Sprint PCS: Winning the Wireless War? Professor: Dr. Keramati Alireza khoshkbarforoushha Ali hoseini dolatabadi Outline Case Goal SPRINT PCS History Wireless Industry Technology Competition Substitute Technologies Threats of new entrants Wireless Applications Case Goal It does not introduce a robust or innovative Business Model. It strives to draw difficult circumstances in witch Sprint PCS should survive and make money! SPRINT PCS History Sprint had been a major player in the U.S. telecommunications industry for over one hundred years. Vision: providing high-speed, always-on voice and data connectivity via wire-line or wireless, all from a single provider. Sprint PCS could attribute much of its success to the strength of its parent company, Sprint, with an impressive 95 percent brand awareness. SPRINT PCS History(cont.) In late 2001, Partnership with three major cable and TV companies to provide wireless personal communications service (PCS). 15 40 Sprint 15 TCI Comcast 30 Cox Cable SPRINT PCS History(cont.) Sprint PCS decided on CDMA as the basis for its infrastructure. CDMA is a digital protocol with voice and data transmission capabilities. It provided efficiency 10 to 12 times greater than analog technologies and twice that of other digital technologies. CDMA provided Sprint PCS a great competitive advantage. SPRINT PCS History(cont.) In just 18 months, the company built and launched a nationwide voice network serving 150 metropolitan markets. Revenues exploded, reaching $1.2 billion in only its second year of operation. Sprint PCS launched its Sprint PCS Wireless Web service allowing users to access e-mail and wireless-enabled Web pages from their phones. SPRINT PCS History(cont.) As of September 2001, The Sprint PCS network covered 360 metropolitan areas and 85 % of the U.S. population. The company’s total customer base had reached 11.82 million subscribers. Key Problem: Despite massive industry growth projections, adoption rates were low with only 10 percent of Sprint PCS customers using its wireless Internet capabilities. Opportunity? Wireless Industry In 2001, the wireless market for voice services was maturing. As wireless phone penetration approached saturation levels, companies should decide continue to focus on voice or diversify into data services. Technology By mid-2001, several wireless technologies were in existence: Cellular technology ◦ 1G Analog cellphone standards ◦ 2G Radio signals in 2G networks are digital ◦ 3G 3G technologies enable network operators to offer users a wider range services: wireless voice telephony, video calls, and broadband wireless data. Satellite technology Wireless LAN. COMPETITION Major U.S. Wireless Telecommunications Firms To be first in customer experience COMPETITION(cont.) Each U.S. wireless competitor faced a different migration path to 3G implementation For Sprint and Verizon, which used CDMA technology, the upgrade process to CDMA2000 1x was straightforward. For AT&T and Cingular, which used TDMA or GSM technology, the upgrade path to full-blown 3G was not as straightforward. SUBSTITUTE TECHNOLOGIES Two of the more prominent ones were wireless e- mail devices, such as: RIM BlackBerry ◦ An always-on two-way pager that let users send and receive e-mail. WLANs ◦ IEEE 802.11b standard, “Wi-Fi.” ◦ Short-distance wireless Internet access at a broadband speed of 11 Mbps. Opportunity/Threat ? Both focused on data transmission, but with (VoIP), they were poised to become serious competitors in the voice arena. THERATS OF NEW ENTRANTS Barriers to entry were rising as consolidation made size and scope critical at a time when capital was drying up. Since building a nationwide network costs in the neighborhood of $10 billion, this cost was not negligible. Competition was driving prices down, and the ARPU(Average Revenue Per User) based on voice services was falling. WIRELESS APPLICATIONS Wireless operators were left with but one choice find a “killer application” . mCommerce Applications ◦ payments, ◦ location-based marketing and directory services, ◦ off-line shopping, ◦ Gaming and gambling Telematics Applications ◦ convergence of telecommunications with the automobile ◦ Mobile services delivered via wireless technology to in- vehicle devices. Location-sensitive applications The Opportunity for Wireless Data In spite of all these applications, forecasts for the wireless data market remained questionable. Forecasts for wireless data services, once predicted to quickly reach tens of billions of dollars, had dropped. The most recent projections showed demand reaching less than $5 billion by 2004. SPRINT PCS APPROACH Sprint PCS had recently bid $280 million in an FCC auction, compared to Verizon’s $4 billion, just for the rights to New York City. In late 2001, the company was upgrading its network to CDMA2000 1x at an expected cost of about $1 billion. Now, Think hard! Which company would hold market power in the evolving wireless Internet landscape? What are the CSFs in the wireless industry? How would Sprint PCS respond to WLAN, satellite, not to mention other cellular competitors? What would be Sprint PCS’s competitive advantage? How quickly would data services reach mainstream adoption? Could Sprint PCS and its competitors generate positive ROIs on their planned 3G network upgrades?