On the Hot Seat with Doug Hutcheson
Leap Wireless (NASDAQ:LEAP) President and CEO Doug Hutcheson is a long-time industry veteran who headed Qualcomm's Wireless Infrastructure Division before becoming one of the founding members of Leap's management team in 1998. Leap recently joined the Rural Cellular Association and Hutcheson was a keynote speaker at the group's annual Competitive Carriers' Global Expo where he challenged fellow operator members to think outside the box when it comes to solving a growing number of industry problems. Hutcheson sat down with FierceWireless Editor-in-Chief Sue Marek at the annual confab to talk about the advantages of network sharing, the potential of wholesale providers and the consumers' growing appetite for mobile broadband.
FierceWireless: During your keynote at the Competitive Carriers' Global Expo conference, you proposed that operators look at network-sharing as a way to deal with spectrum constraints. Is that a viable way to solve spectrum problems?
Doug Hutcheson: Yes that's a way to solve problems...What I was trying to say is that there are alternatives rather than sitting and suffering. There's a variety of different ways to solve this and as an industry if we can't solve it through policy there are other ways to think about solving it that we can control.
I spent time on the network-sharing trying to get everyone in the room to step out of the box and think it isn't just by advocating policy issues that we can solve our problems. There are other things we can think about doing.
FierceWireless: Spectrum pooling was another solution you mentioned. Is that another way of sharing resources?
Hutcheson: Yes that's another variation of the theme. Europe has figured this out, and I think we need to too. This is not a pre-cursor to something happening in the near-term. The first thing that needs to happen is the industry needs to provoke its thought process. That's what I was trying to do. Let's think about different solutions. Network sharing is one of those ideas.
When I have been on the Hill lobbying, one thing that I've seen that I've been proud of, if you allow me to break the world into three--the European, the North American and Asian markets. Europe deployed the most spectrum the fastest, but a lot of it was hung up in 3G. In the U.S. we forced 3G into a more defined footprint, that means that when 4G comes there should be more spectrum available. And our capital utilization has been more efficient. In Asia, in general, it has had to use a lot of its spectrum for basic telephony.
So here we sit as a nation that we have been pretty efficient on how we have used spectrum and networks through 3G. We now have a chance, where we have set it up to have 4G, and it will change how we work and the way we think about all kinds of things. We have set it all up except the access to one piece--spectrum--has become confused. And you can see the angst on all the carriers faces.
FierceWireless: I've been covering this industry a long time as a reporter and I've never heard the projections that we are hearing now--with operators saying they are going to run out of spectrum in a few years. Is that true?
Hutcheson: I think we have a few more years. But some of these carriers are feeling pressure. A few years ago when these investment cycles were set, there was a belief that you could see yourself through these obstacles. But it's really clouded.
FierceWireless: Is there a secondary market for spectrum in the U.S.?
Hutcheson: We have a pending swap for spectrum with Verizon. It's separate from the deal Verizon has with the cable companies, but they are similar proceedings. There are a lot of reasons why our spectrum swap is more compelling because we are actually trading spectrum. But yes there is a secondary market for spectrum and that market will come and go. But, not all players are as open to consideration. There will be varying degrees of how open people are to this.
FierceWireless: What do you think of Dish Network and the spectrum they have?
Hutcheson: Let me start by saying there was really some good vision there. Charlie Ergen and his team had their eye on the ball. That was well done. I have a lot of respect for the patience they have had on that and where it's gotten them.
We will decide what our public comments are on that at another time. But that's part of the spectrum that is murky and needs to get sorted out. We are an advocate for having less uncertainty with these things.
FierceWireless: Do you have enough spectrum to deploy LTE?
Hutcheson: We are rolling it out as we speak. We have markets up and running. We will have 20 to 25 million POPs up this year. We have adequate spectrum to get that up. Our average spectrum position in our markets is 23 MHz.
Our transition has helped us protect the spectrum. We have squeezed really hard to get 2G in to narrow space, and we have squeezed 3G too. We have the spectrum for 4G so we have a logical transition to go through and have runway for the next two to three years on executing our business plan with what we have.
What it means four to six years out--we need to think about what we can get out of what we have and what we can do to work with others.
You have seen us do things to ensure we have options.
FierceWireless: Are you referring to Leap's recent deal with Clearwire?
Hutcheson: Yes, a long time ago we did the LightSquared deal. The thought process was how do we help move those assets along if we need too? That was the same thought process with Clearwire (NASDAQ:CLWR). If we are struggling, no one is served. Those are not our primary strategies, but when I look out five or six years and think about our ability to execute what we are doing, with or without spectrum.
FierceWireless: So you're saying your first priority is to do what you can with your spectrum. But these deals are there in case you can't?
Hutcheson: Yes, I'm not saying we won't do something with Clearwire imminently but our first priority is to get LTE built out in our markets with our spectrum.
FierceWireless: Do tablets factor into this?
Hutcheson: Yes, but I'm sure as you are watching the data, it has flipped. From two-thirds embedded with 3G and one-third with Wi-Fi to two-thirds with Wi-Fi and one-third embedded with 3G.
FierceWireless: But don't you think that's because of price plans? I haven't seen a lot of innovation in pricing.
Hutcheson: We haven't determined what we are going to do. We believe that in five years a consumer is moving toward a 50 Gigabyte per month usage level. It's split across a continuum of three different types of delivery-- pipes [landline], Wi-Fi and the mobile network. And the mobile network will provide the always on, always connected piece of it.
But consumers are already using an iPad as a storage device. Consumers will typically download whatever they will download in the most efficient way. If I'm going to watch a movie when I'm traveling, I don't expect to get it over wireless network. I'll download it before I leave or sideload it.
I do not believe most consumers will expect to download a two-hour HD movie, and it will be part of their wireless plan.