@ Global CDMA Forum: Sprint Nextel exec dishes on smart phones, LTE plans, traffic and the cloud

SHANGHAI, China – Sprint Nextel Corp. has been transitioning and remaking itself for at least two years now. During that time, much more has changed in the mobile industry than stayed the same.
Many of the situations that the carrier faces today are not unique to any one carrier. Data traffic is surging as smart phones become increasingly popular for consumer and enterprise customers alike.
Here at the 5th Global CDMA Operation and Development Forum put together by Huawei Technologies Co. Ltd., Kevin Packingham, SVP of product and technology development at Sprint Nextel, talked about these latest trends and explained where they are playing a key role in how the business continues to remake itself today.
Smart phone sales exceeded feature phone sales for the very first time during the first quarter and they know comprise 34% of all sales, making it the largest device category, he said. But with that surge, traffic has followed.
“The average smart phone uses 10 times the data that the average feature phone would use,” he said.
Much of the rise in traffic on Sprint Nextel’s network can be attributed to its own doing, particularly its early adoption of the unlimited data pricing model. Indeed, while other carriers move toward tiered data pricing plans, the carrier is holding firm to its unlimited data offering as a differentiator in the U.S. market.
“Originally a lot of the U.S. service providers tried to do pricing based on usage,” Packingham said, but many customers don’t understand data usage in the same terms they do with voice minutes.
“We expect this to continue well into the next several years as we evolve the network to WiMAX and LTE,” he added.
<span class=cr_red)LTE an option
Sprint Nextel only opened this dual path along WiMAX and LTE recently. The carrier has been a devout WiMAX follower for many years, but is now opening up to the possibility of LTE. When Packingham was asked to explain the carrier’s evolving strategy with the two technologies, he highlighted the early-to-market advantage WiMAX presented. Moreover, WiMAX was best suited for the 2.5 GHz spectrum available to Sprint Nextel for a next-generation network a couple years ago. That spectrum was configured to work with TDD-based mobile broadband technologies like WiMAX that were different from the FDD-based cellular technologies.
But now that LTE technology trials are underway and commercial launches are expected by the end of the year, Sprint Nextel wants to leverage both technologies “because we have several different spectrum bands that we operate on,” he said. “We do see them as complimentary.”
Sprint Nextel could move quickly to deploy LTE using its traditional 800 MHz and 1.9 GHz spectrum holdings that currently are used for its CDMA and iDEN networks. LTE backers are also working on developing a TDD version of LTE that would allow Sprint Nextel and its WiMAX network partner Clearwire Corp. to deploy LTE technology on its 2.5 GHz spectrum.
Packingham added that Sprint Nextel is looking to partner for international LTE coverage and the technology will certainly be a part of its roadmap as follows the evolution path on CDMA.
Most importantly, he said Sprint Nextel needs network technologies that are extremely efficient and it believes WiMAX and LTE deliver in that arena.
Sprint Nextel predicts data traffic will double every year through 2014 at a compound annual growth rate of 108%, he said. Smart phones and portable devices such as laptops and tablets will be the access point for 91% of all traffic by then and 66% of that traffic will be consumed by video. At a compound annual growth rate of 131%, “mobile video has the highest growth rate of any of the services,” Packingham continued.
The carrier expects many wireless subscribers to have 3 or 4 Wi-Fi-enabled devices and anticipates more than 5 billion devices could be connecting to a mobile network by 2014, he added.
“It will continue to be a balancing act over the next several years,” Packingham said. “I don’t know that we have a perfect answer yet, but it will be one of those things where we have to work together.”
The problem for most carriers is that revenue growth isn’t matching traffic growth.
“The customer’s willingness to pay for some of these incremental services is very marginal,” Packingham said.
Sprint Nextel has made a long-term investment decision to invest in more expensive WiMAX chipset terminals even on devices for customers that don’t live in a WiMAX network. Indeed, the price threshold for devices in the United States is becoming a worsening problem.
“In the U.S. market we all break the rules,” Packingham said, “and it’s not very healthful for anybody.”
Open market ideology
Sprint Nextel has also shifted strategy on the applications and development front. Packingham said it’s critical for carriers to embrace an open marketplace and cooperate on a series of best practices with application providers.
Whereas the carrier and its competitors previously clamored to brand everything under their flagship umbrella – Sprint TV, Sprint Email, Sprint Music, for example – carriers are much more willing to let application makers do the development work, he added.
This approach has requires a different skill set internally, Packingham said. Employees that used to develop services specifically for customers are now relationship builders and business development managers. Incorporating services from outside has helped Sprint Nextel focus on the most relevant and popular services to customers and businesses, he continued.
As Sprint Nextel moves out of the “isolated communications industry,” Packingham said the carrier is now asking new partners for advice on how to create a new ecosystem where they all can flourish.
In that vein, Sprint Nextel is focusing much more of its attention on software-as-a-service or cloud computing. Sprint Nextel has refined its vision for the cloud, a category that’s expected to generate up to $58 billion in revenue this year, according to Packingham.
The carrier’s view of the cloud has only improved as CDMA networks evolved to a more beneficial cost structure, he said. Even a year ago, the module pricing on CDMA was not competitive with GSM, Packingham noted. But because costs have improved, Sprint Nextel is now inviting many different vertical markets to pursue new opportunity on wireless networks, particularly on machine-to-machine.
“Intelligent routing is going to be critical,” he said. “We’re able to balance out how different services use the network.”