There’s still no word on when Clearwire will make the new network commercially available to Sprint and other wholesale customers like Leap Wireless (Clearwire won’t sell LTE services directly to consumers), but Clearwire is on track to complete its first stage by June of 2013 with 5,000 cell sites, Fierce said. That’s not a huge number, but Clearwire isn’t planning to build a ubiquitous network. Instead, it’s placing LTE cells in high-traffic urban areas, and selling that capacity to other carriers to augment their current LTE services.

The big issue for Clearwire will be devices. While Sprint has agreed to use Clearwire to give its own LTE network extra bandwidth oomph, it doesn’t yet have devices that support either Clearwire’s 2.5 GHz band or its special flavor of LTE. Clearwire has promised that dual-mode smartphones and modems supporting both the frequency-division LTE used by the rest of the country’s carriers and its own time-division LTE will be plentiful, but they’ve yet to emerge in the U.S. For instance, the recently launched Galaxy S III and the new iPhone 5 will be able to access Sprint’s LTE networks but not Clearwire’s.

Rival carriers are continuing to build out their LTE networks. This week, AT&T expanded its own LTE network to Seattle; Portland, Ore.; and Memphis, Tenn.; three of the last remaining big cities missing from its metro market 4G footprint. AT&T still doesn’t have the breadth and depth of Verizon’s network, which now covers 235 million people in close to 400 markets and is expanding into rural regions, but it’s now has a footprint of 72 big cities. Meanwhile, Sprint has some catching up to do. It’s deployed its network in six regional clusters

LTE image courtesy of Shutterstock user Inq

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Ting, which is owned by webhosting company Tucows, has started taking pre-orders for the device and will begin shipping them to customers in three to six weeks. That Ting is getting LTE phones is no surprise – Ting revealed it would back in April. What’s surprising is that it’s happening so soon and that Ting gets immediate access to such a high-profile device. The S III has only been available on Sprint’s network for only a month.

MVNOs pay network operators wholesale rates for voice and data, which they then offer to consumers usually at big discounts over the big carriers. But MVNOs also have to agree to contract stipulations that prevent them from venturing too far onto their partners’ turf. Typically that means reserving newer network technologies and also a restriction on what devices an MVNO can sell. For instance, AT&T won’t let any of its resellers offer a device currently in its portfolio. And with the exception of Sprint, no carrier is giving their MVNOs to their newest, fastest networks.

Sprint, however, has aggressively courted MVNOs, even going so far as to create a build-your-own-MVNO kit, which allows new virtual operators to come online as quickly as possible. In a recent interview with GigaOM, Tucows CEO Elliot Noss said Sprint is well ahead of any other U.S. operator when it comes to its wholesale policies, which ultimately led Ting to select the operator. “Our view on AT&T and Verizon is that they come to wholesale very begrudgingly and they will do only as much as the market forces them to,” Noss said.

Ting will offer the phone without a subsidy, meaning customers will have to fork over the full $529 retail price for the 16 GB version and $579 for the 32 GB version. But customers will likely be more than compensated for that upfront investment through Ting’s innovative pricing plans.

Ting flouts the typical carrier billing model by not requiring customers to commit to specific buckets of voice, text and data each month. Customers do sign up for tiers of minutes, SMS and data, but if they use less than their plans’ allotments in a given month, Ting credits them for the unused portions on their next bills. According to Noss, Ting’s savviest customers merely select zero in all three categories and just pay for what they consume each month.

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After adding half a million new subscribers in the first quarter, Clearwire saw its customer totals dip by 42,000 in the second quarter. It’s not a huge loss, but at this stage of Clearwire’s development it’s one it can’t really afford. With only 11 million connections – the vast majority of them with Sprint – Clearwire needs to keep growing. It needs to demonstrate to its fleeing investors it has market-making potential, and it needs revenues not just for operations but to fund its future LTE network and long-delayed nationwide expansion.

Revenue-wise Clearwire is better off than the subscriber losses would imply. It renegotiated its wholesale contract with Sprint last year to guarantee a minimum of $1 billion in payments into 2013. So even as subscriber losses accelerate as more Sprint customers abandon WiMAX phones, Sprint will continue to pay the 4G carrier. Sprint has also begun selling WiMAX devices through its prepaid brands Virgin Mobile and Boost Mobile, which will help offset those subscriber losses.

