‘Something’s Gotta Give’ in Impossible U.S. Wireless Economics, Hesse Says
SAN FRANCISCO -- U.S. wireless carriers must change industry economics created by upward-spiraling data use and large subsidies on handsets that customers are upgrading often, Sprint Nextel CEO Dan Hesse said Tuesday. “Something has to give,” he said at the Open Mobile Summit. This is a “very challenging” problem throughout the industry, as shown by the share-price histories of AT&T and Verizon Wireless, considered the most successful carriers, Hesse said.
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Cellphone “subsidies are going through the roof,” Hesse said. It’s not unusual for carriers to sell for $200 or less handsets that cost them $600 or more, he said. And “the network costs are a lot higher” for smartphones than for less advanced handsets, “because they use a lot more” data, Hesse said. The carriers’ aim is to reduce churn and increase the average revenue from customers, he said. And “churn actually is coming down,” Hesse said.
"We're looking for new revenue sources” including advertising, increased device prices and shared mobile commerce revenue, Hesse said. “We will keep our options open” on joining the movement toward tiered data prices, he said. “We are right now the outlier, if you will, in saying we want to maintain some all-you-can-eat pricing.” That’s a result of Sprint’s having decided, “so far, our brand stands for simplicity,” Hesse said. Sprint’s mobile technology is “somewhat open,” more so than the other carriers, Hesse said. And his company is becoming more open, moving from “mildly irritating” to “the tolerable side,” he said half-jokingly.
"The Apple experience, making use of “probably the most closed system,” is a good one, Hesse said. Elsewhere, in the “Wild West,” there’s “not a very good experience,” including because of security concerns, he said. “Even though they're on the other side,” Hesse said of Apple, “I wouldn’t bet against them. They're an extremely capable company.” He wouldn’t comment on media reports that Sprint has excluded China’s ZTE and Huawei as network vendors under U.S. government pressure based on security qualms. “It’s really all speculation,” he said.
Hesse played down as a regulatory technicality Clearwire’s recent disclosure that it may not stay in business without additional financing. “That doesn’t mean Sprint and other investors won’t continue to fund Clearwire,” he said. After his presentation, Hesse wouldn’t discuss an SEC filing by Sprint saying the carrier might sell its Clearwire stake to avoid being held responsible for any loan defaults by the 4G venture (CD Nov 9 p12).