Sprint Nextel continues to freefall, losing 25% of its already depleted value on a gloomy forecast for 2008; but one thing is clear ? if it proves unequal to the task of exploiting the exceptionally valuable 2.5GHz spectrum it holds, an increasingly united group of interests will ensure the frequencies are not left to rot. It seems more and more likely that, with or without Sprint, Clearwire will be at the hub of the effort.
Once the 700MHz auction is completed next month, it will be clear which of the would-be disruptive players in US telecoms will still be short of spectrum. If Google is left out in the cold, it will doubtless intensify its existing alliance to provide the applications portal for Sprint?s Xohm WiMAX service, looking to push its open access objectives via that network. It is now also starting to work with Clearwire, another indication of the logic of Sprint and Clearwire bringing their previously failed alliance back to life. This could result in a system where the hefty spectrum holdings of Sprint and Clearwire are pooled, operational and build-out costs shared, software platform and advertising mechanisms are provided by Google, and financing comes from Intel alongside possible investments from Motorola, Samsung, and SKT. Such a structure would have a genuine shot at offering a service that could steal some customers from Verizon and AT&T.
Clearwire, as its new Google deal shows, is more than happy to play ball with the big names and take the role of power broker, while at the same time allowing its network and business to be used as a vehicle for the political and commercial ambitions of Intel, Google and potentially Microsoft. Sprint Nextel has a more complex situation to handle as most of its problems come from realigning and reviving its current business. This makes many of its shareholders hostile to Xohm, as it is an avoidable drain on capex funds and, many believe, a distraction from the main task at hand. Few would be entirely happy to let the valuable spectrum holdings go altogether, unless there are sufficient disappointed and deep pocketed players after the 700MHz sale to create a new rush of interest, and inflation, around 2.5GHz. In that case selling the licenses could generate a valuable cash injection for Sprint while ridding it of a cost burden ? though, of course, it would also rob it of the asset with the greatest potential to give the cellco a future platform. Without this asset, Sprint looks likely to be consigned to being an acquisition target or sliding down the rankings to become a niche operator up against the two giants.
New CEO Dan Hesse had a baptism of fire last week when the carrier reported worse than expected subscriber defections and issued a downbeat projection for the year. Hesse is trying to establish his credentials in operational efficiency and has put further detail behind his streamlining plan. Initially, there will be about 4,000 job cuts in the first half of 2008, as well as reductions in outside contractors and the closing of about 8% of its retail stores. Hesse says these actions will save $700m-$800m a year but this was not enough to stop Sprint shares falling by $2.87 to $8.70 last Friday. This was largely because, in the fourth quarter, Sprint lost a net of 683,000 postpaid subscribers and 202,000 prepaid customers: far worse than Wall Street had expected. Sprint stock is down 65% since June 2007 and it is starting to enter takeover target territory, with private equity firms, one of the major cablecos (most likely Comcast, despite its own business pressures), or an international player like SKT being potential candidates.
Clearwire has been making cuts of its own, though it insisted that these were not layoffs but "redeployment of resources?, according to Mark Fanning, vice president of people development. Fanning said that the company is eliminating some positions because it has achieved efficiencies in established markets, but overall is still hiring to support growth into new markets. An employee who asked not to be named said 130 people would be axed, but Fanning said it would be "well, well south" of that figure, and the final total will be known in a few weeks? time. Clearwire has about 200 job vacancies and employs about 2,000, up from 1,075 18 months ago.
The streamlining, combined with the resignation from the Clearwire board of Intel Capital president Arvind Sodhani last month, are fuelling speculation that Clearwire may also be getting ready for a possible acquisition. This despite recent statements by founder Craig McCaw saying that he would not look for the company to be sold for several years.
The Clearwire-Google deal:
The Clearwire deal with Google is not as far reaching as the search giant?s alliance with Sprint, under which the two companies will co-develop the entire user experience and portal using the Android open platform and other technologies. But it still indicates how a close-knit set of companies with an interest in alternative telecoms models is forming around both 2.5GHz spectrum holders in the US, with Google in a pivotal position. Clearwire will promote Google applications such as Gmail and search to its
Clearwire said it will begin migrating its current customers to Gmail and Google Calendar in the first half of 2008, and offer its customers access to Google Talk in the same timeframe. "We will migrate our customers who currently have Clearwire.net email accounts to Gmail and give them access to Google's communications applications via the web," said Scott Richardson, Clearwire's chief strategy officer. He also said the start-up will use Google's AdSense for Search in future portal applications.
"Google's goal is to encourage more networks because the more networks there are, the more competition there is and the lower the price of access," Tim Farrar, president of Telecom Media and Finance Associates, told Red Herring. "That means more data will be transmitted and more advertising opportunities for Google." By contrast, Yahoo is working more closely with traditional carriers and steering clear of new operators
I disagree with your assumptions and conclusions.
1. Google's motivation. Google's first goal is to promote a network-centric/ASP model to compete against Microsoft. All the noise about its participation in the UHF auction is about forcing open-device and open-application requirements in wireless. Once done Google will sell its application model to every wireless operator that will listen including Verizon and AT&T.
