Sidecut Reports

Even though he’s busy managing day-to-day operations for the “old” Clearwire as he also works on integration issues for the “new” Clearwire and its planned nationwide WiMax network, Clearwire CEO Ben Wolff still found time to talk to Sidecut Reports for a mid-summer update this week. In this edited transcript of our phone interview, Wolff talks about what is tops on his priority list, including Clearwire’s coming launch of Mobile WiMax services in Portland, Ore., along with an ongoing process of educating Wall Street on how and why Clearwire’s new services will be different from traditional cable, broadband or wireless offerings.

Sidecut Reports: Can you give us an update on where Clearwire stands right now? Does Clearwire have any access yet to the new investment capital, and have any integration efforts started with Sprint?

Clearwire CEO Ben Wolff: We won’t get access to the new capital until the deal closes [expected in Q4 2008]. Until we’re through with the FCC and DOJ processes, we can’t coordinate activities. We can do some planning on what the company will look like after the closing.

Sidecut Reports: Where does that leave Clearwire for the rest of 2008?

Ben Wolff: We’ll continue building out the markets we were going to build out in 2008 — Portland, Ore., Atlanta, Las Vegas, and Grand Rapids, Mich. Sprint continues to do the same thing with the markets they were targeting [Baltimore, Chicago and Washington, D.C.]. The good thing is, they are different markets. What has become clear is that we and Sprint are building in a very similar architecture, in some cases using many of the same [infrastructure] vendors. So I don’t imagine there will be much complexity in integrating [after the deal closes].

Sidecut Reports: Will your new markets use Mobile WiMax?

Ben Wolff: Yes.

Sidecut Reports: What about your plans to upgrade your existing networks to Mobile WiMax? Is anything happening there yet?

Ben Wolff: Physically, nothing is happening yet. It’s certainly in the planning stages. Once we consolidate our spectrum with Sprint’s, that will give us enough spectrum depth to do a WiMax overlay [in Clearwire’s existing markets]. So we’ll have the ability to share infrastructure and run our legacy network side by side with a Mobile WiMax network. In Seattle, for instance, we are currently using all the spectrum currently available to us. With Sprint’s spectrum, it opens up the way for Mobile WiMax.

Sidecut Reports: What are your day to day responsibilities? It seems like there might be a split between running the “old” Clearwire and getting ready for the “new” Clearwire.

Ben Wolff: We need to continue to prove out the fact that this can be a profitable business, and that it can scale out. So I do pay close attention to operations and profits. I also spend a lot of time on the integration process — thinking about what the team will look like when we’re combined, getting all the things in place. We want to move toward Mobile WiMax and introduce the new Clearwire in one fell swoop.

Sidecut Reports: What about educating Wall Street analysts? How is that process going?

Ben Wolff: Education is important, especially in this financial climate. A lot of my job is to help Wall Street understand what is different — what the services are, what the revenue model is. It doesn’t fit into a neat convention or any one description.

Sidecut Reports: Is that a tough job?

Ben Wolff: Some analysts get it, and others just can’t get their heads around it. Some of the cable industry analysts want to compare it to residential broadband, to pigeonhole it. I think it’s a somewhat jaundiced view to say that if it doesn’t offer video, it’s going to be hard-pressed to get high enough ARPU. Then there are some wireless analysts who want to see only a national [coverage] footprint, all at once.

It’s getting some [analysts] out of their comfort level. For our new network, the overall cost structure [for infrastructure] is a lot different, and so is the idea that spectrum is what makes the [WiMax] world go around. That is an awful lot for people to try to get their arms around.

Sidecut Reports: Does the popularity of the iPhone and its 3G launch help or hurt your efforts?

Ben Wolff: I think it will help significantly in the long run. When Steve Jobs got on stage and showed the 3G iPhone downloading a National Geographic web page, they made a big deal about how it only took 21 seconds. We went out on our Portland network, using a small-screen device, and downloaded the same page in four seconds. As great as the iPhone is with its wonderful user interface and applications, it’s still dragged down by the speed of the network. It’s a great precursor, because it’s clear that customers want an Internet experience in their hand. What’s next is a network that can really support it.

Sidecut Reports: What is your take on the growing publicity around LTE, the 4G choice for AT&T and Verizon?

Ben Wolff: I want to make it clear that Clearwire is not in a technology holy war. That said, WiMax is here today and it’s our choice. But if you look at it closely, only the uplink [technology] of LTE is different from WiMax — 85 percent of the DNA is the same. I think the real [question] is what spectrum you are going to use to deploy technology. LTE is mainly a frequency division duplex (FDD) technology, and if you look globally, there’s not much FDD spectrum for use. What’s really available is time division duplex (TDD), which WiMax uses. In most of our U.S. markets we have about 150 MHz of spectrum, versus the 22 MHz of spectrum Verizon got in the 700 MHz auctions.

So technology is only half the equation. You’ve got to have a pipe that’s big enough. But really, the consumer doesn’t care if it’s LTE or WiMax. They just want a good experience at a good value.

Sidecut Reports: Speaking of value, can you talk at all about what WiMax pricing might look like?

Ben Wolff: We really can’t talk about pricing yet, but I will say that we will be able to offer a better value than 3G because we can make bits move at a better cost. What we really want is to give consumers a variety of different services — you’ll have residential broadband plans at different speeds and bandwidth, you’ll have day passes, and devices with [WiMax] chips embedded — so it’s hard to talk about what pricing is or will be.

Sidecut Reports: When will Clearwire offer those services?

