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Watch out AT&T, Sprint and Verizon: A whole host of super-fast wireless services could be coming down the pike.
LightSquared, a new 4G wireless network backed by private-equity firm Harbinger Capital Partners and to be built by Nokia Siemens, is set to roll out starting next year. By 2015, LightSquared intends to have its network covering 92% of the U.S. population, the company announced this week.
"4G" is a term used for the next generation of wireless networks, which promise to deliver broadband-like download speeds over the air that are up to 50 times faster than 3G (though actual speeds will be slower). Sprint (S, Fortune 500) has already begun to roll out its 4G network, and Verizon (VZ, Fortune 500) and AT&T (T, Fortune 500) are planning on unveiling 4G networks soon -- Verizon at the end of this year and AT&T in 2011.
A new player in the wireless market is a rarity these days -- there's more consolidation than new blood. Nokia Siemens said it will spend $7 billion building up LightSquared's network. That's a big gamble few companies can afford to make.
But that's not the only reason LightSquared's new network is significant: The company says it doesn't plan to sell directly to consumers. Instead, it will wholesale its network to retailers and service providers.
"LightSquared is hoping to accelerate the ability of other service providers to offer 4G services to consumers," said Dan Hays, a partner at consulting firm PRTM. "This opens doors for additional competitors and new innovation."
Here's how it might work: Under one hypothetical scenario, a big retail company like Wal-Mart (WMT, Fortune 500) could decide it wants to start selling mobile phones with "Wal-Mart Wireless" branding. So Wal-Mart would sign a deal with LightSquared to use its 4G network, but Wal-Mart would sell the service and the devices to its customers.
Another potential customer pool is existing, low-budget wireless providers like T-Mobile or MetroPCS (PCS), which have very limited networks of their own. These providers could buy bandwidth from LightSquared to offer 4G service without building out their own infrastructure. Leap Wireless' (LEAP) Cricket already does something similar with its 3G service.
But the real growth potential is in wiring up devices that aren't currently connected to the Internet. No one thought books needed to be broadband-enabled -- until Amazon (AMZN, Fortune 500) introduced the Kindle e-reader.
The first generation of Kindles ran on Sprint's network. (Kindle customers don't pay access fees for that bandwidth; Amazon foots the bill, reasoning that it will sell more e-books to customers who have ubiquitous access.) But Amazon later switched to AT&T, which now powers all the major e-readers, including Sony's (SNE) Reader and Barnes & Noble's (BKS, Fortune 500) Nook. Apple's (AAPL, Fortune 500) iPad also runs on AT>'s network. Adding competition to that market for "white-label" broadband access could help bring down prices for consumers.
It also opens up new product possibilities. Right now, the Big Three wireless network operators have been hesitant to license bandwidth to other companies for services that could cannibalize their own. For instance, General Motors' OnStar system uses Verizon's network, but Verizon offers similar roadside assistance and navigation systems. It's a tense balancing act.
LightSquared won't have those conflicts of interest, because it's not trying to sell directly to consumers. If it gets its network built, it will want to hawk bandwidth to anyone with the cash to buy it.
"LightSquared will be a disruptive force in the U.S. wireless landscape by democratizing wireless broadband services," LightSquared CEO Sanjiv Ahuja said in a prepared statement. "We're not only delivering exciting opportunities for manufacturers and retailers, but also real change for consumers."
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