Sprint's $3bn 4G gamble

I blogged about this before but back then the details were sketchy.

Sprint said on Tuesday it is partnering with Intel, Motorola and Samsung Electronics to build a nationwide mobile WIMAX (802.16e-2005) network and develop devices that will access it. They plan to spend $3bn over the next 2 years, with a launch at the end of 2007. About 100m people will have access to the network by the end of 2008.

Gary Forsee, Sprint's chief executive officer, said the jump to 4G is not a replacement for Sprint's 3G network but will help the company develop a new market for advanced wireless services. Forsee said Sprint envisions a future when a whole slew of new devices - such as music players, video recorders and portable, low-cost PCs - will attach to the wireless network to allow consumers and business users to access content instantaneously over the mobile internet.

Of course he has to say that - his shareholders would crucify him if he admitted that CDMA is a dead-end and any EV-DO investment (upgrade to Rev. A happening this year) was like throwing money down the toilet. Am I being too cynical? Perhaps not. Ditching CDMA has become du jour of late with Telstra being one of the most famous examples. Plus the economics of the situation seem to make WIMAX more attractive than continued CDMA investment. For example:

1. WIMAX can transmit over greater distances and in a wider spectrum band so the cost of operating will be less than CDMA.
2. WIMAX chipsets are 1/10th the cost of chips used in EV-DO devices. Sprint's strategy seems to be all about devices, devices, devices. WIMAX is a global standard meaning massive economies of scale for terminals.
   
3. Sprint already owns a large portion of the 2.5GHz WIMAX spectrum in the US.

CEO Forsee even admits as much: "The cost performance on the 4G business model and the throughput gains, plus the cost of putting these chips into cameras, gaming devices and other consumer electronics, is what makes it different from EV-DO Revision A."

It just seems strange that their 4G timescales are so aggressive. Why not wait a bit longer and get a better return on EV-DO investment?