Verizon Wireless’’s PR agency was kind enough to send me an evaluation unit of its new MiFi device today, so I thought I’d spend a few minutes sharing some initial thoughts. For anyone not familiar with it, this is a pocket sized portable WiFi hotspot attached to Verizon’s EVDO network, with the intention of allowing your various devices – laptops, phones, gaming consoles etc. – to easily connect to the Internet in a variety of mobile situations.

The first thing I did was pull it out of the box to see what it looked like. I was actually slightly surprised by how small it was:

It’s less than a centimetre thick, so thinner than my iPhone and quite a bit thinner than my BlackBerry Bold. And the footprint is just a hair larger than a credit card. So it definitely lives up to the “pocket-sized” description and it’s extremely portable (I stuck it in my pocket with my iPhone later on as I went to run some errands and forgot it was there). 

The next step was getting the thing up and running, and there I ran into problems pretty quickly. My main personal computer is a MacBook and so that’s the machine I wanted to use to get it started. But although in theory I was supposed to just plug it in with the supplied USB cable and then follow automatic prompts, nothing happened when I plugged the thing in. No disk image, no simulated CD, nothing. So there was no way of getting the device to do anything useful at all whether automatically or otherwise. I tried unplugging it and plugging it in again several times but no dice. This was somewhat disappointing since the box clearly states that it’s Mac OSX compatible:

If the MacBook was my only device I’d have been out of luck. Fortunately, I have a desktop PC lurking nearby I could use, and so I tried that instead. To cut a long story short:

• the first time I plugged the device in, it caused what the PC later described as “a serious error” – it was unresponsive for several minutes and I had to restart it just to get it to talk to me again.
• the second time, things went better. The device registered, drivers were installed and up popped the VZ AccessManager program that manages devices like these as well as Verizon’s aircards and USB modems. 
• I tried to register the device using the program, but the first time around it failed. The second time (once I’d found an activation item buried in one of the menus) it worked. 
• at this point, the device was finally ready for use.

I switched it on and looked for the wireless access point on my MacBook. Nothing. Refreshed: nothing. Finally, it showed up – it appears that it takes quite a few seconds for the device to be ready after being switched on – nothing too wrong with that, I suppose, once you know. 

The SSID is a long string starting with Verizon MiFi2200 followed by a unique 4-digit number (although if they sell more than 10,000 of these things I guess those numbers won’t be unique anymore). Logging in requires an 11-digit numerical password which is helpfully provided on the back of the device in case you forget or need to show it to someone else using your device.

The first thing I did was run a speed test using my laptop on Speedtest.net – results below:

That’s 1.4Mbit/s down, 360kbit/s up – not too shabby. 178ms of latency – not great, but not terrible either, and fairly standard for WWAN networks. Of course, this is based on the nearest server and so on, so your actual speed is in most cases going to be slower since most of the websites you access aren’t within 50 miles.

I hooked up a second laptop to it and ran a Hulu video on that one while I retested the speed – it came in at around 1Mbit/s, so it seems to handle multiple connected devices pretty well.

So in what situations would this be useful?

The question is, why do you need a device like this? Why not just use a USB modem or similar device that doesn’t require separate power (the MiFi does, of course)? Well, one that sprang to mind immediately was my work laptop, which is so locked down that it’s impossible to install anything on it, including the software that comes with most aircards and modems. I’ve never been able to use any of the several USB modems and aircards I’ve received from Sprint and others on my work laptop because I couldn’t ever install them. Assuming you’ve got somewhere else to get the thing up and running first, this is a nice solution – since it just looks like another WiFi network to my work laptop, it works just fine.

Beyond that fairly limited use case though, are there any others? One that immediately occurred to me (and, I think, was suggested by someone at Sprint last week) was hooking my iPhone up to it while out and about for a speed boost. Theoretically, this only makes sense if AT&T’s 3G network is slower than Verizon’s, which isn’t necessarily true, but I thought I’d give it a try. Using Speedtest.net’s iPhone application (warning: iTunes link), I ran three speed tests – one each for my home WiFi (connected to a 20Mbit/s FiOS connection), the MiFi over Verizon’s EVDO network, and the iPhone’s own 3G connection. The summary is below, in reverse order:

The details are here, in the order I described above (home WiFi, MiFi, iPhone / AT&T 3G):

Obviously, my home WiFi with the superfast backhaul was quickest. But the MiFi also beat the iPhone’s own 3G hands-down – by about a factor of 2 on the dowlink, although very similar on the uplink. Why is this the case? Possibly the particular place where I tested the two networks has better Verizon than AT&T signal. Possibly the design of the MiFi gets a stronger signal than the iPhone. I don’t know for certain, but I won’t complain about that doubling in speed. (Slightly off-topic, I also wondered whether the iPhone’s WiFi capabilities are capped at 10Mbit/s – I regularly get very close to 20Mbit/s when testing my home connection over a laptop).

