developers at our annual application developers conference.  These events have become so popular that, in recent years, we’ve had to limit participation.

 

And as we’ve worked with developers, we realize that the biggest headache is having to develop for many different platforms.  When an application is ported to a new handset, often 80% of the code needs to be tweaked to the peculiarities of that device.  To solve this challenge, Sprint has invested in Titan, a development platform that will eventually be rolled out to our entire portfolio (starting with Windows Mobile devices this year).  With Titan, the amount of rewrite should be closer to 5%.

 

But, it’s not just content and applications developers that we support.  It’s also hardware manufacturers creating whole new classes of devices with mobility built in.  I recently heard Verizon’s Anthony Lewis talk about their Open Device Initiative and in that talk he referenced the Amazon Kindle as the perfect example of the future of mobility.  Well, guess who’s network the Kindle uses?  Let me give you a hint, it starts with an S, not a V…  In fact, Verizon has been bragging about having already certified 2 devices through their initiative.  Maybe Sprint isn’t shouting much about our open device activities because it’s not an initiative – it’s simply how we do business.  We’ve already certified more than 200 different devices from over 40 independent developers to run on our network, and we aren’t slowing down.

 

Worry Free
Finally, we are investing in making mobility worry free for our customers.  When folks need to worry about figuring out how a data application works, or how much of a surprise they’ll see on their next bill, then we won’t see adoption of these applications, which certainly means we won’t see mobility having any meaningful impact on society.  Sprint is making tremendous investments to take away the worries of capturing the full power of mobility.

 

One of our first big moves in this area was the creating of Simply Everything – a pricing plan that takes away the worries of whether watching TV or using navigation or sending a message or browsing the web will result in a billing surprise at the end of the month.  We have seen tremendous impact on our customers’ freedom to enjoy all that mobility has to offer from this one simple move.

 

However, if it is hard to figure out how to use these new applications, then what’s the point?  So, we have also introduced the One Click interface, which makes it easy for feature phone users to find and use the life-changing capabilities that mobility has to offer. 

 

And to make it even easier, we have introduced a radical approach to retail.  We call it Ready Now.  When customers come into our stores, after completing the sale of a new handset, we don’t stop there, we invest considerable time after the sale setting up their phone for them and teaching them how to use all of the features.  So, now when our customers leave the store, they are fully ready for the mobile revolution.

 

I look forward to your comments on this framework for thinking about how the industry needs to change to make the mobility revolution a reality and I look forward to continuing the dialog over the coming weeks and months to share with you my perspectives on the industry and to hear from you your ideas, comments, and feedback!

 

(BTW - if you want to keep track of my weekly collections of evidence that mobility is revolutionizing society, check out my non-Sprint blog at McGuire's Law.)