Sponsored By

New Clearwire a boost for WiMAX but faces challenges

The new WiMAX venture between Sprint Nextel, Clearwire and other players-including Intel, Google and three major cable operators-is big news for both WiMAX and the broader mobile broadband industry.

May 19, 2008

5 Min Read
New Clearwire a boost for WiMAX but faces challenges

By Mike Roberts

The new WiMAX venture between Sprint Nextel, Clearwire and other players-including Intel, Google and three major cable operators-is big news for both WiMAX and the broader mobile broadband industry.

For WiMAX the deal, which has been in the works for months, is a major shot in the arm at a time when news of delays in Sprint’s WiMAX rollout had the technology and its backers spending more time than they liked in defensive mode.

For the mobile broadband industry the fact that Sprint Nextel and Clearwire brought major cable operators on board-namely Comcast, Time Warner and Bright House-signals that three successful converged operators see WiMAX as the best route to expand from triple-play to quadruple-play services, with the fourth service being mobile broadband.

In addition, Sprint already had a WiMAX deal with Google, but the Internet giant has now significantly increased its commitment by pledging $500 million in funding to the new venture, in exchange for the right to develop and provide Internet applications and services for the new company including search, advertising and its Android mobile operating system.

Bringing Google on board is a huge boost for both the Sprint / Clearwire venture and WiMAX generally. For the venture, Google’s involvement makes it far more likely that its new WiMAX platform will come packaged with compelling new Internet applications and services to help it differentiate in a market where mobile broadband Internet is already taking off via alternative systems such as HSPA and EV-DO Revision A. For the WiMAX industry, landing a significant strategic and financial commitment from one of the top Internet players provides significant validation to the industry’s aspirations to differentiate WiMAX partly by using it as a platform for new open Internet business models, devices, applications and services.

But it’s not all good news, of course. First, at this stage the deal is a ‘proposed transaction’ scheduled to close in the fourth quarter, so there’s obviously a risk it will not go ahead as planned. Sceptics will note that Sprint and Clearwire had a previous venture that fell apart, but on a conference call announcing their new venture the operators stressed that the new venture is different in that all the participants have signed binding definitive agreements, so all that is required to close the deal are shareholder votes and regulatory approval. In contrast, the initial Sprint / Clearwire venture was much less advanced when it was announced, and required a significant amount of secondary negotiation on the terms of the deal, which is where it hit the rocks.

Even assuming that the new Clearwire venture goes ahead as planned, it will be a huge challenge to focus and manage a company made up of seven key partners with very different interests. For example, it would be easy to imagine that internal battles could lead to delays, and there is precedent for this given that the initial deal reportedly suffered many delays. But only time will tell on that one. Certainly the players involved are optimistic that they’ve resolved many of their differences in the initial agreement, and are hoping for smoother sailing going forward.

In addition, the new Sprint – Clearwire WiMAX venture may have more modest rollout plans than Sprint was planning for its Xohm service. Last year Sprint said that its WiMAX service would have a population coverage of 100 million by the end of 2008, and the new Clearwire venture now says it will have population coverage of 120-140 million by end-2010. Although this does not prove a more conservative rollout, it certainly does suggest it. This would also fit with recent news from Sprint that it would not be launching its Xohm WiMAX services in April as planned.

Although Sprint and Clearwire are putting most of the assets and/or funding into the new company, in return for 51 per cent and 27 per cent shares, respectively, the remaining 22 per cent of the company will go to five strategic investors contributing a total of $3.2 billion. The cable operators are investing significant amounts. Comcast is committing $1.05 billion, Time Warner Cable $550 million, and BrightHouse Networks $100 million. They would not be putting that sort of money on the table unless they expected the WiMAX venture to deliver real value in their ongoing battle against the telcos.

Intel is also a big investor, with a $1 billion commitment to the deal, although that is not a surprise. The vendor has already invested billions of dollars in WiMAX and is counting on the technology to help drive sales of everything from notebooks to new device form factors such as Ultra Mobile PCs and Mobile Internet Devices. Intel could simply not afford to see the world’s highest-profile WiMAX deployment-that of Sprint-suffer from a lack of funding, which is rumoured to be one of the reasons Sprint’s WiMAX deployment and launch has been delayed, in addition to the reasons it has cited publicly, which include delays in installing new backhaul, billing and other systems.

Why have the cable operators invested in WiMAX as opposed to one of the more established mobile broadband systems such as EV-DO or HSPA? The simple answer is because the opportunity was there-both Sprint and Clearwire were looking for funding for the WiMAX deployments, and the cable operators have long been interested in moving into mobility. What’s more, WiMAX fits well with cable operator strategy, given that it was designed to be able to support advanced mobile data and video services, as well as voice, meaning that cable operators will eventually be able to offer repacked versions of their existing content and services via WiMAX.

Also, it’s clear that mobile broadband operator Verizon Wireless, which has deployed EV-DO and EV-DO Revision A services, will not be opening its mobile network to cable operators anytime soon, given that its fixed-line affiliate Verizon competes fiercely against them for both voice and broadband subscribers. Verizon has also invested billions to deploy its FiOS fiber-to-the-home service in a bid to leapfrog the cable operators with a blazing-fast bundle of video, Internet and phone services. Similarly, AT&T is not a likely partner, given its longstanding competition with cable operators, its recent major investment in triple-play services via its U-verse FTTH deployment, and the rollout of HSPA services via its wireless unit.

Read more about:

Discussion
Get the latest news straight to your inbox.
Register for the Telecoms.com newsletter here.

You May Also Like