with Mike Sievert, Chief Commercial Officer at Clearwire
Mobile WiMAX advocate and network operator Clearwire (NASDAQ:CLWR) set off shockwaves when it announced in August that it would test LTE technology in Phoenix, a move that was seen by many as signaling the end of WiMAX. Although it has only been a few months since the LTE testing started, Clearwire Chief Commercial Officer Mike Sievert at last week's 4G World trade show in Chicago revealed some interesting tidbits about Clearwire's LTE tests.
Sievert sat down with FierceWireless Editor in Chief Sue Marek after his 4G World keynote to discuss the company's LTE testing, the company's complicated relationship with Sprint Nextel (Sprint owns 54 percent of Clearwire but also competes with Clearwire for customers), and Clearwire's reported spectrum auction.
FierceWireless: During your keynote, you talked about getting 90 Mbps in your LTE trial. Can you tell me more about the LTE trials?
Sievert: The trial is pretty new. We just announced it in August and it is just now under way. There are a few things we are testing in Phoenix. One, we are looking at LTE 1X, which uses 10 MHz channels (10 MHz up and 10 MHz down) or thereabouts.
And we are also looking at what we call LTE 2X, which is 20 MHz channels, which means 20 MHz up and 20 MHz down, for a total of 40 MHz per carrier.
FierceWireless: Why are you doing these tests?
Sievert: One of the main objectives is to test all of these configurations and have them co-exist with WiMAX. In all the sites that we have in Phoenix we are operating WiMAX right next to these various flavors of LTE. The idea is to understand how they co-exist in a network that could potentially in some point in the future entertain having both.
One thing we are testing is the ratio of bits to Hertz, which we have achieved with 4G--the idea of getting 2 bits per Hertz. In other words, on 10 MHz channel being able to deliver 20 Mbps speeds. Do those ratios hold as you get to wider and wider channels? What we are finding in our initial results from our speeds tests with LTE 2X is that it does. Wider channels do lead to faster speeds, better performance and more capacity.
This provides some initial affirmation of what we saw when we traveled to Oslo, Norway, with our engineering team to see what they are doing with the same technology. This evaluation is looking at commercially available technology that exists today and doesn't require further configuration using our spectrum in North America, if we should chose to deploy it.
FierceWireless: I think what you are saying is that with a wider channel and more spectrum, LTE performs better. And therefore this is an advantage for Clearwire. Correct?
Sievert: One thing the management team must do, because Clearwire is a smaller company, is make sure we have a differentiated offer. We clearly have that today. We are the first company to have 4G rolling out from coast to coast as extensively as we are. We are now operating the largest 4G deployment in the world that we know of. Certainly we are the largest in the U.S. and we have a very differentiated experience. Our job is to make sure it stays differentiated. That's why we have been so careful to future-proof our network, make sure it's all IP and that we aren't beholden to any one vertical provider. Our IP network does things like provides our own backhaul at a very low cost in most instances using microwave.
FierceWireless: What do you mean not beholden to one provider?
Sievert: A soup-to-nuts solution that you would buy from one provider. As an all IP network, our network is flexible, easy to upgrade and agnostic to the particular radio technology that is being used at the edges of the network. Right now that technology is a very differentiated, highly performing WiMAX technology that has a large ecosystem and is being widely deployed.
But at the same time, it is our job is to evaluate future developments as well.
FierceWireless: Are you committed to continuing the Clear brand, your own branded service, and not just going completely wholesale?
Sievert: It's a model that is working. We are a wholesale and retail company. And what that model has allowed us to do is build a business plan that we believe can bring our markets EBITDA positive within the first 18 months or so of launching them. It is a strategy that recognizes we are in a scale business. The more customers we can bring on the sooner from launching the better. Having multiple brands is part of our strategy for maximizing the total usage of the network.
FierceWireless: We recently did a story about delays in Clearwire markets--Denver and Miami. We had readers who were concerned that you were cutting back on your deployment. Clearwire said that was not the case. Can you explain?
