Sprint CEO sees potential impact on WiMax from sour economy

But Hesse notes wireless 'has become a staple' for consumers, who are unlikely to give it up despite tough times

BALTIMORE -- The flagging economy could affect how consumers respond to the new Xohm WiMax wireless service rolled out here by Sprint Nextel Corp., Sprint CEO Dan Hesse said today.

"I don't want to lead you to believe that the economy will have no impact," he said in response to a question at a demonstration of WiMax-embedded devices here, just nine days after the Xohm service kicked off throughout most of the city. "We're monitoring the situation closely. There will be some impact on our business."

But he said Sprint feels "relatively fortunate" and "more insulated" than other businesses that depend on consumer spending because of the central role wireless devices are taking in peoples' lives.

"On the consumer side, in the last five years, wireless has become a staple," Hesse said. "People would rather give up TV or Internet before the cell phone." He said there are more concerns about the effect of the weak economy on the wire-line side of telecommunications, "where customers are more likely to cut the cord" than with wireless.

Hesse acknowledged that a continuing poor economy could mean that Sprint might have to sell wireless devices "perhaps ... with not as many bells and whistles" for less, suggesting that a phone in the $99 range might be sold in the $79 range.

The Xohm service in Baltimore has been described as offering a range of network service options to attract a variety of users, including consumers, students, and small and midsize business users who travel within the city. A day rate of $10 is available, for example, with average downlink speeds of 2Mbit/sec. to 4 Mbit/sec.

Hesse also said that the $3.2 billion financing deal arranged as part of a planned joint venture with Clearwire Inc. remains solid and that Sprint has been in regular contact with investors such as Intel, Google, Comcast and Time Warner Cable. The joint venture, which is valued at $14.5 billion, is expected to close by year's end, he said.

Hesse and Xohm President Barry West said it will take $5 billion to build out a national network, which goes beyond the six cities Sprint has announced: Baltimore, Boston, Dallas-Fort Worth, Chicago, Philadelphia and Washington. They both expressed confidence that the extra $1.8 billion could be raised when the time comes.

Xohm's most immediate goal is to provide enough coverage to reach up to 140 million people nationally by the end of 2010, West said, adding that 100 major cities could be covered by 2015.

West and officials from Intel Corp., which has been a strong supporter of WiMax, said the nature of WiMax -- as a new high-speed wireless technology available on many devices -- will help drive interest and growth, even with an economic downturn.

After monitoring the technology sector through multiple recession cycles, "I've learned you don't go from recession to boom on old technology; you do it on new technology," said Sean Maloney, executive vice president at Intel.

West said the availability of embedded WiMax on laptops from eight different manufacturers is an example of new technology that will have an impact. "So many embedded [WiMax] laptops early in the launch is amazing," West said.

Several models of laptops with embedded WiMax or WiMax air cards were demonstrated on Inner Harbor boat taxi tours and bus tours. Downlink speeds ranged from 3Mbit/sec. to 9Mbit/sec. in several demonstrations, but the slowest speeds were over the water of the Baltimore's Inner Harbor. WiMax service was also demonstrated at the recent WiMax show in Chicago.

Technicians explained that waterways pose problems for all kinds of radio transmissions because water is a good medium for radio transmission, meaning signals can travel farther than intended and can be interrupted by signals from other antennas. West said one reason Sprint chose Baltimore was because it had so much water, which would pose a technology challenge to Xohm engineers.

WiMax service on Nokia N810 tablet

In addition to the laptops, Xohm officials demonstrated a new mobile Internet device from Nokia, the N810, which will sell for $495 in a few weeks. The device, about the size of an iPhone, includes a touch screen and slides open to provide a QWERTY keyboard. It will also support both WiMax and Wi-Fi. Speed tests on the N810 were in the 3Mbit/sec. range for downlinks.

Hesse said that by year's end, Sprint expects that a dual-mode air card for laptop use will be available, allowing connections to other 3G networks as well as WiMax and greatly improving the range of use for business users and consumers. With the air card, when a user leaves a WiMax area, the 3G connection would take over.

Sprint officials would not say how many people in Baltimore have subscribed to the WiMax service, although West said speeds have been in the advertised range. He acknowledged that some early adopters could not get a signal inside their homes but noted that some bloggers have tested the network and have found it "fantastic" in those locations where a WiMax connection could be made. He said the WiMax network in Baltimore is about 70% built out.

Copyright © 2008 IDG Communications, Inc.

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