Q&A: LightSquared CEO: Breaking open wireless
It's clear that there are fortunes to be made from America's insatiable appetite for wireless apps and devices. But breaking into the market as a wireless network and going up against the granddaddies of telecom -- AT&T and Verizon Wireless -- is a hugely expensive gamble that most are losing.
LightSquared hopes to succeed where others have failed. It could be New York financier Philip Falcone's major second act -- or costliest flop.
All eyes are on the Harbinger Capital-backed satellite venture's attempt to break open the U.S. wireless market by leasing its network to a wide array of customers from companies such as Apple and Best Buy.
Chief executive Sanjiv Ahuja dropped by The Washington Post recently and said the idea takes some "intestinal fortitude." But he's seen the model work in Europe and other parts of the world. Simply put, LightSquared thinks consumers don't really care who runs the network of radio waves that carry voice and data packets through the air. What they care about is new tablets and phones and apps, and LightSquared wants to cut out the middle guy. Forrester Research on Monday said it expects the mobile apps market to reach $38 billion by 2015.
But the company has lots of hurdles to overcome. Ahuja, now based at LightSquared's Reston headquarters, talked about the company's vision, opposition from global positioning companies and getting the money to make it all work.
Here's an edited transcript of our Q&A:
Q: Break down what you are trying to do with LightSquared and what it brings to consumers.
A: What we are doing is taking a wireless broadband pipe and making it available to a single person out of a garage or a large partner. We are breaking open the market so that every entrepreneur or retailer can get into the wireless business by building their own vertically integrated and focused networks.
Q: What does that mean? That a device like the iPad will be bought directly from Apple or Wal-Mart preloaded with a wireless card and ready to plug in?
A: Yes, we see a business where the broadband wireless pipe is like a utility, and anyone can lease it. Look, wireless has been created in the U.S., but the U.S. has fallen behind Japan and South Korea on innovation. And here, you pay $200 more a year (for wireless services) than in Europe.
Q: But you also pay more for devices, yes? And that's because device manufacturers like that carriers subsidize the costs of phones.
A: In the U.S. you also have a duopoly, and the penetration of wireless is lower than many countries in Europe. The biggest urban centers see dropped calls. We bring competition. The president's initiative is the right one; with 65 percent broadband penetration in households, something needs to be done, and LightSquared brings more competition. And we plan to bring 16,000 jobs a year for the next five years.
Q: How does this affect consumers?
A: Through our service, device manufacturers can go directly to the consumer and buy capacity embedded into their product. That means consumers are not stuck with multi-year contracts. I don't choose a network when I think about my mobile phone. I choose a product. That's how we are thinking about things differently. Our service is infrastructure, a utility.
Q: Who will be your customers?
A: Anyone from wireless carriers to device-makers to a whole assortment of businesses. In Europe, we've seen grocery stores sell wireless services. Our philosophy is that all devices should be agnostic, including game consoles, tablets and next-generation devices. Do you care if you are getting your gas from Exxon, Mobile or Shell? Of course not, and you shouldn't with wireless services, either.
Q: Do you have any of these many customers signed up yet?
A: Today we have several customers, but we aren't announcing. And we are in discussions with several more. Some are ones you would not expect -- from the largest companies to the small companies with just five people.
Q: Are you still on track to launch in the third quarter? Did the GPS concerns at the Federal Communications Commission slow things down?
A: We are on track. And we expect to reach over 100 million pops next year and 92 percent of the population by 2015. Today, our plan is to exceed that as well. Beyond that 92 percent is rural consumers, and we will be able to reach them as well.
Q: Will you be able to finance the rest of this vision? It's a big gamble for investors in this economic climate, no?
A: We are on track. We have $10 billion we intend to invest in this, and in the next several days, we may have further progress. But the difference is that every dollar goes into the network. We don't have to spend money on marketing or sales.
Q: What do you make of rumors that Clearwire will go wholesale? Does that change the picture?
A: I think that is very good. If imitation is the best form of flattery, then we are pleased because it shows this model will succeed in the U.S.
| March 1, 2011; 9:00 AM ET
Categories: Broadband, Consumers, Mobile
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