Wednesday, August 24, 2011 at 4:19 pm.
Will Verizon be Sprint’s 4G LTE savior?
Five years after Sprint made its first bet on WiMax as its 4G network technology, it’s clear that a rival technology called LTE has won the 4G format war. Now Sprint will need to figure out how to build a LTE network sooner than later, as Verizon and AT&T launch theirs.
In a recent research report, RBC Capital Markets analyst Jonathan Atkin walked through many of Sprint’s options.
One interesting idea is that Sprint could start to solve its 4G LTE problem rather quickly by signing a wholesale roaming agreement with Verizon Wireless, which is already far along in building its 4G network. Then Sprint could take its time to figure out how to construct its own LTE network, while re-selling Verizon LTE service to its customers in the meantime.
The biggest hurdle, it seems, would be figuring out a wholesale relationship that’s lucrative and profitable enough for Verizon, but affordable enough for Sprint. Given the competitive relationship between the companies, it’s easy to make the argument that this would be impossible. But if Verizon and Sprint could somehow figure out how to make a deal, it could be mutually beneficial.
(Why would Verizon want to do this? Yes, it would be helping out a competitor. But it would also be getting some cash in the meantime. And it likely has plenty of excess capacity on its LTE network. And a stronger Sprint is arguably a more useful weapon against AT&T, Verizon’s real rival. Lastly, there’s also the possibility that someday, Verizon might want to buy Sprint.)
Interestingly, this deal might have been easier for Sprint if Google had pushed the FCC harder to adopt all four of the “open access” provisions it had proposed for the big 2008 spectrum auction, where Verizon bought the 700 MHz airwaves it’s using for its LTE network.
Google had originally pitched four provisions: open applications, open devices, open services, and open networks. The third one, open services, might be most useful here: “third parties (resellers) should be able to acquire wireless services from a 700 MHz licensee on a wholesale basis, based on reasonably nondiscriminatory commercial terms.”
The FCC never mandated this, only forcing open applications and open services on the spectrum buyer (Verizon). And who’s to know what “reasonably nondiscriminatory commercial terms” means practically — maybe no different than what Verizon would want from Sprint, anyway.
But here we are, a few years later, and there might actually be an opportunity for one of the big four carriers to do a huge 4G network wholesale deal with another.
I wouldn’t say it’s the easiest option for Sprint, but it could be the quickest. And that counts for something.