WiMax is going nowhere fast, but that is not stopping a consortium of cable and tech companies from considering a plan to invest $3 billion more into a proposed bailout-through-merger of Sprint Nextel’s (S) WiMax business (known as Xohm) and Craig McCaw’s Clearwire (CLWR). The consortium that is reportedly being put together would include Comcast (CMCSA) ($1 billion), Intel ($1 billion), Time Warner Cable (TWC)($500 million), Bright House Networks and Google (GOOG) ($500 million).
This latest plan comes after Sprint Nextel’s (S) disastrous $30 billion write-down last quarter of its Nextel acquisition, and is an attempt to salvage something out of that train wreck. It also comes after Intel recently balked at putting up $2 billion itself. Intel (INTC) wants to sell WiMax chips and has already sunk $600 million into Clearwire (CLWR). But even Intel has its limits.
WiMax is a promising technology and these are early days. But even an extra $3 billion won’t be enough. Building out a nationwide WiMax network could cost as much as $8 billion to $12 billion. And there could be more technical hiccups. (An Australian WiMax provider is already giving up).
Clearwire, which is already operating its broadband wireless service in parts of the country, lost $727 million last year, on revenues of $151 million. So far, it has raised at least $2.75 billions dollars through private investors ($900 million in 2006), an IPO ($600 million), and a $1.25 billion line of credit. As for Xohm, it has only soft launched with employees in three cities. Nevertheless, last year it cost Sprint Nextel $577 million in capital expenditures and operating expenses.
I can see why Google might throw its hat into the ring here—anything to promote more broadband wireless networks. But Comcast and Time Warner Cable should stay away. The logic behind the investment seems to be that the cable companies could use the WiMax network to counter the moves by Verizon and AT&T into their turf (with TV service over phone lines). It is being suggested that the cable companies would be able to launch their own white-label mobile phone and high-speed Internet services over WiMax , or use it to distribute their TV content to computers and new digital devices.
Here’s where that logic breaks down:
1. WiMax is more an alternative to fixed broadband Internet access than it is to mobile phone service. Verizon and AT&T have a huge head start and customer lock-in when it comes to cell phone service. WiMax mobile phones would take decades to chip away at that even if they do offer fater data speeds. Today, Clearwire is only offering at-home phone service, not mobile. As for broadband Internet and home phone services, Comcast and Time Warner already compete effectively against the phone companies today with their alternative services over cable.
2. It no longer makes sense to try to own all the pipes because pipes are becoming a commodity. Yet pipes are an expensive commodity. If the idea is to create a new way to stream TV and movies to people, the cable companies no longer have to build out the infrastructure themselves to do that. It would be much cheaper to let the WiMax business prove itself to be viable on its own and cut deals for distribution.
The Aussie's built a chair with two legs and now complain that they can't sit on it. Garth Freeman is a frugal slowtard.
Re: Buzz Broadband
Public Statements Concerning WiMAX and Airspan by the CEO of Australian WISP, Buzz Broadband
This week, at a WiMAX conference in Thailand, the CEO Buzz Broadband of Australia railed at the audience that WiMAX was a “disaster”. CEO Garth Freeman made several disparaging remarks about the range of WiMAX systems and their ability to carry VoIP traffic.
Buzz Broadband deployed Airspan MicroMAXd, ProST, and EasyST equipment to around 200 users, the same equipment that is installed in many of the 100 or so other Airspan WiMAX deployments. In addition to broadband services, Buzz Broadband intended also to offer VoIP services to its subscribers. Mr. Freeman’s recent statements highlighted two complaints: the range of the solution, and the quality of service (QoS) capabilities for voice traffic.
With regard to range, although Airspan offers both micro-cell and macro-cell base station solutions, Buzz Broadband opted to go with the less-expensive micro-cell base stations in order to reduce cost. This was a well understood tradeoff of cost vs. range. In support of larger cell radii, particularly in support of indoor desktop CPE devices, Airspan offers the HiperMAX base station, which offers the best link budget in the industry for an 802.16d-2004 solution.
Regarding QoS for VoIP, MicroMAX certainly offers appropriate QoS for wire-line quality voice support, but, as an access technology, can only do so for the portion of the link between the user device and the base station. In the case of Buzz Broadband, we know that there were significant under-provisioning issues in the core network which connected the Airspan equipment to the Internet. Very early in the relationship, Airspan technical services determined that Buzz’ backhaul network was considerably under-dimensioned (again to save cost) and lacked sufficient QoS, and that these factors were the direct cause of VoIP quality issues in the network. Airspan even went so far as to offer to fund a third-party analysis to help Buzz understand these issues. Both Airspan’s help and third party assistance were refused by Mr. Freeman.
At Airspan, we pride ourselves on our customer service and excellent products. In the case of Mr. Freeman’s company Buzz Broadband, we exhausted all avenues to help this customer re-engineer their core network and resolve these service issues. In the end, with Mr. Freeman rejecting help from the outside, the technical and financial resources of Buzz Broadband were not sufficient to deploy a functioning network to the satisfaction of its customers. We regret the distress caused by Buzz’ poor network architecture decisions to the customers in need of Broadband Internet access and VoIP services.
It is unfortunate that Mr. Freeman felt the need to broadcast his difficulties in such a public fashion. WiMAX has proven to be enormously successful from a technical standpoint, and Buzz’ allegations, even when so easily dismissed, are a distraction to the WiMAX industry and ultimately a disservice to the millions of satisfied broadband wireless access consumers worldwide.
If you should have any questions regarding this or any other concern, please don’t hesitate to contact me at Airspan on 561 893-8643 or firstname.lastname@example.org.
Declan Byrne Chief Marketing Officer Airspan Networks, Inc.
As to the author's comments on where the alliance logic breaks down:
1. WiMAX is not a competitive alternative to incumbent cable/telco broadband Internet, rather it can be a useful means of connectivity in rural and undeveloped ares with no prior broadband offerings.
2. The logic for the alliance is more likely to breakdown in that cable companies want a useful mobile PCS offering to compliment their existing triple play video-broadband-VOIP services. Mobile WiMAX VOIP has never been deployed by any major commercial carrier. Why is it prudent to bet everything on an unproven technology when carrier-grade PCS technology is already widely available? Or, if the rumored alliance has to wait three years for it to develop, they'll drop behind LTE for delivering voice & high-speed data services.
The cable companies have a very viable and arguably prudent option of letting the broadband wireless players prove the usefulness of their networks then strike distribution deals with for best-in-class services.
<<WiMax is a promising technology and these are early days. But even an extra $3 billion won’t be enough. Building out a nationwide WiMax network could cost as much as $8 billion to $12 billion.>>
I don't know where you are getting your numbers, but you might want to check out the following:
<<Interestingly Sprint actually sees its WiMAX investment as less of an investment than it would make on other forms of network upgrades. Sprint says it will overlay its WiMAX network onto its 3G network at one tenth the cost of what it takes to build out its 3G network. I’m not sure capital expenses are Sprint’s issue, just spending money on networks (Nextel, WiMAX) that might have integration issues, is a bigger problem.>> http://gigaom.com/2007/04/12/sprints-own-activist-investor/
The man is obviously a fool. Needs to put down the crack pipe.
First the writedown was an excellent move from the standpoint of taxes and future capital moves. Only short term vulture stock holders were pissed. Longer term it was a great move. Second the WiMAX is the best Broadband platform from a technical standpoint, far superior to LTE. If Sprint can get partners to help fund it it will be fantastic for the company and stockholders. Disregard any of the ravings of Vonagedude/Cubiclehead or any of his other aliases as he continues to short from his mom's basement. JW