Sievert: It's a timing issue. Basically in those two markets we are not initially deploying the Clear brand--and only in those two markets. We haven't made any statements about what we will do beyond the initial time frame. We are launching those markets but we aren't initially launching the Clear brand in those markets right away.
This is not a statement about a future direction. It is a timing question. We've taken on a lot in 2010--a lot of deployments, a lot of large markets.
FierceWireless: Are you considering auctioning your spectrum?
Sievert: Yes, it's one of the options. We announced that it is one option we are considering for the next round of funding on the business. I don't have an update for you on how it's going or if it is the lead option. It is one option that we talked about; it is one of the four approaches we are considering to fund the business.
FierceWireless: If you sold some of Clearwire's spectrum, would that alter your deployment plans?
Sievert: Probably not. It's hard to speculate because it would depend on how much spectrum was sold, if we sold any at all. The basic strategy is to sell excess spectrum that is not critical to our core business model or plan. As you know, we have an average of 100 MHz of spectrum in our markets, more than anyone else in this space. You could theoretically reduce that position, fund the next round of growth in the company, and still have more spectrum than anyone else in the United States. It's one of several options.
FierceWireless: You may be getting some competition in the form of wholesale provider LightSquared, which plans to deploy LTE. Are you concerned about this competition?
Sievert: Theoretically that is true but we haven't run into it yet. Our wholesale business is performing very well, and we continue to get strong interest from potential partners to work with us. The way I view the competitive scenario is, if you are really well positioned in a growing market with the right core assets that are hard to replicate, then in some sense you really like competition. What we want to see is the mass consumerization of mobile broadband in this market as fast as it can. We know ultimately when the market hits its fastest stride, we are the best-positioned company. So the sooner that day comes, the better.
So with Verizon, Lightsquared and others getting into 4G, it will bring it into the consumer consciousness even more, which adds to the competitiveness but accelerates the growth of the market.
Since we are well positioned in the market, we welcome the competition because we think it will accelerate the growth of the market.
FierceWireless: Matt Carter, president of 4G at Sprint, has implied that Sprint was not completely satisfied with the coverage provided by Clearwire's initial markets. And recently three Sprint executives resigned from Clearwire's board of directors. How do you feel about Clearwire's relationship with Sprint?
Sievert: We are building something and there will be bumps along the road. But overall we work well together, and I think Matt reflected that in his remarks. It is a complicated relationship. Sprint is a major shareholder of Clearwire and a major customer on the wholesale side. As you mentioned, until a few weeks ago their executives sat on our board of directors, so for those of us in management that makes them our management. In addition to all that, on the retail side, we compete. It's a complicated relationship, and I think we've done a good job of making it all work well. You can see that reflected in our growth numbers.
FierceWireless: Do you feel Clearwire's relationship with Sprint could affect Clearwire's attempts to sign a wholesale relationship with someone that would compete with Sprint, such as T-Mobile USA?
Sievert: The whole model is to be the 4G network of networks. To us it's about attracting whatever company feels we can give them a great value proposition, and that feels like they can extend their customer relationships with a 4G network experience. We have been saying for a long time that we are very open minded about what types of companies we could have a wholesale relationship with.
FierceWireless: You are open minded, but are all the members of your board open minded?
Sievert: Yes, all members of the board are interested in maximizing the value of Clearwire and the performance of the company. Time will tell. We have been actively working on relationships, and we were happy to announce Best Buy and Cbeyond. And we see more opportunity.
FierceWireless: Any progress on T-Mobile USA?
Sievert: Nothing to update you on.
FierceWireless: Clearly it's challenging to launch one brand--let alone two--and build a network. How is your prepaid brand, Rover, progressing?
Sievert: Time will tell. We are testing Rover in Houston and St. Louis. We wanted to start because prepaid in general is typically marketed under a separate brand. It helps with distribution because there are rules about distribution and how people are compensated, and it prevents people from getting confused. We will see how it does. We are excited about getting into the space. If you look at voice wireless, it's a big part of growing the business. We think that will be true in mobile broadband as well.