I took the device with me when I went out to run some errands and discovered that a dead spot in AT&T’s network at the local mall (ironically right by the Apple store) was no longer a problem – I had the MiFi on in my pocket while I checked email and Tweeted from my iPhone and had none of the normal connectivity problems. Use case found.

In theory, there are others too – the marketing materials from Verizon suggest family roadtrips, construction sites, college students in study groups, insurance agents on the road and conferences. All are reasonable suggestions, though most would be just as well served by a USB modem. 

Conclusions

In summary, I found that:

• The MiFi provides good speed – even an improvement over the native 3G on my iPhone, and plenty of downstream speed to get work done on the road
• The activation process was cumbersome and would have been a show-stopper if I only had my MacBook. I wonder why an activation process involving installed software and drivers is even necessary – the thing never needs to connect to my laptop after that anyway – why not just let me activate it online and avoid all that hassle?
• There will be some use cases for some people – but probably not for everyone, and that’s fine. USB modems will be just peachy for many people and some people don’t need a mobile broadband connection at all
• I haven’t had it long enough to worry about this or really be able to comment on it yet, but compared with a USB modem I can imagine that remembering to recharge might be a pain.
• The device is truly extremely portable, to the extent that you could chuck it in the same pocket as your phone without an issue and would probably forget it was there (as I did).

Thank you Verizon, for sending me a trial device. I’ll be using it quite a bit over the next couple of months until I have to give it back. It’s probably also worth noting that the underlying device is the same as the Sprint device that also launched recently, so most of what I say here would go for Sprint’s version too – including, most likely, the network performance, which should be similar on Sprint’s EVDO.

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I’ve just concluded a day and a half with Sprint at their annual analyst day. At this point I’m sitting at Kansas City airport – one of the easiest to get through in the world – unfortunately waiting for a few hours because of a delay to my flight. But this gives me an opportunity to set down some thoughts while they’re still fresh in my mind.

Housekeeping & links

I wrote up my thoughts on last year’s event here. More posts on Sprint can be found at this link. I used Twitter to share some of my thoughts as the event went along and you can see that thread here.

First, the good news

Sprint’s come a really long way since last year’s event, and it’s made progress in several key areas. Dan Hesse (the CEO) has the same set of three priorities now as he outlined last year, which is always a nice surprise at these events! They are the brand, financial stability and the customer experience. And on the last two at least I think they’ve made significant progress. Financial stability is much approved to the point that the company is throwing off a decent amount of cash, has a more manageable (though still substantial) debt burden and is improving margins. They’ve also done a sterling job of improving the customer experience, where the key proof point is the 40% reduction in calls to customer care they’ve seen over the past year.

The company is now in a much better place as a result. Many of their customers have experienced improvements in customer care and in the overall experience of being a Sprint customer. Neither customers nor investors need have significant concerns about the short-term financial viability of the company. And the launch of the $50 unlimited Boost plan has turned around a key metric for them in the past quarter – iDEN net adds. That opportunity is a really great one for them for the foreseeable future because they can add a ton of customers at very low subscriber acquisition costs (1/5 of postpaid adds) and zero incremental capex because the iDEN network is so empty. 

The senior executives were approachable and frank, which is always refreshing. Dan Hesse himself was available to the analysts for informal conversations over dinner, along with many of the other execs, and the new CFO is disarmingly frank and blunt. Both tell a good story. And they have achieved an enormous amount over the past year in these key areas – that progress is impressive and they deserve a good deal of kudos for it.

Now, the bad news

The bad news is that it isn’t yet clear how Sprint is going to turn around what is now its single biggest challenge – continuing net subscriber losses. Even though churn is improving, and that’s a big step, the problem is gross adds, which continue to be well below where they should be, and massively lower than they have been in the past. No-one is adding as many subs as they have in the past because the market’s slowing down, but Sprint at least needs to win its fair share, and it hasn’t done for some time now. What I was looking for more than anything going into this event was a solid story about how Sprint will grow gross adds, but I didn’t feel like we got it.