Clearwire has been trying to cut its dependence on Sprint by signing other wholesale deals, but for every step forward it seems to take a step back. Partners and investors Time Warner Cable and Comcast have abandoned their plans to resell WiMAX and have instead chosen to partner with Verizon. Clearwire landed mobile virtual network operator (MVNO) deals with Leap Wireless, NetZero, Tucows’ Ting and FreedomPop. But Ting and FreedomPop have both indicated that they plan to move over to Sprint’s LTE network when it’s available, so Clearwire only gains temporary relief.

Clearwire’s retail business isn’t faring much better. Of its 11 million total subscriptions, 1.3 million are retail customers, a number that’s held steady for the last several quarters. Clearwire will have to find growth from somewhere or its crisis of confidence will only worsen. Already Google and Intel have sold their Clearwire shares, and pretty much every one of Clearwire’s original champions, save Sprint, has cut their ties with the suffering operator.

Image courtesy of Shutterstock user Linda Bucklin

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Virtual operators are sprouting up like weeds in a garden – except these weeds are starting to look a lot more attractive than the rose beds they’re enveloping. These mobile virtual network operators (MVNOs) essentially resell the voice and data services of big operators, but often at much lower prices and with more flexible plans.

In just the last few weeks we’ve seen several new ones pop up. Last Friday, GSM Nation gave us a sneak peak at the MVNO it plans to birth this fall, distinguishing itself from the pack with a retail portal that sells almost any smartphone. Data-only operator Karma emerged last week, touting a unique social model for sharing bandwidth with the masses. Last month, Voyager Mobile launched offering two simple but comprehensive plans – one with data and one without.

MVNOs all but died out in the last decade, victim to their own over-segmentation of the market. The only survivors were the ones who kept their focus on the budget prepaid segment like TracFone and operator-owned sub-brands like Virgin Mobile and Boost Mobile. So why the sudden of flurry of activity in the last year?

We posed that question to a couple of MVNOs and their answer was a bit surprising: MVNOs are thriving because the big network operators are letting them thrive.

Here come the GSM boys

A good deal of new MVNOs have built their business models around cheap and plentiful data, and there’s a reason: operators have become much more flexible on how they charge for mobile broadband. For the longest time, carriers simply wouldn’t give MVNOs access to their data networks. When they started to so, they charged prohibitive rates and made their virtual partners pay for their megabytes up front, making it very hard for MVNOs to craft reasonable data plans, GSM Nation CEO Ahmed Khattak said.

But nine months ago, AT&T and T-Mobile started selling data and voice airtime by the bucket, which gives MVNOs much more flexibility in pricing, Khattak said. Even more significantly, those carriers started working directly with MVNOs to craft unique plans in exchange for a percentage of the plans’ revenues. The MVNO submits a proposed bundle of minutes and data to an carrier – along with a $15,000 fee — and if it’s approved, the carrier then takes 25 percent to 30 percent off the top of every monthly bill, Khattak said.

With those new policies in place, it makes it very easy and very cheap to launch an MVNO, Khattak said. GSM Nation will get off the ground with only $700,000 in investment, supplemented by revenues from its smartphone retail business, Khattak said.

“The big decision we had to make was ‘do we go with AT&T or do we go with T-Mobile,’” Khattak said. “We chose T-Mobile because T-Mobile is much more receptive to new MVNOs than AT&T. They give us more bandwidth, while AT&T is very protective of its network.”

Another key factor was that AT&T doesn’t allow MVNOs to sell any handsets Ma Bell currently it offers, which would have prevented GSM Nation from connecting the Apple iPhones and Galaxy devices it retails in its online store. Since GSM Nation is first and foremost an unlocked phone purveyor, that policy was deal-killer for Khattak. But it certainly hasn’t stopped other MVNOs from signing up with AT&T. TracFone’s Straight Talk, H2O Wireless and Red Pocket offer SIM-only plans that allow it bypass that restriction as long as their customers bring their own devices to the network.

Sprint: An MVNO’s best friend

Sprint has a long history of supporting MVNOs, but recently it has opened its network even further to wholesale partners, said Elliot Noss, president and CEO of Tucows, a webhosting company that launched its own MVNO, Ting, in February. Sprint’s wholesale rates and flexible policies allow Ting to offer some of the most innovative – and potentially disruptive plans – in the industry.

