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Summary:

We are still not sure if this deal between Sprint and Nextel is happening or not, of given Sprint’s history, if it will be completed at all. (Remember they were going to merge with WorldCon and then they didn’t!) Still, there is a component of this […]

We are still not sure if this deal between Sprint and Nextel is happening or not, of given Sprint’s history, if it will be completed at all. (Remember they were going to merge with WorldCon and then they didn’t!) Still, there is a component of this deal which could have a far reaching and perhaps incredible impact on the future of WiMAX, the generic name for fixed wireless technologies. Why? because these two companies together have a near-nationwide footprint in the MMDS spectrum band at 2.5 GHZ, which provides additional potential option for broadband wireless service that other carriers lack. Between them, they pretty much control this spectrum. In an previous post I had pointed this out, but thought it is time to reinforce the issue.

Theoretically, fixed wireless can work in different frequencies, but the WiMAX vision centers around three bands: 2.5 GHz, 3.5 GHz and 5.8 GHz. In the United States, 3.5 GHz is not available, and 2.5 GHz swath is owned by Sprint and Nextel. That leaves 5.8 GHz unlicensed spectrum. But there are some limitations to this spectrum. Lower frequencies have longer range, better wall penetration, and can over come line of sight issues. Higher frequencies like 5.8 GHz are good for backhaul, but when you start using them in consumer laptops or handsets, it is as awkward as a nerd in the playboy mansion.

Now unless Nextel and Sprint decide to do something with the spectrum, aka build out a so-called 4G network which is based on some sort of fixed wireless technology, WiMAX is going to be relegated to the 5.8GHz spectrum, which is good enough for back haul but not good enough for laptops and handsets. The question is why would Sprint-Nextel actually build this one out, especially after spending billions on a 3G network. They would need to squeeze every single dime out of that network before starting to use the 2.5 GHz swath they are sitting on.

Martin has an excellent take and more details on his weblog, Telepocalypse.

They’ve dithered for years over what to do with this, and written down the asset by the odd billion or two over the same period. The synergy of this deal is not that they will deploy in this area because of their combined footprint, but that they won’t. My guess is that the MMDS spectrum will be kept in the cupboard behind the stationery supplies in HQ for the forseeable future.

  1. Martin G. has also said he believes the MMDS will sit vacant and so do I, but for reasons not yet articulated.

    Now that I’ve had a night to sleep on this deal, I think its a terrific deal for Sprint and Nextel, and an awful deal for consumers. In fact, if Jeff (at BuzzMachine) wants to turn the tables on the puritans undo influence over at the FCC, the Blogosphere should really rally against this deal.

    A believe the MMDS spectrum will never be lit, but will serve as an effective “barrier to entry” by sitting vacant.

    If players outside of telecom think about making serious bids in the new 700mhz auctions, their financiers will have to really consider the “time to market” bloodbath new players could suffer in the race to offer new services. With all that vacant MMDS spectrum just waiting to go. Its like a big dare, and financers don’t like sucker plays.

    If this deal happens, then we have 3 players, 2 RBOCS, and new Sextel. The RBOCs are not going to do anything stupid on pricing because of their losses from fixed lines.

    Thus Sextel will have the ability to biggyback on the RBOCs need for the current stable price structure, and since together Nextel+Sprint will have enough scale to already be profitable, they’ll can just coast along and count the money.

    There’s enough business for the 3 of them to really hammer consumers, and slow the pace of innovation to a crawl.

    This deal is ultimately bad for consumers.

    We’ll be held hostage to three very profitable companies with no incentive to rock the boat.

    I think this will be harder to get approved than the conventional wisdom thinks, plus it could be a non-political test for the blogosphere.

    How much influence do folks in their pajamas really have?

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  2. Charlie, remember that the FCC has a large proposal to reform the MMDS band to make it more useful and to bring in more auction revenue. But I don’t know the status of that reform. I liked the plan, but my understanding was that MMDS incumbents would fight because it would cause them to lose some of their ability to control the band.

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  3. Charlie Sierra Sunday, December 12, 2004

    Glenn, nice to see that you’ve turned the comments on, on your very good WiFi blog.

    I believe you’ve got the right idea (MMDS reform) but the details are off.

    MMDS reform was to allow it to be more competitive vs. the PCS/Cellular bands. The reform was to relax certain obsolete restrictions. But this reform mostly got started/took place before Nextel bought out MCI and Nucentrix’s MMDS inventory.

    Most of MMDS has already been auctioned and Sextel would own 80-90% of this band. Since they are a PCS/Cellular operator and MMDS is more expensive from a CAPEX angle, the MMDS reform is moot.

    Now I swear I’m not a conspiracy guy, but on a Sunday morning before my resident toxins have awoken, I started thinking about this deal.

    Who is ready and willing to buy MMDS spectrum, if the FCC tells Sextel to unload it? Clearwire!!! Wireless’s very own Howard Hughes.

    I wonder just when this rumored deal was hatched?

    Something just doesn’t feel right about this deal.

    Anyway since the one thing everybody agrees on is that if approved this is the LAST deal, then I suspect everybody that is inclined to opposed this bugger is going to come out guns ablazin’.

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  4. My understanding is that current MMDS licenseholders would see their portfolios reduced under the reorganization, though. I’m talking about the June 2004 proposal not the loosening of licensing. I’ve found most people are thinking about the older loosening issue re MMDS not the total reorganization!

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  5. Having worked in the MMDS field at Sprint in a former life, the biggest impediments to progress I saw are the incumbet license holders. Sprint has lease rights, but does not own outright, a very significant portion of the MMDS spectrum. Many of these license holders are holdouts from the 70s when the frequency was used for television, and are sitting on their licenses hoping for enough money to retire on. Because of the channel interleaving, multiple parties have to be negotiated with individually to get enough spectrum to go to market.

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