Wednesday, May 07, 2008

Joint Sprint, Clearwire network could boost consumer power

By Associated Press

Sprint Nextel Corp. has finally rounded up the financial backing it needs to build a faster wireless network. But for consumers and the electronics industry, speed may be the least important thing about the new network.

Though specifics are scant, everything points to the new network breaking with the current model of the U.S. wireless industry, where carriers both operate the service and sell the devices that use it.

Right now, when you buy a Sprint phone, you use it on the Sprint network, and Sprint picks the applications, like TV services, that come with the phone.

Sprint has indicated the new network will be run on an ''open access'' basis, where anyone with a compatible device can connect it.

If everything works well, this could lead to a proliferation of cell phones, Web tablets, computers, TV set-top boxes, GPS devices and gadgets we haven't even dreamt of. Manufacturers will be free to make gadgets that can ride on the network, without striking a deal with the carrier first.

Rather than buying a cell phone with a monthly minute plan, you could be buying a device that gives you unlimited use of voice-over-Internet services like eBay Inc.'s Skype.

''That's the real power of having this open access -- it unleashes innovation,'' said Bob Williams, who tracks telecommunications for the Consumers Union, the publisher of Consumer Reports.

For example, Nokia Corp., not Sprint, will be selling the first portable gadget that's likely to be available for the network. It's a Web tablet that looks like an oversize iPhone and costs about $500.

You'll buy it without a contract, and when the WiMax network is available, the device will tell you, much like a laptop will alert you when Wi-Fi is available. You'll then have the option to sign up for an Internet plan through the Web browser.

There could be quite a few more payment options here than we're used to from wireless providers, who generally only have monthly data access plans. We might get the option to buy service by the day, or even by the Web page, which could make viable devices that only occasionally need to connect to the network, like GPS navigation devices you use only when driving, or alarm clocks that download a podcast every morning.

And speaking of buying access, you may not even be buying it from Sprint, or from the joint venture called Clearwire that will be operating the network. As made clear by the announcement Wednesday, the cable companies that are putting up much of the money for the buildout will be buying wholesale access to the network and will be reselling that under their own brands, bundling it with cable service.

Google Inc., another investor, will also have thumb in the pie: Clearwire will support phones that run Google's Android operating system, which aims to extend the company's dominance in Internet search and advertising to mobile devices.

Clearwire won't be completely revolutionary: Some open network features are available in some form or other today.

For instance, Amazon.com Inc.'s e-book reader, the Kindle, uses Sprint's current cellular network to download books, but the user doesn't need to know that. Amazon pays Sprint for access to the network, and no Sprint subscription is necessary. The cost of using the network is baked into the price of a book download.

But Amazon had to work with Sprint to create its device, and a company with lesser resources might not be able to follow in its footsteps. For now, there's no competing wireless e-book reader.

In another example of partial openness on existing wireless networks, you can buy a ''SIM'' chip from AT&T or T-Mobile USA and plug it into any compatible device, like a cell phone you bought overseas, to get onto their networks. But the carriers want the customer relationship, so you have to deal with them to get service.

When it comes to the Kindle, Amazon, not Sprint, owns the customer relationship and handles customer care. That's a model we can also expect on the WiMax network. The device manufacturer or the retail service provider, like the cable company, will be the point of contact for the consumer, rather than the network operator.

While giving up customer service means a loss of control for Sprint, it could also work to its advantage, since it is struggling to provide customer service that measures up to the other providers.

''Not to quote 'Me and Bobby McGee,' but there is a remarkable freedom in having not much to lose,'' Williams said. ''There's no question that Sprint is having its problems.''

Naturally, Sprint won't leave all its problems behind with the WiMax network. There are questions about how well its signal will penetrate indoors, for instance. Those are important questions, particularly because some of the first products to be available for the network will be large modems intended to provide home computers with an alternative to wired broadband.

And the Clearwire venture might even be beaten to the punch when it comes to open access.

Verizon Wireless has promised to open up its existing network starting late this year to devices that pass a short technical qualification process. Given the very tight control that Verizon Wireless has hitherto exercised over its network, that effort has been met with some skepticism. But if it lives up to its promises, it could be a strong competitor.

In any case, the wireless industry is likely to look quite different a year from now.