Ting sells the closest thing the U.S. has to metered data plan. Customers sign up for tiers or minutes, SMS and data, but if you use less than your plan’s allotment in a given month, Ting will credit you for the unused minutes, texts or data on your next. If you use more Ting will charge you for the additional usage at no penalty. According to Noss, Ting’s savviest customers merely select zero in all three categories and just pay for what they consume each month.

Sprint’s embrace of the virtual operator model has landed it a lot of partners. Republic Wireless, Voyager, Movida, Kajeet and a dozen others all use Sprint’s network. Sprint’s friendliness toward MVNOs carries over to its 4G partner Clearwire – in which Sprint owns a plurality stake. Data-only MVNOs like Karma, NetZero and FreedomPop, as well as Ting, have all signed on with the WiMAX carrier.

“Sprint has more of a history of wholesale,” Noss said in an email interview. “They are also a very large, but very hungry #3 in the market. That is really a perfect combination to make for a great wholesale partner. Having a wholesale and retail division inside the same company is a challenge that we appreciate at Tucows and we chose very carefully.”

Sprint does place some restrictions on handsets Ting is allowed to sell, and as a CDMA carrier it can’t resort to SIM card plans to bypass those policies. But Sprint only bans some devices, and the exclusivity period is relatively short, Noss said. “Basically, if they’re putting a big advertising push behind a device, they’re going to want time to reap the benefits of that push themselves,” Noss said. Sprint is also much less protective of its network than others. For instance, Sprint has agreed to make to make its LTE network, launching this summer, immediately available to Ting.

Are the carriers coming to MVNOs or are they being dragged?

Khattak believes that the big carriers have thrown in the towel, and have adopted a if-you-can’t-beat-‘em-join-‘em attitude toward the market. Operators know they’re going to continue to lose customers to these new competitive virtual operators, so they might as well reap the wholesale revenues rather than give that business to another operator, Khattak said.

Noss doesn’t see it that way. With the exceptions of Sprint and Clearwire, the carriers are being dragged kicking and screaming to MVNOs – they simply have no choice.

“Our view on AT&T and Verizon is that they come to wholesale very begrudgingly and they will do only as much as the market forces them to,” Noss said. “We believe that ‘necessary evil’ would better describe their view of MVNOs than ‘if you can’t beat ‘em, join ‘em’. … the incumbents will only be as flexible as the market forces them to be.”

Feature image courtesy of Shutterstock user Reno Martin

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Dish is claiming that it must wait for the LTE standards body, the 3GPP, to validate its S-band satellite spectrum – now being called the Advanced Wireless Services 4, or AWS-4 band — for 4G use. Normally that would seem reasonable – except that the 3GPP is expected to give its stamp of approval this December. Dish is claiming it needs a full four years after that to bring online a measly network covering 20 percent of the population. From the filing (pdf):

In general, development, testing, certification, and deployment must follow each other.  This entire process is expected to last 48 months from when the AWS-4 service rules and 3GPP S-Band specifications are completed.

In short, based on an ambitious buildout schedule and barring unforeseen circumstances, DISH believes it can deploy its network to 60 million POPs within four years.

It’s not as if the FCC isn’t giving Dish a long leash. The FCC proposes a 3-year time line for Dish, and the commission is even factoring in the time Dish has to wait while it finalizes the rulemaking that would officially designate its spectrum for terrestrial use.

Buying time for a quick spectrum flip?

So why does Dish need the extra year? It claims it needs to wait for the equipment, chipsets and devices to be available. By Dish’s reckoning wireless vendors have become so sluggish and unresponsive it will take 48 months to retune their already commercially available base stations and print new chipsets for the 2 GHz band.

Earlier this year, Dish claimed that it also had to wait for LTE-Advanced to be commercially available, which is another specious rationalization. LTE-Advanced is an iterative technology. You have to have an LTE network before you make it advanced.

To put this in perspective, the 3GPP approved the final LTE standard, called Release 8, in December 2008. Exactly two years later Verizon Wireless had a commercial LTE network up and running. And Verizon was starting from scratch with a brand new standard – Dish only needs the 3GPP to tack on another frequency band class.