When I put that question directly to Mr Hesse, his response was that the gross adds strategy was everything they’d talked about over the day and a half. While that’s part of the answer, my overwhelming impression was that all the initiatives are very long term, and we’re left (along with Sprint) waiting for them to kick in. A constant theme throughout the event is that perception lags reality, and while Sprint has improved network performance and customer experience, these are things that will take a long time to flow through into customers’ perceptions and even longer to flow through into non-customer perceptions. 

Other things Sprint is “waiting for” (in my view) are:

• 4G rollout – yes, in theory, Sprint will have a two-year edge over Verizon and an even bigger edge over AT&T. But it will only roll out a handful of markets this year and only make serious progress next year. And handsets won’t begin to show up until late next year. And in the meantime customers who don’t live in the mostly tier 2 markets that will be first to light up will not see any impact
• The Pre – yes, this one is coming soon so the wait shouldn’t be too long, but there were echoes of the many mentions of the Instinct at the last event and the great hopes placed in that device. The Pre is a more truly competitive device than the Instinct, but it won’t be a real game changer for Sprint anymore than the Instinct was.
• Economic recovery – a large part of Sprint’s performance among business customers – especially in the Nextel segment – is dependent on economic recovery, and that may be some time in coming. 
• Brand rollout – Sprint is changing is brand messaging again (in contrast with Verizon, which has had a fairly consistent message for 7 years, and AT&T, which has been consistent for 3), and I’m still not convinced that the new branding makes any more sense than the old branding. Even if it works, it will take considerable time to kick in.

I don’t want to give the impression Sprint is simply sitting around waiting for things to happen – it is proactively working on its three key priorities and making progress in all three areas (though I’m most dubious about the brand, as I just mentioned). But these are all long-term initiatives with an uncertain payoff at the end, and in the meantime there is little Sprint is doing that will provide a short-term boost to postpaid gross adds. 

In summary

Sprint is undoubtedly in a better position than it was a year ago. It has solved many of the fundamental issues it faced then, and made improvements in other areas. But I remain concerned that they don’t have a long-term strategy that gives them a clear view of when they are likely to see positive postpaid net adds again. All the other things they’re doing are good, and will improve other metrics including margins and cash generation. But unless they can start growing again they will remain subscale compared with Verizon and AT&T – their two most significant competitors – and will have significant cost disadvantages flowing from that lack of scale and the fact that they’re running two separate networks. 

Over the next couple of years, if Sprint does start to present a more significant threat to the big two, they will respond aggressively, and I don’t think Sprint will be in a position to fight back. It has less cash to spend on advertising, it has less headroom to increase device subsidies or otherwise make its offerings more attractive, it will be operating on three network technologies which are becoming increasingly marginalized (iDEN, CDMA and WiMAX) when competitors are operating on LTE and gaining all the scale advantages that will offer. 

Having said all that, I’m genuinely excited about the Pre. From what little we saw of it, I was impressed that it will be a compelling device for people willing to put up with the perceived shortcomings of Sprint as a carrier, although the impact may be significantly hampered by whatever Apple and AT&T announce in early June. I also believe that if the 4G rollout is handled right it will be the one true differentiator that Sprint has for mainstream customers and could provide a good boost (no pun intended). And the management team at Sprint is smart, focused and hard working with a track record of executing on a clear strategy, so if anyone can do it, they can.

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There is news today that Sprint has made a massive leap forward in its customer care operation and has gone from being a real laggard in this area to being top dog in the US – at least on one key metric: wait time before reaching a human being (once through the IVR and into the call center queue). According to a survey from Pali Research (irritatingly, registration required for that link – but a good summary here):

We recently concluded our 6^th survey of wireless customer care response times and Sprint has leapt to the best performance of its peers from the worst in our first survey 2.5 years ago… Sprint’s survey results of 91% in Q3 2008 soundly beat its peers:  AT&T Wireless – 33%, T-Mobile – 43%, and Verizon – 85%. 

I think this is incredibly impressive – Sprint has hardly been a paragon of good performance in the wirelessarena lately, and has had one or two other major things to worry about recently too. But it made customer care a major focus area when Dan Hesse took over (see this earlier post) and the results are kicking in. This is one timely demonstration of the point that I made in my previous post on the topic of customer care at telcos, that fundamentals need to improve dramatically in this area. Kudos to Sprint for fixing this key element of customer service so quickly.

