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Sprint Nextel is using Wi-Fi to sell its 4G WiMax wireless broadband service.
The nation’s third largest wireless carrier has at least a year-and-a-half head start over its closest competitor, Verizon Wireless, when it comes to 4G. But to capitalize on that lead, the company has to win as many subscribers for its service as quickly as it can. Verizon plans to launch its 4G network later this year.
In its race against the clock, Sprint is leveraging a tried-and-true technology, Wi-Fi, to help entice consumers to sign up for its service. The reason is simple. There are millions of Wi-Fi enabled devices already in the market, and there are only a handful of products using WiMax, the technology Sprint’s partner Clearwire is using to build the 4G network. Integrating Wi-Fi into WiMax products is a quick and inexpensive way for Sprint to expand the number of devices that can use its 4G network.
“Wi-Fi changes the way we think about mobile devices,” Dan Hesse, Sprint’s CEO said during a keynote discussion with CTIA CEO Steve Largent during the trade association’s gathering in Las Vegas last week. “We tend to think of just phones (when we think of mobility), but everything is going to be wireless and mobile.”
To help seed the market and make the 4G service more useful for consumers, Sprint has been announcing new devices that share the 4G wireless connection among several Wi-Fi enabled devices. Last week, Sprint announced the new HTC Evo smartphone, which will be the first 4G wireless and mobile WiMax phone to hit the market.
Sprint Nextel
Not only is the handset itself impressive, sporting cutting edge processors and a 4.3 inch-screen, it also doubles as a Wi-Fi access point, or MiFi, to provide Internet connectivity via Wi-Fi for up to eight devices.
The network speeds are impressive. During a demonstration at the CTIA show, where the Evo was unveiled, Sprint executives showed how the device could stream a high-definition video from YouTube as well as video from a Roku box onto the phone.
At the Consumer Electronics Show in Las Vegas in January, Sprint announced the Overdrive product, which also acts as a mini Wi-Fi router or MiFi providing Internet connectivity to Wi-Fi enabled devices via the 4G WiMax connection.
Wi-Fi’s staying-power
It’s easy to understand why Sprint would turn to Wi-Fi. Wi-Fi hot spots are nearly ubiquitous, having popped up almost everywhere over the last decade from consumers’ homes to coffee shops to airports. The cheap cost of the chips means that just about any device can become Wi-Fi-enabled.
As a result, Wi-Fi has found its way into almost every consumer electronics product on the market from laptop computers to portable gaming devices to mobile handsets. About 580 million Wi-Fi-enabled devices shipped in 2009, according to the Wi-Fi Alliance, the industry trade group that certifies products and promotes the technology. About 141 million of those devices were mobile phones. And by 2014, the Wi-Fi Alliance estimates 90 percent of smartphones will have Wi-Fi built in.
Wi-Fi chipsets are also very inexpensive compared to 3G and 4G similar chips used in portable devices. Still, operators, such as AT&T, are pushing hard to get 3G wireless chips in more devices. But getting it done isn’t easy.
“We are not there right now,” said Avi Greengart, research director for consumer devices at Current Analysis. “There’s no question the cellular chipsets are more expensive than Wi-Fi chips. And there are also challenges with the business models. But over time, end-to-end, 3G and 4G connectivity will become more common as the cost comes down and the networks are build out.”
MiFi comes on the scene
Sprint isn’t the first wireless operator to try to cash in on Wi-Fi to strum up business for its wireless broadband service. Last spring, Verizon Wireless launched its MiFi product, the MiFi 2200, a tiny, battery-powered EV-DO modem, which allows up to five devices like a laptop, iPod Touch, or the soon to-be-launched iPad, to connect to the Internet via 3G wireless service.
Verizon sells the device for $50 with a two-year contract and mail-in $50 rebate. Service starts at $40 a month for up to 250MB of data per month and $60 a month for 5GB.
In January, Verizon also introduced MiFi capability for a new handset, the Palm Pixi Plus. The smartphone sells for $99 after a $100 rebate and two-year contract. Verizon allows subscribers to add MiFi capability for $40 a month.
Verizon’s MiFi products are gaining some traction, but they are not widely popular. And based on Palm’s recent quarterly earnings, none of the Palm handsets are selling well, including the Palm Pixi Plus with its MiFi capabilities.
Roger Entner, a senior vice president at Nielsen Company, said there could be several reasons why consumers haven’t flocked to these products. One reason, could be that many consumers don’t even know about them. MiFi is still relatively new to the market and the products have not been marketed heavily. Another reason crowds of customers aren’t signing up could be cost. For consumers already subscribing to $30 a month data plans for their smartphones, tacking on another $40 to $60 a month is significant.
Another reason adoption may be a bit slow is because the Verizon product provides Wi-Fi connectivity over a 3G connection, which is far more limited in its transmission speeds than typical DSL or cable modem broadband.
This is where Sprint can differentiate itself. Its Overdrive product, which connects up to five devices via Wi-Fi and the new Evo, which connects up to eight devices, use 4G wireless, which is faster than 3G EV-DO. Typical downstream data rates are between 1Mbps and 6Mbps for the Sprint/Clearwire WiMax service. This is comparable to some low-end DSL services.
Even with these Wi-Fi routers/modems attached to faster wireless pipes, price will still be a major factor in how popular these devices and services become. And because the 4G network isn’t everywhere, customers may still often get slower 3G data rates using Sprint’s EV-DO network.
Sprint hasn’t yet announced pricing for the Evo, nor has it said what it, if anything, it will charge for the Wi-Fi hot spot service. The Overdrive product costs $100, after a $250 rebate and a two-year contract. And the monthly service is $60.
If Sprint includes the Wi-Fi hot spot functionality into the pricing for service on the new Evo, then it could become very popular and it could help win new customers to Sprint for the service.
“Using Wi-Fi in this way is an extremely smart strategy,” Greengart said. “It likely won’t be the main reason people buy the phone and sign up for the service. But if the Wi-Fi hot spot stuff is included in the service price, then it could be a factor.”
But Nielsen’s Entner said it is unlikely Sprint will not charge extra for the capability to allow several devices to connect to the same wireless broadband service via Wi-Fi.
Another potential pitfall for these MiFi devices is battery life, Entner added. Because the networks are not entirely built out, the devices will have dual chips in them to switch between 3G and 4G networks. They will also include Wi-Fi radios, which means these devices have at least three distinct radio technologies built into them.
Some early reviews of the Overdrive are critical of its battery life, and Entner warns that the battery life on the Evo could be even worse, since the device also acts as a mobile phone. Running out of juice on a phone is much more disruptive than draining a MiFi device for your day-to-day activities, Entner added.
“The Evo is such a cool device, ” he said. “It’s got this huge screen, but big screens mean massive power use. And people simply can’t afford to have their phones go dead. Whereas, if your MiFi hot spot goes dead, so be it.”
Whether or not MiFi functionality will helps bring new business to Sprint’s 4G network isn’t yet known. But it will be very interesting to see how the market evolves.