This is another example of an operator making desperate claims about the need for spectrum, and then finding every excuse not to build networks when they finally get it. It’s a good indication that Dish chairman Charlie Ergen has no intention of ever building a network and just wants to flip the licenses for a quick and profitable sale. The more leeway there is on a building a network, the more attractive those licenses will be to a potential buyer.

Consumer advocacy group Public Knowledge also suspects that Ergen’s intentions aren’t pure. It sent its own filing to the FCC (pdf) asking that Dish’s spectrum be loaded down with conditions that would prevent big carriers like AT&T and Verizon Wireless from gobbling up its LTE capacity at wholesale rates. The most interesting condition was No.4, which would stipulate “unjust enrichment penalities” on Dish if it tried to sell its spectrum to Ma Bell or Big Red. From the filing:

While permitting a lucky incumbent to spin regulatory straw into gold may increase the total amount of spectrum available for mobile data services, the transfer of AWS-4 licenses to the emerging wireless duopoly would be worse than the status quo for consumers, competitors and innovators.

Dish photo courtesy of (CC BY 2.0) Flickr user Dave Lindblom; Sale image courtesy of Flickr User Peter Kaminski

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You can see the bankruptcy filing on TMF Associates’ blog (pdf), listing among its numerous creditors Boeing and Alcatel-Lucent, who have LightSquared on the hook for more than $7 million each for satellite and communications gear. The claim amounts from other creditors are much smaller, but there is a long list of them.

Philip Falcone, whose hedge fund Harbinger Capital owns LightSquared, foretold the filing last month when he stated that bankruptcy might be the safest option for the would-be carrier, allowing it to fend off its lenders while it tried to move its nationwide LTE launch forward. In February, the Federal Communications Commission yanked a critical waiver LightSquared needed to use its satellite spectrum for terrestrial 4G when opposition from government agencies and the GPS industry started stacking up. The issue was the potential interference caused by LightSquared’s high-powered network to the country’s global positioning system satellite signals in an adjacent band.

LightSquared has been fighting the decision, demanding that the FCC either green light its network or supply it with replacement airwaves. But given the industry, government and political outcry against the company, neither scenario is likely to happen.

That leaves LightSquared with a bunch of assets to get rid of in bankruptcy, and none of them are worth all that much. It has its satellites, which Boeing might retake possession of, and it has its spectrum, which was supposed to be its most valuable asset. If LightSquared’s gamble had paid off and the L-band repurposed for 4G use, those licenses would have been worth billions, but no mobile operator would buy them now.

There may be one exception. As TMF analyst Tim Farrar postulated in his blog, Dish Network might have a way of cleaning up LightSquared’s spectrum. Dish owns S-band satellite frequencies in a far-off band. If it could combine that spectrum with LightSquared’s L-band frequencies it might be able to pull off not just a workable, but an extremely high-capacity LTE network that would steer clear of the GPS bands entirely.

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Will domestic and global mobile operators like AT&T, Vodafone, Telefónica and others “play ball” with Apple? Many in the U.S. were surprised six years ago when AT&T capitulated to Apple’s terms to become the first carrier to offer the iPhone six years ago. Conventional wisdom is that the struggling operators compromises, not a leading operator like AT&T. But Apple makes everyone “think different.”

And in hindsight, the first iPhone deal was a brilliant strategy that has continued to pay huge dividends to AT&T. In the last quarter just reported, four out of five smartphones AT&T sold were iPhones.

Apple changed the formula of the relationship between operator and handset vendor, with Apple having more bargaining power than the operator for the first time in mobile history. And that’s the point.

Apple will make an offer carriers can’t refuse

Today, mobile operators would have a hard time saying “no” to the world’s largest and fastest growing company, which builds the devices everyone wants. Apple tends to have its way with operators. Any reluctance on the carrier’s part to offer Apple a sweetheart wholesale deal would be outweighed by the huge business opportunity presented. It’s a classic case of “The Prisoner’s Dilemma.” The carrier’s biggest fear is that if it says “no”, the business and growth would go to a competing carrier and it would be kicked the curb.

