Craig McCaw, current Chairman of Clearwire (NSDQ: CLWR) and founder of McCaw Cellular Communications, which later became AT&T (NYSE: T) Wireless, and John Stanton, who founded Voicestream and Western Wireless, joined Steve Largent on the stage to talk about the start of the wireless industry. Stanton, who is an investor today through his own firm, will become a board member of Clearwire if and when the merger closes between Clearwire and Sprint (NYSE: S) WiMax division. The conversation started off looking at the past and where the industry was almost 30 years ago, but quickly moved on to discuss 3G and 4G. The boldest statements came in the end when Largent asked the pair what the industry would look like in five years. Both stressed innovation, but the largest applause was saved for Stanton, who warned that the U.S. carriers are quickly becoming a commodity, and that they need to make more investments in content and platforms to maintain growth.
— What was it like in the early 80s?: Stanton: “One of the exciting new things was that we weren’t coming up with new offerings, we were coming up with a new industry. AT&T didn’t understand that all of our Seattle customers could also use it in Portland. That was the beginning of roaming, it was purely accidental. One of my favorite stories involves one of [Largent’s] former teammates. We sold phones through independent stores. One sold a phone to Jacob Green, was a huge player for the Seahawks for $4,000. They didn’t explain that you didn’t get service for that, and his first bill was for several hundred dollars. He thought he got service for life…The business was so thoroughly fragmented. In Seattle, we had six partners, and as a consequence, M&A was expected from the beginning.”
McCaw: “The operators faced a three to five year process. The process is much better today… the free market approach was we are going to throw it out there and have the entrepreneurs figure it out. Guys like John and the guys in the industry. All of us had to sort out this mess.”
Lots more after the jump…
— How do you get customers to pay $3,000 for a phone in the car when you can’t sell a data plan for $20 today?: McCaw: “This isn’t an AK-47 [holding up a classic large brick phone], it was the original phone. You couldn’t hold it for more than 15 minutes. It had 30 minutes of talk time, but you couldn’t hold it up for that long. Things started slowly. The car phone was even worse because you had to take the car apart, and keep his car for a whole day. So, as we look at this from the data perspective, people don’t realize two things that are relevant: When products aren’t right, people won’t buy it… people won’t come until there is something moderately rational. As you begin, you don’t expect it to be viable, and the one thing I’d say about data, it hasn’t been right for the customer or the operator.
— What’s the view of wireless broadband here compared to the rest of the world?: Stanton: “The U.S. has had good and bad policies [when it comes to spectrum]. But the goodness has been the notion of innovation. Average users on a per month basis, 96 minutes of use in Germany. The standards and pricing that they’ve regulated has limited the industry even though it accelerated it at first. What McCaw has been able to do is exceptional and compete against the guys who were on the last panel. They have the ability to create a very interesting network. That innovation is driving volumes here, compared to Europe. A better regulatory process is better at letting entrepreneurs do their own things.
McCaw: I wouldn’t say that our country is great because there’s all these laws of unintended consequences. Europe is an SMS market, and in Europe with extraordinary roaming rates, they are punitive. We conquered that problem in the U.S. how many years ago? 18? Europe operates on punitive pricing, which drove them to short-messaging. For us in the U.S., it’s a much more natural progression. If the cellphone is such a part of your life, the next step is to put the Internet now in such a way that it’s like being at your desk. Our team includes Sprint, Google, cable guys and John, to come together and say there’s something much better here, let’s not be held back from the past.
— On evolution to faster networks: McCaw: Clearwire had more customers faster than McCaw Cellular, and we don’t think it’s fast by today’s standards. The idea with what we’ve assembled with Sprint, it’s unbelievable and will change the paradigm of cost. It’s slow or it costs a bundle of money. Punishing the customer is not the answer. When you hit that sweet spot, it will explode.
— WiMax vs. LTE: McCaw: “They are the same, but different. The argument in our favor — they are so close it doesn’t matter — is if you are downloading a movie, why is half your spectrum sitting there not doing anything. That’s the beauty….That’s the great opportunity, but technologically they are like brother and sister.”
— In five years, where will the industry be?: McCaw: “The thing we see is that the industry is commoditizing when you look at one cent a minute. Is it even worth keeping track of? The lesson with the iPhone is innovation. People say handsets are a commodity business, well, I wish I was in that business, and received the same margins that Steve Jobs does…The lesson is that if you innovate it means something.”
Stanton: “From my point of view, there’s two things that the major carriers have and need to be cognizant of. You talk about big numbers, like 75 million customers, but the biggest U.S. operator has 2 percent of worldwide subscribers. Scale is going to be ceded to foreign companies. This is still a U.S. centric organization [CTIA], and innovation has been ripe here in some respects, but we still also have to go to GSM [World Congress]. The U.S. has to get out of its old ways. I’m surprised that none of the major U.S. carriers have made significant investments. In the conversation about open networks this morning, that defaults back to the fact that we are only access providers. When you become an access company, you cede yourself to growing at the rate of the economy. The U.S. is still flirting with double-digits, whereas Europe and Asia are growing at the rate of the economy. I’d argue that NTT DoCoMo (NYSE: DCM) created a platform that was better than any of the traditional networks today, by owning content, why is it that none of the carriers have sown their own content? They ceded that to Google (NSDQ: GOOG). We are running the risk of heading toward a U.S. commodity business, instead of a global content business that therefore earns disproportional profits.”
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