Having said that, this is just one metric. It doesn’t measure customer satisfaction, first call resolution, or the volume of calls to care in the first place (another area where Sprint was until recently also the laggard among its peers) – it only measures time to answer – admittedly, an important element but also an easy one to fix if enough resources and money are thrown at the problem. I’ll be watching with interest as other surveys and reports on the other elements of telco customer care are released in the coming months to see if Sprint’s efforts in those other areas have paid off too.

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I posted a while back about a dinner I had with some other analysts with Dan Hesse, the new CEO of Sprint. At the time, I said that I came away from that dinner with more confidence than I had had in a while about Sprint’s prospects.

Well, I’ve just come away from Sprint’s analyst event and it’s been a mixed bag. On the one hand, it’s always good to get a deeper dive into everything a company of Sprint’s size is working on – there’s always a lot more beneath the surface that you just can’t get into in one evening’s discussion over dinner, and some of that detail is reassuring and impressive. On the other hand, there were other things – some specific initiatives but also some themes and trends which emerged over the day and a half of the event – which were more worrying.

On the positive side:

• Sprint has three clear strategic priorities: fixing the customer experience, establishing a clear brand in the market, and focusing on profitability. This clarity of purpose and focus on fundamentals is a good thing, and the key will be to execute on it without adding a raft of additional initiatives and programs over the coming months. Sprint needs to get the basics right before it gets distracted again.
• Accountability is being pushed down throughout the organization, with four business units each having their own P&L, and customer satisfaction in particular being made a component of bonus structures for everyone except salespeople. This is a big and positive change from the previous administration.
• The iDEN network’s capacity problems have been fixed, partly because so many customers have left but partly although through targeted investment and a better approach to managing capacity. As such it is now performing at ‘best-ever levels’.

These are all important steps, and the key will be consistency in sticking with them.

But on the negative side:

• In many of the conversations over the past couple of days, I got the sense that Sprint is relying heavily on its WiMAX initiative (soon to be Clearwire) to fix many of its problems. It was a bullet point on so many of its slides. But it won’t make a meaningful contribution until late 2009 at the earliest, and even then the scale of that contribution is up in the air. It worries me that it seems to be something that Sprint is relying on so much.
• To a much smaller extent, Sprint used its forthcoming Samsung Instinct device as an indicator of several of its key initiatives. I believe they’re using the one device to represent a wider range of devices, but it was worrying how often that one particular device was used, and how few other groundbreaking devices Sprint has in the pipeline. It was used to illustrate Sprint’s commitments to  openness, innovation, usability, and touch screen devices in general, and it is Sprint’s main answer to the iPhone, but I believe it falls well short of the iPhone in a number of key ways. And that’s a little worrying too, because it suggests Sprint is banking on a single device too much, and also that it isn’t able accurately to gauge its position in the market.
• Sprint also appeared to be in denial about its competitiveness against Verizon and AT&T, its two major competitors in the business market. Its proposed differentiators – even in future – were things it has claimed to be doing for the past four or five years, with the key thrusts being WiMAX (again), convergence (which was once a differentiator but no longer is) and flexibility (the flip side of being sub-scale) – something there is some merit in, but probably not a key element of its differentiation strategy. I believe Sprint faces substantial competitive disadvantages against these two companies in particular and I don’t see any way for Sprint to overcome those in the short term.
• Because of all the trouble Sprint has faced, it has less money to spend on advertising and investment in its business, and it continues to suffer all the effects of running multiple networks. These problems are insurmountable in the short term (especially without a Nextel spinoff) and simply compound the other problems.
• The new “Now Network” tagline is nowhere near as easy to comprehend as Verizon’s or AT&T’s key messages, which are immediately understandable and compelling to any ordinary user. Even the next level of detail – around speed and usability for data services – doesn’t lend itself easily to a one-line pitch to consumers. And so even though Sprint is clearer about what it means than it was in the “most powerful network” days, I’m not sure its customers will be.
• In several of these areas, perceptions still lag reality. The iDEN network – both in terms of reliability and Sprint’s commitment to it – still suffers from negative perceptions which are arguably no longer in keeping with reality. But Sprint is also still suffering from the lack of clarity about its positioning in the market, despite its formidable network assets, customer base and heritage.

