Leap outlines tactics to address capacity-stretching data traffic

Cricket provider Leap Wireless (NASDAQ:LEAP) plans to let its mobile broadband business "tail off a bit," according to Doug Hutcheson, Leap's president and CEO, and will instead focus on selling smartphone data plans. But Hutcheson said Leap will take a number of steps to ensure it can meet subscribers' data demands with an already-taxed network.

Leap currently counts around 900,000 "broadband" customers, or those who use USB modems to access the Internet via Leap's CDMA EV-DO network. Leap last year introduced a tiered pricing structure for its broadband service: $40 for 2.5 GB, $50 for 5 GB and $60 for 7.5 GB per month. If users travel over their monthly allotment, Leap said it can throttle users' download speeds. Leap said its broadband customers use an average of around 2 GB of data per month.

Leap also counts around 1.8 million smartphone users toting either Android or BlackBerry devices. Leap said its smartphone customers use an average of around 680 MB of data per month.

During the company's fourth-quarter earnings announcement, Leap disclosed that data traffic on its network increased significantly from the third quarter to the fourth quarter, largely due to the influx of new smartphone users. Indeed, Leap said fully 40 percent of its new customers opt for smartphones.

Interestingly, Leap offered a clear look at how smartphone and broadband users are stretching the bounds of its network capacity:

In order to address the flood of data traffic, Leap said it plans to introduce session-based data later this year. The carrier also said that, if users begin to stretch the bounds of its network capacity, it could offload traffic onto the network of its roaming partner Sprint Nextel (NYSE:S).

Leap said it also plans to launch its first commercial LTE trial market later this year, a move that could ease congestion on its CDMA EV-DO network. Leap said its LTE network will sit on new, unused spectrum.

Finally, Leap's Hutcheson said the carrier may consider refarming spectrum "over the next several years" to "move the adoption curve forward" and free up additional spectrum and capacity.

"It was our goal...to utilize more of our 3G network capacity; that was our intent," Hutcheson said during Leap's earnings conference call, according to a transcript provided by Morningstar. "Our intent is to utilize as much of it as we can. The plan to do that is we will continue to let the broadband business tail off a bit. We'll do that by pricing at this point and keep opening up room as we get closer to the line of capacity, we'll open up room as required or as necessary for smartphones. I don't think we're going to be on that line by the end of first quarter. I certainly believe we will have advanced further down that and we will be taking steps to shape our business."

Hutcheson said Leap might "fine-tune" its capital expenses this year in order to "open up a little bit more room" in capacity to accommodate smartphone growth.

For more:
- see this conference call transcript
- see this Leap presentation

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