It’s no secret that Apple has been thinking about this strategy for some time. Apple filed a patent for “Dynamic Carrier Selection” on October 10, 2006, just a few months before Apple announced the first iPhone. The diagram in the patent application portrayed Apple as the wireless service provider connecting to multiple carriers. This would allow Apple to make wholesale cellular agreements with and connect to multiple carriers so it could offer its customers choices in carriers, plans and services. Apple has clearly put a lot of thought into its dynamic carrier selection architecture.  And lest anyone think Apple isn’t serious about this, last June Apple extended the filing in what many considered confirmation of its plans.

Adding further fuel to the fire, Apple recently has been fighting with other handset vendors, including Nokia, over a new, smaller-sized SIM card for GSM and LTE handsets. According to some, such a SIM would allow Apple to bypass carriers entirely, and activate a new customer through the iTunes Store. Whether it uses the NanoSIM, virtual SIM or other variant, Apple could have the ability to activate and sell voice, data, messaging and roaming subscription plans before the ink dries on a carrier wholesale agreement.

Apple has all of the pieces necessary to offer wireless service directly to customers. They have the world’s leading brand, a loyal following who will pay a premium for Apple’s products and services, and 363 retail stores around the world, growing to 400 by the end of the year. And with iTunes, it has the digital content and billing platform to offer service with one-click simplicity. The infrastructure is in place today, with the patented architecture ready for Apple’s next big move.

iPhone customers typically spend as much as twice or more the U.S. national average monthly wireless bill, which was about $44 in the last year. So these are high value customers. And they buy apps and content – music, videos, TV shows and movies – through Apple today. By offering mobile service with iPhones and iPads, the company could provide the full Apple experience to its users.

How likely is this to happen? Given the patent filing more than five years ago, it wouldn’t surprise me if Apple is already talking to mobile operators, nor would I be surprised if the mobile operators initiated the conversation.

And what about Google?

Might Google offer mobile service directly to its customers, for the rumored Google Android Tablet or any Android smartphone? With Google acquiring Motorola Mobility, it, too, will be able to manufacture handsets to its own specifications. But it won’t be nearly as easy for Google to follow Apple’s likely path. While Google has a great brand — number two in the world and second only to Apple — it doesn’t have the retail stores, the experience with subscription services, and the customer care that Apple offers. Nor does it have the elegant ecosystem that enables single-click app and content purchasing that Apple has through its iTunes Store.

Whitey Bluestein, a 25-year telecom veteran, is a strategic advisor and corporate development specialist focused on prepaid, applications, payments and services. For more information, go to
http://whiteybluestein.com

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While announcing its first quarter earnings on Thursday, Clearwire said it has identified the first 5,000 WiMAX cell sites it will upgrade to time-division-LTE (TD-LTE), a variant of LTE that uses the same frequencies for the uplink and downlink rather than splitting them into separate channels. It’s targeted 8,000 sites in total for the first stage of its build out, though it hasn’t announced any plans to expand beyond its WiMAX footprint yet.

Clearwire won’t be offering a complete network in those cities. Instead the hot zones will be used to augment its wholesale customers’ existing mobile broadband networks. That means Clearwire will become even more reliant on its wholesale business, a direction it has long been heading. Though it has largely shut down its own retail stores, Clearwire still sells Clear-branded modems and hotspots through Best Buy and other resellers, as well as its online portal. Still, of the 11 million subscribers it had at the end of March, only 1.3 million were retail. The rest connected through Sprint and its other wholesale partners.

There are also some signs that its wholesale business may be flagging as well. Engadget reported on Thursday (and AllThingsD confirmed) that Best Buy is canning its Connect mobile broadband service in June after only selling 11,000 subscriptions. Connect has been utilizing the WiMAX service last year and was expected to be another major source of revenue for Clearwire beyond Sprint.

Clearwire did add 586,000 new connections in the first quarter, but the vast majority of them were Sprint 4G smartphones, a font that will soon dry up as well. Sprint has begun phasing out its WiMAX phones – though it continues to support and sell older devices – in preparation for its own LTE launch this summer. Eventually Sprint plans to tap into Clearwire’s new TD-LTE network, but that won’t be for at least a year. Luckily for the 4G operator, Sprint has decided to shift its Clearwire business to prepaid and will start selling Boost Mobile and Virgin Mobile WiMAX devices next quarter.

