Broader scope
This has been a major reason why Motorola, an infrastructure supplier to Clearwire-Sprint, elected to make its new Droid phones available on Verizon (and other) networks rather than on the Clear network - the difference between expected sales of tens of millions vs perhaps a million or so, respectively.
So what will become of Harbinger/LightSquared's planned hybrid satellite-terrestrial network? To begin with, the scale of the agreement is expected to evolve in a step-wise fashion. The major down payment of about $3 billion can be viewed as a "foot in the door" required to build out the spectrum. While the initial investment is sufficient to achieve the early coverage milestones, it is far from the amount needed over the next ten years to substantiate the outlined vision for the new hybrid operator model. The announcement of $7 billion to $8 billion capital expenditure is not entirely secured.
Harbinger's goal of turning over the investment in spectrum and operations for what they hope is a very sizeable profit, may assuage the company to pump up the level of commitment.
LightSquared is also a play on the expected evolution of ICT operator model to that of a more open, collaborative wholesale model. This new model includes "everything but the kitchen sink" use of spectrum as an exploited resource to serve everything from low ARPU M2M apps to high-value mobile broadband subscriber devices and specialty vertical market applications. Implicit in this IP broadband everywhere model is the expectation that much of the creativity in devices, applications and vertical-to-mass market development will be performed by others. As Clearwire has recently acknowledged in discussions, "we can't develop applications ourselves, the open market has to do that for us."
The target of the ever-evolving marketplace must be set two to five years in advance of announcing new deployments and the work needed to make devices available during their brief "hot" window of opportunity.
Harbinger's move to use NSN to build and manage its network fits well with the company's intent to eventually sell the developed spectrum assets. It also fits the growing rigors for operators to become facilitators of partnerships, wholesale services and become active in a wide range of vertical markets.
In other words, deliver content and services in a volatile shape-shifting business environment. We think that the hybrid satellite-terrestrial LTE network business model will achieve significant success after passing a few thresholds.
Robert Syputa is a senior analyst and advisor with Maravedis