For all these reasons, even though I’m positive about Sprint’s potential to turn things around, I’m not yet convinced that it will actually be able to turn things around and in many ways the deck still seems stacked against it. But I think the leadership team and basic strategy are in place to give it a great chance at success if execution finally matches the strategy – something that has been sorely lacking at Sprint for the last several years.

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There are reports that Sprint is considering spinning off Nextel. Interestingly, one of the options being considered:

Sprint is said to be contemplating a couple of options for Nextel. The company has held preliminary talks with Nextel founder Morgan O’Brien, who now runs a company called Cyren Call Communications in McLean, Va., that is trying to create a nationwide wireless network for public-safety communications.

is very similar to a scenario I considered in a post a while back:

It would make a lot of sense at this point to cap investment in the Nextel network, build a robust replacement Direct Connect product on the CDMA side, and invest there instead. Then, in time, either shut the Nextel network down or sell the rump to a specialist public safety provider. What Sprint needs now more than anything is focus on the one hand and a single network, single brand and single device portfolio to drive some serious synergies and efficiencies on the other. Keeping the Nextel network alive indefinitely feels like an act of desperation at this point. [emphasis added]

Nextel is the bear on Sprint’s back right now, and unless it does something to get rid of it, it’s saddled with several big disadvantages in competing against Verizon, AT&T, T-Mobile and even some of the smaller players:

• having to maintain a combined portfolio that is either considerably larger than competitors’ – if it wants each brand’s portfolio to be competitive – or maintain a portfolio a similar size to competitor’s in total, but therefore be uncompetitive within each brand (it appears to be pursuing the latter strategy)
• maintaining a level of investment in networks considerably above that of others because it is maintaining two separate networks
• trying to compete while spending a smaller amount on advertising than competitors while attempting to boost (no pun intended) the visibility of two or more brands
• trying to maintain two rather different customer bases and differentiated messaging and branding for both sets of customers and potential customers.

All of this is on top of the problems the company is already dealing with, although most of those problems stem from the merger in one way or another. Although disentangling Nextel would be difficult and painful it may well be the right thing to do. As long as Sprint has these problems to deal with it’s hard to see how it can ever be truly competitive again.

At the same time, there are rumors about a possible renewed deal with Clearwire. Again, getting Nextel out of the way would allow Sprint to really focus its attentions on investing in the next generation of the core Sprint network, which is a big gamble in its own right.

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Following on from the Qwest-Verizon Wireless news, and the negative impact on Sprint, there are lots of rumors this week suggesting that Deutsche Telekom is considering buying Sprint:

Deutsche Telekom AG is weighing a bid to acquire Sprint Nextel Corp. that could catapult the German telecommunications giant’s wireless arm, T-Mobile USA, to the No. 1 position in the U.S., according to people familiar with the matter.

Well, yes, technically, it would put the combined entity in the number one position in terms of subscribers, but Deutsche Telekom would have to be absolutely bonkers to consider such a move. Sprint is already suffering from its inability to merge two incompatible networks (iDEN and CDMA) – DT would have to be a total glutton for punishment to add a third, also incompatible, GSM network to the mix. Of course, you could add in WiMAX and make it four…

The theory is that Sprint’s depressed share price makes this an attractive purchase, but even so it would be a huge nightmare to merge these companies together, and would require some really dramatic changes to even begin to make it work. I say this even though I’m still somewhat confident things can be turned around at Sprint in the long term. I think that there is potential for growth again in the next year or two, and the WiMAX rollout, though risky, might just pay off too.

I know Deutsche Telekom is hugely dependent on T-Mobile’s growth to offset the mess at home, but of course this move would also take that trend in the wrong direction, dragging down the company’s overall growth path without providing any obvious benefits. Any synergies would be outweighed by the amount of investment needed to reconcile the three different network operations. The timing is also odd, since T-Mobile has supposedly now completed its 3G buildout and is getting ready to launch 3G services in June. I just have to hope that this is one of those rumors cooked up by a journalist on a slow news day and that it passes just as quickly as it has come.

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Several news sources this week covered the formal disintegration of Sprint’s partnership with the cable companies, which had been marketed under the brand name Pivot. This news was a long time coming, and neither Sprint nor the cable companies had been investing in the service for some time.