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FreedomPop was the first to publicly switch allegiances, agreeing to tap into Clearwire’s current WiMAX network covering 130 million pops as well as the higher-capacity LTE network it plans to build in 2013. The biggest defection, however, is still officially on the fence. Sprint, which owns the largest stake in Clearwire, not only agreed to buy LTE capacity from LightSquared; it contracted to build its network, integrating it into Sprint’s new revamped base stations. According to a Bloomberg report, Sprint plans to officially abandon that deal this week, as soon as an imposed deadline on LightSquared getting regulatory approval expires Thursday.

As LightSquared’s fortunes have waned, Sprint, not surprisingly, has been showing a lot more love for Clearwire, and is now counting on the WiMAX wholesaler to provide critical capacity to its own future LTE service. LightSquared’s chances of overcoming government and GPS industry opposition to its plans were already slim to nonexistent. But without Sprint, LightSquared has no means of bringing a network online even if it were to get that approval.

That means we’re likely to see a lot more of LightSquared’s would-be customers knocking on Clearwire’s door. But mixing it up with Clearwire comes with its own complications. Tapping into Clearwire’s future LTE networks means getting specialty devices that can access the carrier’s variant of 4G, called time division-LTE, or TD-LTE (subscription required). Clearwire is hoping it can build a global ecosystem to support its LTE technology and bands. It has aligned itself with some powerful operators, including the world’s largest China Mobile, but those ecosystem efforts have also hit some snags. In addition, Clearwire has not revealed any plans to expand beyond its initial limited footprint, meaning any nationwide retail brand like Best Buy would have to settle for covering less than half the country.

And while Clearwire may be gaining new customers, it’s losing some key partners as industry liaisons shift. It’s key cable company investors Comcast and Time Warner Cable have latched on to Verizon’s star, agreeing to jointly sell their wireless and residential broadband services. Early backer Google hadn’t announced any plans to sell its own 4G service, but now that possibility is practically nil. According to the Wall Street Journal, Google sold off its original $500 million investment in Clearwire to Credit Suisse at a steep discount.

Tower Image courtesy of Flickr user Nikhil Verma.

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FreedomPop has been rather hush-hush since it revealed its plans in December. At the time, it announced it would purchase wholesale capacity from ailing LightSquared, raising questions as to whether the new service would get off the ground. On Tuesday the Federal Communications Commission said it planned to yank LightSquared’s LTE network waiver, effectively killing its plans to launch a wholesale nationwide mobile broadband network. One day later, FreedomPop had a new wholesale partner and said it would reveal more of its launch plans in a press conference this afternoon.

“FreedomPop’s ultimate goal of providing our customers with a free mobile broadband alternative will soon be realized thanks to Clearwire’s proven 4G network services,” Tony Miller, FreedomPop VP of Marketing, said in a statement. “This agreement enables FreedomPop to offer a disruptive retail service, providing free, flexible, high-speed internet access to millions of Americans.”

Last week Forbes got hold of Miller and wrote up many of the details of the company’s unique business model. In short, FreedomPop plans to offer a “free” basic service to most of its customers but charge fees to premium users, which Miller expected would account for 10 percent to 15 percent of the ISP’s subscriber base. FreedomPop won’t sell devices, but rather loan them to customers for free as long as they put down a deposit. Instead of smartphones and tablets, FreedomPop will distribute only modems, such as USB sticks and mobile hotspots, which customers can use to connect their laptops, tablets or any other device.

When Miller spoke to Forbes he didn’t reveal any details about how FreedomPop would price its premium plans or how exactly it would monetize all of the free broadband access it planned to give away, though he added that the virtual ISP planned to make use of mobile advertising to supplement its revenues.

If FreedomPop’s plans sound like innumerable Internet services business models out there, it’s no coincidence. One of the company’s biggest backers is Niklas Zennstrom, co-founder of both Skype and Kazaa. Companies ranging from Skype to Dropbox to Evernote have put freemium at the core of their services, offering the platform and most basic functions for free, while reserving key features for its paying customers.

How FreedomPop will transfer that freemium model to a wireless ISP is puzzling. It could implement strict data caps on its free subscribers or throttle back speeds to limit use of high-bandwidth applications like video – or a combination of both.

Image courtesy of Flickr user frankh.

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