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Sprint and Clearwire have decided to jointly pursue a WiMAX- based mobile broadband Internet vision using the new/old name Clearwire. Ironically, the two tried this before — as did Sprint and three of its new cable investors, Comcast, Time Warner Cable and Bright House Networks in a relationship called Pivot — and the results were ugly.
This time Intel and Google have joined the cable guys in throwing US$3.2 billion into the new Clearwire pot. It’s expected to take until the fourth quarter of 2008 to sort out regulatory approvals for the merger; it should take at least that long to sort out the involved massive egos.
“Sprint’s prior attempts to forge a wireless-cable alliance have been disappointing at best,” said a Competitive Alert issued by New Paradigm Resources Group. “And to complicate things further, Sprint already attempted a WiMAX alliance with Clearwire that essentially fizzed out in November.”
All true, admitted Atish Gude, senior vice president of mobile broadband operations for Sprint’s XOHM business unit which will be swallowed into the new Clearwire, with Sprint owning 51 percent.
“We learned a lot from Pivot that enabled us to fix a lot of the issues with the Pivot relationship in the new relationship,” said Gude. “Cable companies didn’t have a lot of control; it was basically a sell-through joint product development. This new relationship gives them more control over pricing and go- to-market and product development and innovation.”
Cable likes control like an alcoholic likes vodka. Comcast is spending $1.055 billion, Time Warner $550 million and Bright House $100 million to assure some control this time. Cox Communications, the fourth Pivot member, deviated from the cable brotherhood and bid for 700 MHz spectrum during the recent FCC auction. It is not part of the new Clearwire.
Comcast’s big investment is a surprise since the company’s chairman-CEO Brian Roberts, during a 2007 fourth quarter and year-end earnings call, told investors that wireless was not a hot button in 2008. The MSO would continue to plow ahead with its SpectrumCo partnership with other cable companies who bid on AWS spectrum, but other than that “there’s really nothing new,” Roberts said in answer to a question. “It is important to stress that strategy has not changed and we’re studying what’s the best way to utilize that (AWS spectrum) if at all, but we’re not seeing any impact from the wireless business in the results that we reported today or in our plans for 2008.”
Roberts might not be expecting an impact but Gude sees things moving right along for the new Clearwire.
“We are going to afford the cable companies to have a wholesale relationship and develop products on WiMAX that they will ultimately bundle with their home offering,” he said. “They will develop a whole series of stuff and attach it to a home-and-away service between fixed line and wireless. The new Clearwire won’t have a wireline play.”
That doesn’t mean the new Clearwire won’t need wireline services for backhaul, which opens a door for Nortel, which was shut out when Sprint announced infrastructure partners Nokia, Samsung and Motorola. Nortel also has a side door through a VoIP deal it’s cut with Clearwire.
“We have some good ties with a lot of the players … whether it be Clearwire (with) a voice-over-IP win and offering on their WiMAX network. We have some strong ties with Comcast in voice-over-IP as well,” he said.
VoIP will be some part of the new Clearwire just as it was part of the old XOHM, Gude said and “cable will have access to voice through an extended relationship with Sprint and access to their 2G/3G network,” he said. “When we talk voice, we talk first fixed, because it was fixed on our road map, but then extending to mobile because the infrastructure we’re putting in automatically allows us to get to mobile.”
When that day comes, ironically, Sprint will be able to “develop an MVNO for WiMAX,” Gude said.
The role of silicon
All of that may be putting mobile phone before the laptop, though, because everything depends on silicon and so far WiMAX phones and laptops and PDAs are conspicuously unavailable at the local Best Buy. Silicon development could accelerate because Intel Capital has invested $1 billion into the new Clearwire and would like to make back some of that money on chipsets for devices that run on the WiMAX networks.
“Intel has made tremendous progress. We have those chips and laptops in our certification labs today,” said Gude. “There is a process to get them onto the shelves, but that process leads through the development, manufacturing and certification to get all these things to work on our networks.”
Voice won’t necessarily be a high priority for the new Clearwire because the new Clearwire will adopt the old XOHM’s business model that emphasizes, among other things, “Internet access not only for customers to go wherever they want on the Internet but also for application developers and the developer community to develop apps.”
Google, the staunchest of the staunch open Internet proponents, has tossed $500 million into the new Clearwire pot so one would expect to see Clearwire-inspired open Internet devices as a top priority.
All these expectations among the partners and the new Clearwire create several questions beyond the simple one of whether the parties will be able to work together this time.
Yes, Gude said, the new Clearwire has enough 2.5 GHz spectrum to build a viable nationwide network. No, the new Clearwire isn’t involved with any 700 MHz spectrum but would welcome new players in that spectrum because “it will expand the ecosystem.”
Clearwire’s two biggest wireless competitors — Verizon and AT&T — both invested heavily in 700 MHz spectrum but both committed to an LTE (long term evolution) path that WiMAX proponents believe puts them two years behind the WiMAX deployment curve. On the other hand, the WiMAX Forum is working to fold 700 MHz into its spectrum certification so somebody wants to use that air for WiMAX.
“I really believe they’re (Verizon and AT&T) going LTE; they’ve claimed it, but if they see the light like we have that this is not about technology, this is really about developing a new business model, anybody can change their mind,” Gude said.
And isn’t the new Clearwire, with its high-speed data and fixed VoIP a cable competitor?
“We live in a complicated world where some days you have partners who turn out to be competitors and competitors who turn out to be partners,” Gude said. “This is absolutely one of them.”
Which, in the end, led the analysts at New Paradigm Resources to conclude that money covers a huge swath of questions.
“To be sure,” the analysts intoned, “these cable MSOs may not have been thrilled with the results of the Pivot program. Nevertheless, they’re certainly willing to help prop up a new Sprint/Clearwire alliance with some very big money. And if they — along with Google and Intel — are convinced that WiMAX represents the future of content distribution, there is more than enough reason for Sprint and Clearwire to kiss and make up.”