Sprint to Subsidize Cost of WiMax Adoption

CHICAGO — As WiMax providers take aim at the consumer market, lowering the cost is a key incentive to induce customers try the service -- and it may even be the linchpin to success, Atish Gude, senior vice president of broadband operations for Sprint Nextel’s XOHM WiMax business unit, told an audience at WiMax World 2008 here Thursday. Sprint launched a XOHM deployment in Baltimore earlier this week.

Sprint expects to complete by the end of this year the combination of its XOHM WiMax business assets with those of fellow WiMax provider Clearwire to form a new company. This new entity, which will retain the Clearwire brand, will then move to deploy WiMax in other cities.

Two points, Gude told the crowd, are instrumental in the success of the service in Baltimore, the first Sprint deployment in the United States:

• the ability for customers to try it at low cost; and
• the elimination of the one- and two-year contracts that are typical in most wireless service plans.

Customers agree to those contracts in part to get mobile devices at little or no cost, Gude said. While carriers subsidize the initial cost of the cell phone, they typically make up the cost during the initial contract, and profit more if they get the customer to renew. While that business model helps customers get a low-cost device, some don’t want to be locked into to a long-term contract, so may be slow to sign up initially. Such a pricing model won’t work for WiMax because the key to success will be rapid development of a large customer base, Gude told the audience.

Instead, Gude said, XOHM is providing customers with connectivity devices -- modems for fixed locations and “on the go” wireless devices -- for relatively low costs, and offering connectivity for as little as $10 (for a one-day trial). Modems cost $79.99 and “air cards” carry a $59.99 pricetag.

In addition to the $10, one-day pass, Gude said that during the initial six-month promotional period, customers can receive home Internet service for $25 a month, mobile service for $30 a month, and a “pick two for life” monthly service option covering two different WiMax devices for $50 a month. The monthly fees are scheduled to increase after the initial six-month introductory period.

Additionally, XOHM subscribers have free access to a customizable Web site, called MyXOHM, focusing primarily on local services and entertainment content, as well as providing security services, hosted storage, and interactive communications. After choosing preferences, subscribers have their content pushed to a customized and location-aware portal via small digestible widgets.

By easing customers into the WiMax offering at a low price, they are more likely to agree to higher-priced services, much as they do with cell phones, Gude says. For example, customers will often start with a low-cost cell-phone plan covering only a small number of minutes. But once they start using the service and begin incurring overage charges, they increase their monthly packages to higher-priced plans. Gude used his own family's experience as a benchmark for how times have changed. “Five years ago," he told the crowd, "my parents didn’t have a cell phone -- now they can’t live without it.”

But cell-phone plans can still be quite complex, something XOHM hopes to avoid by keeping its pricing simple. “We think that customers can get a lot of benefits out of WiMax if we take the complexity out of it,” Gude says.

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