In fact, it seemed as if none of the companies really ever invested anything significant in the venture beyond the initial outlay to set up the entity which ran it. Cable company call center representatives were not apparently paid commission on Pivot sales and thus had very little incentive to sell the service when they had plenty of other options to pursue with their customers. It also never really made it out of the initial test markets.

There clearly are people who want to watch TV on their handsets, and there are even people (myself included) who would like to be able to set their DVRs from their cellphones. But that doesn’t mean they want a service which revolves around those features. And they especially don’t want a service which feels like it is tied down to a particular feature set and a secondary relationship which they may or may not want to keep over the long term.

This is the same problem which doomed Mobile ESPN – people want ESPN content on their phones (the Sports Center audience numbers don’t lie, and they pretty much all have cellphones), but they first and foremost want great phone service, good prices, attractive devices, good customer service and so on. Then they want to be able to layer that other stuff on top, and add and remove it as necessary over time, whether for financial reasons or just because something better has come along.

Even though mobile services tied into quad plays from telcos have been more successful, they haven’t been hugely so, and it comes down to the same reason. People want to make an individual decision about mobile phones that is decoupled from the other decisions they make about communications and media services they subscribe to. The two-year contracts they’re locked into are quite enough restriction for most people, and they don’t want any more.

It appears the cable companies realize that, and perhaps always have. Although the logic of the partnership was sound at a high level – the cable companies have everything except wireless, and Sprint had only wireless, in a world which appears to be moving towards bundles – but that logic breaks down once you get into the details. People are buying bundles, but they’re buying bundles of home services and not typically bundles including mobile.

The cable companies, though, still feel they need a play in wireless, if not because of the bundling trend, then for two other reasons: other companies are offering mobile TV services, which may erode their share at the margins, and because they are experiencing the same slow-down in their core business that is driving the telcos in their bid for TV- and mobile-driven growth. They need wireless as a source of growth, even if not a source of higher ARPU from each individual customer.

As such, it appears they’re making some moves to get back into the wireless market via a more direct route. Having acquired AWS spectrum, some of them also acquired 700MHz spectrum in the recent auction.
There have been unofficial rumors that the cable companies may be planning to do a deal with Google, Sprint and Clearwire to build a national WiMAX network. And Comcast has apparently hired the former CTO of Telefonica O2 Europe to investigate options for the company’s wireless strategy.

There’s no telling at this point whether they will be successful this time around – joint ventures are notoriously bad at working out. But with the cable companies more in control of their own destinies they probably have a better chance with this than they did with Pivot.

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Just got back from dinner with Dan Hesse, Sprint CEO, at CTIA here in Vegas.

While these conversations are generally informal and more or less off the record, there were some insights he shared which I think I can safely pass on without breaching the spirit of the evening. My first question was what he had learned about what had gone wrong at Sprint which had led it to the predicament it’s in today.

His main answer was that it ultimately all comes down to the merger with Nextel. He made a reference here to the invasion of Iraq, which is worth thinking about more as an analogy, since he implied that the merger was both poorly planned and poorly executed. The main issues stemmed from the fact that the merger was ultimately billed as, and contracted as, a “merger of equals” because the market valuations of the two companies were similar. This created huge problems, both in terms of the price paid and in terms of the structures and policies which flowed from that decision.

Firstly, in terms of the price paid, this led to massive synergy requirements to provide a return on investment. These synergy targets (which I would characterise as negative, meaning they revolved around cutting costs, rather than positive, which would be true synergies, resulting in a whole that was greater than the sum of the parts) were overly ambitious and became the driving force for all the other targets at the company. The focus was therefore on massive cost-cutting, was very internal, and ignored external considerations, and especially considerations of customer care, churn and customer service, all of which suffered as a direct result.

The second problem was that the “merger of equals” narrative required an equitable distribution of various goodies after the merger concluded. This included seats on the board and in the senior management roles at the company, which were distributed equally between Sprint and Nextel. The split headquarters between Reston and Overland Park also resulted from this mentality. And it meant that no single unifying strategy led the company during that time, but rather it was constantly torn between the competing visions and philosophies of the people who had brought the two companies together.

From all this flowed the lack of focus on the important things, the over-focus on secondary considerations, and the mess Sprint is in today. Hesse is quickly changing all of this – one of his first moves was instituting greater accountability throughout the business (Gary Forsee had been the only person in the company with P&L responsibility before he left). And he has also made customer care, churn and other external metrics key to incentive structures and reporting throughout the business.

