Sprint, Clearwire reach deal on wholesale pricing
Agreement will help fund Clearwire's build out of its 4G WiMax network, as rumors emerge that Sprint may also be in talks to use LightSquared's soon-to-be-built 4G LTE network.
Sprint Nextel and Clearwire have settled their dispute over wholesale pricing, the companies announced today. Sprint uses the nationwide Clearwire network for its 4G WiMax wireless broadband service.
Under the new deal Clearwire will receive at least $1 billion from Sprint in 2011 and 2012. The minimum 4G usage commitment for this year is $300 million and $550 million next year. Sprint will pay $175 million in pre-payment for the service that will be used later this year and beyond.
The companies also worked out an agreement for devices that use both Sprint's 3G network and Clearwire's 4G WiMax network. The deal is meant to align "the interests of both companies to enable growth for customers using smart phones and dual-mode devices."
The companies will also be allowed to resell each other's 3G and 4G services to other parties.
Clearwire is building a nationwide wireless broadband network using a technology called WiMax. It's a joint venture with investment from Sprint Nextel, Comcast, Time Warner Cable, Intel, and Google. Sprint owns more than 50 percent of the company, and it is the primary customer for the wholesale 4G wireless network.
Building a new network is not cheap, and Clearwire has struggled to come up with the cash to finish building its network. The stalemate in negotiations between it and Sprint over the roaming agreement called into question how Clearwire would continue to pay for its new network.
The deal now clears up some of that uncertainty.
Still, there are rumors floating around based on a report from The Wall Street Journal this morning that Sprint is close to signing a deal with a new wholesale player called LightSquared. Like Clearwire, LightSquared is building a new 4G network. It is using LTE, the same technology that Verizon Wireless and AT&T are using for their 4G networks, instead of WiMax. And unlike Clearwire, which also competes with Sprint by selling a commercial 4G service directly to consumers, LightSquared will only sell access to its network on a wholesale basis.
The Journal reported that in the proposed deal LightSquared would get access to Sprint's network and spectrum as it builds its nationwide LTE network. In exchange, Sprint will get paid some cash, but will also get access to LightSquared's network.
The benefit of using LightSquared's network is that it will give Sprint a wider footprint particularly in remote and rural locations. Today Sprint must pay competitor Verizon Wireless for roaming. This deal could let Sprint cut back on its roaming deals with Verizon.
What's more, it would give Sprint a strategy for also offering 4G service using the LTE technology, something the company's executives have said it might consider. This is important as most carriers around the world adopt LTE and not WiMax for their next-generation networks.
A deeper analysis of LightSquared's strategy and what it might mean to Sprint will be published later today, so stay tuned.