2. Intel's motivation. Intel will sell WiMax technology to every carrier, microwave, UHF or anyone willing to adopt it. For Intel the game is volume and they are the "arms merchants" of the tech industry and will sell to all sides simultaneously.
3. Clearwire has spectrum footprint in only 30% of the U.S. and while they may be the "idea hub" of microwave, they are too small and too insignificant to either compete against any nationwide carrier or to transform the industry. To Intel, Clearwire is a WiMax testbed.
4. To propagate the misguided rumor that Intel Capital's Arvind Sodhani resignation from Clearwire's board was due to an acquisition is unabashed Clearwire pump. This rumor conveniently ignores the reality that Arvind's resignation allows Intel to make investments in a UHF bidder that could compete with Clearwire, and that drawing down Intel's board representation to one director also enables them to sell half their Clearwire investment.
5. With respect to the MDS licenses this spectrum has been rotting for years even though it has been in the hands of Sprint, before them WorldCom, before them the failed wireless cable operators, all who lost billions of dollars in the attempt. IEEE 802.16 with its new WiMax moniker is a great idea but its 8-10 years too late for the U.S. market. MDS licensees never built-out fixed wireless nationwide and now they want to go from nothing to being a leader in nationwide mobile broadband services. However, the top PCS carriers already have a lead in data services and now at least one will be armed with the most desirable mobile friendly spectrum. Further, that operator can use whatever technology they desire, including WiMax. No matter what technology the UHF carrier uses they will cream-skim the high value customers throughout the US leaving subsequent players with low margin business.
The entities most likely to win are Intel, Google and a UHF carrier. Sprint's best hope may be to package up the entire enterprise to an offshore buyer arbitraging currency strengths. Clearwire is barely a footnote in MDS history.
This journalist's review of Clearwire's WiMax, pre-WiMax isn't particularly favorable. She reports actual throughput of 386kbps/105kbps. Hardly impressive.
Just look at all your posts. Virtually every word is "will", "should", "supposed to". What is visibly lacking is the word "is".
You can see from publicly available information that existing EVDO technology already delivers 1.5Mbps to mobile users and is already available in most major markets in the US.
Then you make up some fictitious monthly cost of "40/month for combined in-building and mobile broadband that has never been built. Clearwire's mobile service is $67/month as stated in the article.
If you understood how sectorized cells are done you'd know that WiMax is a Point-To-Multipoint shared medium and will experience degradation with loading.
Ironic you're such a WiMax supporter execpt when it comes to the WiMax Forum's UHF profile announcement. When a Verizon or AT&T wins the nationwide license wouldnt' be surprised to see a lot of resources applied to that project, not that the UHF operator needs it, they can simply take the best of WiMax and run with it.
Mega, this video blows your theory that you can't offer Wimax in a small portion of a city because that's exactly what they did in Chicago last fall in a test run.
The sustainable advantage is that the UHF license holders have the superior spectrum for mobility and no one else does.
The UHF holders will both qualities essential to success and that is "first to market" and "first to scale".
The comparison underscores the difference between the economics of UHF versus microwave how quickly the applied capital can produce revenue for metropolitan area mobility. Lets ignore fixed WiMax for the discussion because virtually all the vendor/investor hype is for mobile WiMax.
Consider metropolitan area mobile services using 2.5GHz microwave in a market such as the greater Boston area. Suppose for the sake of example that the area covers 1,256 sq. miles represented by a circle with radius 20 miles.
In a geography such as Boston microwave cells will be kept fairly small due to the dense New England foliage during the summer months, lets say a cell with radius 3 miles. Each cell can serve an area of roughly 28 miles. Therefore the carrier will use approximately 44 cells to cover the targeted area. Each cell requires a tower, a lease, high-speed backhaul and time & labor to build them all and all need to be operational before the carrier can deliver mobility to the targeted area, and hence "launch the service". Microwave carriers are essentially required to overbuild and hope they get enough customers to recover that CAPEX investment.
Now for the UHF the scenario is quite different. You are probably aware local television broadcasters using UHF spectrum can serve an equivalent geographic area from a single tower. This is probably not how UHF operators will deploy, but the benefit of a long range signal (ie; 40 miles) applies. Conceivably a UHF carrier could setup a single site, possibly on an existing television tower, and start generating revenue with a small number of customers. As demand grows, they'd quickly saturate their total bit capacity and would have to partition the Boston area and add cells. However, they'd be spending to gain incremental revenue, not to produce the first dollar. This strategy allows UHF operators to potentially cream-skim the high-value customer in many markets quickly.
While the example is overly simplistic the argument holds, and interestingly the ratio of few cells to many is the same argument WiMax supporters use to describe why WiMax is superior to mesh Wi-Fi in delivering community-wide Internet access - even though in the Wi-Fi case its RF power constraints that makes the Wi-Fi cells small.
You should familiarze yourself with the UHF blocks being auctioned right now. One block is aimed specifically at broadcast multimedia and since its UHF with high RF power it has the propagation characteristics of HDTV.
Also familiarize yourself with MediaFlow, QCOM's technolgy for delivering wireless multimedia.