Sprint: unlimited focus driving need for Clearwire?

Watching last week’s PGA tournament I was struck by a new Sprint TV ad that powerfully, forcefully and very clearly played up Sprint’s ability to offer true unlimited data plans, as compared to the tiered data plans of its top competitors, Verizon, AT&T and T-Mobile. By putting all its chips behind unlimited data, it comes as little surprise around here that Sprint has also apparently decided it’s time to bring the Clearwire spectrum assets back in-house — because if the key to Sprint’s ability to compete in the near future is its unlimited data plans, those plans need the spectrum advantage controlled by Clearwire. With the separate Clearwire-retail strategy now fizzled out, there’s no reason for Sprint not to consolidate its ownership of the biggest chunk of wireless spectrum that will be usable and available in the near future, namely Clearwire’s holdings at 2.5 GHz.

Why now? While Sprint’s 4G smartphones have been the power-user’s choice since their introduction a year ago, Sprint had always kinda-sorta hedged its bets on the unlimited question, offering murky “we reserve the right to add per-bit pricing” kind of statements over the past year. But the new ads, and revelations like Sprint selling more 4G devices than Verizon last quarter are the kind of signals that say: Maybe this WiMAX network isn’t quite dead yet. We have no official insight into Sprint’s plans, but we are betting that it was no accident that CEO Dan Hesse revealed Sprint’s 4G device sales numbers for last quarter, the first time Sprint has broken that number out. And why not, when you arekicking Verizon’s behind? Not a bad performance for ol’ No. 3.

Though the story is apparently leaking out in bits there are still some details yet to emerge — such as how much dough the cable companies might chip in, and who will get to use the networks that will run on the Clearwire/Sprint spectrum. But the bottom line is now that Verizon (and AT&T, whenever it gets there) has tied itself to expensive data-capped plans for its 4G LTE network, Sprint can hammer home on the unlimited front as long as it has access to the huge spectrum trove that it buried inside Clearwire back in 2008. That means either funding Clearwire’s continuing buildout or buying up whatever it doesn’t already own to ensure that the Clearwire/Sprint duo don’t lose any of those valuable airwaves because they’re not building any networks on them.

This statement, taken from Clearwire’s 2010 annual report, explains the problem in detail:

The FCC also clarified the procedure by which BRS and EBS licensees must demonstrate substantial service, and required them to demonstrate substantial service by May 1, 2011. Substantial service showings demonstrate to the FCC that a licensee is not warehousing spectrum. If a BRS or EBS licensee fails to demonstrate substantial service by May 1, 2011, its license may be canceled and made available for re-licensing. For our spectrum, we believe that we will satisfy the substantial service requirements for all owned and leased licenses associated with each of our commercially launched markets, whether Pre-4G or 4G. For licenses covering areas outside of our
commercially launched markets, we are in the process of executing a plan to comply with the substantial service requirement by the deadline. Our ability, however, to meet the substantial service deadline for every owned or leased license in areas outside of our launched markets is uncertain, and we will likely seek waivers or extensions of the deadline from the FCC in some circumstances.

So — with Clearwire’s corporate structure now completely Sprint-friendly (meaning that former CEO Bill Morrow and lead investor Craig McCaw are out of the day-to-day picture) and the retail business shelved, Hesse and Co. can step in and reclaim the spectrum assets Sprint buried inside Clearwire back in 2008, when Sprint was bleeding money like a stuck pig and nobody was really sure just how the whole 4G thing would turn out.

Though Sprint threw a nod in LightSquared’s direction recently it should be noted that the Sprint-LightSquared agreement is one of those things that will only come to pass if LightSquared somehow gets enough money to build a network and gets FCC clearance for its spectrum use. Sprint doesn’t lose if LightSquared can’t get its plane off the ground. But Sprint does need to stay viable in an era of behemoths, and the only current available working spectrum to do so (meaning there are proven devices for it) is the Clearwire-controlled swath at 2.5 GHz.

And what about the future? Clearwire’s news about fully committing to LTE going forwardis a smart PR ploy to let potential new investors know that Clearwire and Sprint aren’t stuck on WiMAX. In fact we could foresee in the not so distant future a WiMAX/LTE “superphone” that uses hybrid chips to connect to the existing WiMAX network for regular high-speed 4G signals and then can also tap into whatever “Super LTE” network Clearwire and Sprint can build in the cities where it’s available. That’s how a limited-cities launch might work — you’d always have the current pretty fast 4G speeds to fall back on, and could really whoop it up in the cities where the new super-fast LTE network gets lit.

But the key to it all, is you gotta have the spectrum. Remember how we told you those “voluntary” broadcast spectrum auctions weren’t taking place this year? Right now Clearwire’s unused boatload of spectrum is just sitting there, basically in Sprint’s hands already, albeit with the risk of disappearing if networks aren’t built on it. So yes, it is time for Sprint to step up and lead the way to a fully funded buildout. Let’s see who else comes along for the ride. Like say, maybe, a company that just bought a hardware company to meld with its mobile operating system… and now needs a superfast network to outrun theiPhone with LTE?