Sprint's Dumb Pipe Dream

When Sprint (s S) signed away its WiMAX spectrum to Clearwire (s clwr) in exchange for 51 percent of the company, and the promise of a nationwide 4G network, it also signed away control of its future. It no longer controls its next generation network — instead it has handed over its spectrum to potential cable and wireless competitors in exchange for a 51 percent stake in the spoils. Sprint argues that this is the model for telecom’s future where the network is merely a pipe and the service provider must become the purveyor of customized service packages and applications for a wider variety of users than ever before.

According to Todd Rowley, VP of Sprint’s 4G business unit, the immediate vision is to build out services now based on the combined Sprint 3G and Clear WiMAX network. It already has a data card product out, and plans for a dual-mode CDMA and WiMAX handset to be released in early 2010.

In addition to the typical cellular data model, Sprint also sees consumer electronics makers embedding WiMax chips into special purpose devices such as the Kindle and general use gadgets such as netbooks and laptops. One plus is that a carrier doesn’t have to subsidize such gadgets. Rowley anticipates sub $10-WiMAX chips coming the next few years, making it less costly for manufacturers to embed 4G connectivity in devices.

“We see home broadband replacement opportunities, video surveillance systems and other products, that as we move forward, we will develop devices and services that target a particular space,” Rowley says.

The catch is multiple parties are able to resell the Clear WiMAX service once (and if) it gets built out, making network access almost a commodity. Clearwire as well as cable partners Comcast (s CMSCA), Time Warner Cable (s TWC) and Bright House Networks can compete against Sprint to provide access. This doesn’t even begin to address the competition of other wireless players such as Verizon (s VZ), AT&T (s T) and T-Mobile, which are also trying to boost data revenue by providing cellular access for devices other than phones and computers.

So why would a consumer choose to activate on Sprint? For now the 3G coverage is a plus, although Clearwire can also buy access to Sprint’s 3G network. Beyond that it’s not yet clear what Sprint will be able to offer. Cable providers can integrate their WiMAX enabled devices to a consumer’s current broadband and video services, providing the ability to program a DVR on the go, or extend digital home phone service on a computer.

Rowley says Sprint will likely offer more mobile services designed for a mobile experience such as phones, ultraportable computing devices and things like e-Readers or music players. He admits that novel home services such as security or medical monitoring is where Sprint and its cable frenemies will most likely compete.

Without its own 4G network, Sprint has bet its future on getting 51 percent of WiMAX’s success in the U.S. (not a certain thing), and its ability to develop special packages and offerings for the ultimate in dumb pipes. It’s a risky bet.