LightSquared announced on Tuesday its plans to use a LTE/satellite hybrid network to cover 92 percent of the U.S. population with 4G by 2015, with Denver, Baltimore, Las Vegas and Phoenix to launch first in mid-2011. The network will be a pure-play wholesale platform, and the company hopes to attract MVNOs from the wireline community, cable operators wanting a wireless component, device manufacturers with embedded LTE devices, and rural and regional operators without large spectrum holdings looking to either provide basic broadband to the underserved or to add a national wireless service to its mix. In short, the company is casting its net far and wide in what some are already calling a $7 billion gamble.
Editor Tara Seals sat down with Frank Boulben, CMO at LightSquared, to talk in-depth about the company’s model and vision, the outlook for LTE in general, and what satellite has to do with it.
Tara Seals: Your business model will change the face of wireless competition, in theory, by allowing more operators that lack the spectrum to roll out nationwide the opportunity to do so. Right now many American households only have two options for broadband, remember, and four for cellular services. How do you quantify your value proposition to retail partners?
Frank Boulben: Well, first take a look at the demand side of things. Emerging devices like eBook readers are forecast by analysts to have a 40 to 60 percent increase in the next four years. And there is an undeniable explosion of mobile data usage, but there is not enough capacity. We are looking to install capacity using LTE and employ high-quality and low-cost network covering 92 percent wireless broadband in a context where demand outstrips supply to a great margin. We will sell wholesale only, so we’ll have no brand or retail store or call center concerns. Each dollar that we raise will be reinvested into expanding the network coverage and capacity.
TS: Clearwire has a wholesale strategy for its WiMAX network, and Verizon Wireless has said it plans to license its LTE network to other operators as well. How are you differentiated?
FB: Unlike the competitors, we won’t have competition between the retail and wholesale side of the business; there is no conflict of interest. When there are capacity constraints you will serve first the retail side, your own brand. And at first there will be a capacity constraint for everyone in the LTE market. But we don’t have to make those trade-offs.
From a commercial point of view, there is also no trade-off between retail price and wholesale price. If we sold our own service, there would always be the question of whether the wholesale rate gives you enough space on the retail side to be competitive. Also we’re vested in partner success. Being wholesale only, the revenue and profit comes to us only if our retail partners are successful. So we’re in a very different position.