There is still a massive mountain to climb at Sprint, but Hesse certainly seems to have grasped the essential issues and made quick changes which should lead to the kind of turnaround that’s required. It remains to be seen whether the rest of the company can execute on his vision, but it certainly appears to be the right vision in many respects.

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Sprint held a call with industry analysts on Tuesday, during which it reiterated its commitment to its Nextel network, which is based on the iDEN technology and provides the Direct Connect push-to-talk service which Nextel is famous for. Sprint runs the Nextel network in parallel with the Sprint network, which uses CDMA, and has been losing subscribers for over a year.

As long as two years after the Sprint Nextel merger was announced, the company was saying that it planned to decommission the Nextel network, possibly as early as 2011 or 2012. For a couple of years after the merger completed, the company certainly acted as if it had made its last significant investment in the Nextel network, and the result was that churn rose steadily in its iDEN business. Network congestion drove blocked and dropped calls up, and customers quickly started to notice. The network effects associated with the relatively exclusive push-to-talk service magnified the results even further.

Around a year ago, Sprint’s management began to get to grips with the problem and invested heavily in the Nextel network again. They also began launching new handsets again after a hiatus of 18 months, as part of a bid to resurrect the Nextel network. But customer desertions have continued, and iDEN subscriber losses have dragged down the company’s performance as a whole even as CDMA subscribers appeared still to be growing.

One of the possible strategies which could have been adopted by new CEO Dan Hesse was to accelerate the demise of the Nextel network. This would be facilitated by the fact that Sprint is about to launch the CDMA version of its Direct Connect service, which is based on Qualcomm’s Q-Chat technology. The company claims that it has been able to replicate the Nextel push-to-talk experience on the Sprint EVDO Rev A network, and as such this should provide a good substitute for many customers.

However, Tuesday’s call made clear that Sprint is committed to the Nextel network for the long haul, and has no foreseeable plans to decommission it. Instead, it continues to invest in the network, and has just re-launched the Nextel application development team in support of that effort. It is hoping that it can reinvigorate performance on the Nextel side of the business in order to turn around overall performance.

There are good reasons for keeping the Nextel network alive. The company doesn’t want to instigate forced migrations from the Nextel network to the Sprint network, and public safety organisations rely on the iDEN network and latterly its interoperability with LMR services. But these reasons – though valid – mean that Sprint has to continue to invest in what by all appearances seems to be a rapidly declining user base of just over 17 million. And this at a time when growth on the CDMA side of its business appears to be flagging too. Morgan Stanley estimates that the company added just 3,000 net new customers to its CDMA network in the fourth quarter of 2007.

It would make a lot of sense at this point to cap investment in the Nextel network, build a robust replacement Direct Connect product on the CDMA side, and invest there instead. Then, in time, either shut the Nextel network down or sell the rump to a specialist public safety provider. What Sprint needs now more than anything is focus on the one hand and a single network, single brand and single device portfolio to drive some serious synergies and efficiencies on the other. Keeping the Nextel network alive indefinitely feels like an act of desperation at this point.

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In my post on the flat-rate wireless plans being launched in the US recently, I suggested that Sprint might take the route of:

charging $99 or slightly more for a plan that would include unlimited voice and messaging and/or data usage.

I didn’t explain this at the time (although I seem to have been right I have no insider information here and it was still just an educated guess), but my thinking here was that Sprint would want to undercut the others, but would also want to do it in such a way that it kept ARPU high while providing for its growing base of unlimited data customers (both personal and business users).

By throwing everything into the package Sprint is going after the power users on all networks. But it is also effectively capping ARPU at $99, including data, which means it’s closed off the only real avenue to future growth, which is data revenue. The plan includes:

unlimited voice, data, text, e-mail, Web-surfing, Sprint TV(SM), Sprint Music, GPS Navigation, Direct Connect(R) and Group Connect(R).

So almost every revenue-generating service Sprint has. For business users, there will still be the opportunity to sell additional productivity, horizontal and vertical applications, but it’s really maxed out for consumer users. Now, a $100 ARPU isn’t bad, and certainly a lot higher than Sprint’s current average, but who’s to say this is where the price will stay?

And since this was announced on the same day that Sprint suggested they will lose 1.2 million postpaid subscribers in the first quarter, it’s going to have to be a heck of a powerful shovel if Sprint’s going to dig its way out of that hole.

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