Ben Wolff: We’re going to go with Portland first, and learn from there. We are looking at a soft launch before the end of the year, say early fourth quarter. We’ll see how that goes and then make a decision from a “grand opening” perspective and then make decisions about the other markets.

Need to know more about WiMax? Order our recently updated WiMax report, with full analysis of the “new” Clearwire deal and the motivations for investors Comcast, Google, Intel and others.

Without having seen any full report, it’s perhaps not fair to take a shot at the analysts at Frost & Sullivan for having what looks like some weak takes on the WiMax market. But there are certainly some questions folks should be asking about the press release put out Wednesday by F&S that all but predicts Mobile WiMax’s death before the technology’s even out of the cradle.

Since we have just completed a rather thorough look at the U.S. WiMax market ourselves, we are wondering why the F&S press release got such wide play across the techno-newsosphere without too much questioning along the way. (At least our good pal Loring Wirbel over at EE Times did find some time to wonder if there was another viewpoint on the matter, and kudos to dailywireless.org for poking some holes.) Actually, we’re not wondering why the release got so much play, and we’ll explain why later. But first some questions for Frost & Sullivan “Programme Manager” Luke Thomas, who is quoted at length in the release as being the guy ready to stick a knife in WiMax:

1. Why do you think it makes sense to compare WiMax to Wi-Fi as an operator choice for metro networks? When you say that “In terms of indoor wireless broadband, Wi-Fi fits well in this space and with the emergence of 802.11n, which includes MIMO, throughputs would be far better than what Mobile WiMAX can deliver,” are you proposing that service providers will install wireless access points in buildings all across metro areas, providing for broadband backhaul to each spot, and then guarantee service in the unlicensed bands that Wi-Fi operates in? And that this is a better metro delivery choice than licensed-spectrum WiMax?

2. In terms of handing off to cellular networks when WiMax coverage isn’t complete, you argue that “With respect to outdoor mobile broadband environments, users would expect Mobile WiMAX to seamlessly hand off to cellular networks in the absence of WiMAX reception. In reality this is not possible as Mobile WiMAX is not backward compatible with existing cellular technologies.” Hmm, then why is Sprint already talking about a combined WiMax/3G phone (due out Q4)?

3. When you say that “any operator looking at Mobile WiMAX has to consider the current environment in which 97% of laptops are shipped with Wi-Fi technology,” are you at all aware that Intel — WiMax’s biggest backer and supplier of many core chips to those same laptops — will essentially be giving away WiMax connectivity with its planned WiMax/Wi-Fi chipset due out later this year? What do you say to operators when those chips start shipping?

4. Do you really believe the LTE assertions in your press release, which state: “LTE is expected to be a fully ratified standard by the end of 2008 or beginning of 2009 with deployments slated to occur in late 2009 or first months of 2010 offering peak data rates of up to 170Mbps.” And can we bet a pint or two on whether or not there is an operational, commercial 170 Mbps LTE network running by 2010? (You can guess which side of the wager we might take.)

To be fair, the Frost & Sullivan press release did state that “the work carried out on Mobile WiMAX has the potential to spur new ventures, which could potentially lead Mobile WiMAX to merge with 3G LTE.” But this info was in the second paragraph, buried beneath the linkbait headline of “Mobile WiMAX on the Way Out?” and the lead-graf conclusion that “the technology is facing a range of challenges that are likely to make it unfeasible as a mobile ‘access’ technology.”

In this day of short tech staffs and the pressure on bloggers and reporters to blindly turn copy around, it’s no surprise that such a powerful take from a known entity like F&S would be quickly turned into a Analysts Predict WiMax Death post or report. While some of the challenges F&S assert are certainly hurdles WiMax needs to overcome, the incompleteness and oranges-to-apples comparisons noted by our questions above should have raised more red flags than it apparently has.

(We do have a request in to Frost & Sullivan to see any full WiMax reports they have written; more as we hear more from them. UPDATE: Well, we did get to read through the full “report” from Frost & Sullivan, and it’s not much more than the press release and only raises more questions than it answers — for instance, why does the report not talk about the May 7 “new” Clearwire deal but instead state as fact that Sprint has “terminated its partnership with Clearwire”? Sounds like recycled hash to me. In the meantime, if you would like a 37-page deep look at the state of the WiMax market in the U.S., with complete analysis of the “new” Clearwire deal (based on real interviews and not outdated opinion), please order our report, available for instant download.)

According to Don Clark of the Wall Street Journal, Monday’s big WiMax announcement is going to be about a “patent pool” spearheaded by Cisco, Intel, Samsung and others, aimed at reducing the amounts developers (especially device developers) might have to pay for WiMax-related patents.

For Clearwire, Sprint and other service providers, having a group with Cisco and Alcatel/Lucent in it can’t hurt, since both those companies can probably bring big patent portfolios to bear. But until the real heavyweights of the wireless world sign up — as Clark notes in his story, neither Qualcomm nor Motorola is part of Monday’s pool party — the patent pool is somewhat on the shallow side.

Why is a patent pool important to WiMax’s development? While the “openness” of the planned Clearwire WiMax network may be attractive to independent device developers, the patent problem could be a bigger deterrent. Sure, it sounds great to think that you could build a device, and as long as it meets WiMax standards, you can sell it at Best Buy and customers could instantly connect to the Clearwire network. Sounds good.

But since that device isn’t subsidized or supported by Clearwire, don’t expect them to help out a lot should Qualcomm or say, Verizon’s lawyers come calling, asking for a piece of your profits should your device suddenly turn successful. Ask Jeff Citron how those battles end up.

Of course, Sprint is not shy when it comes to filing patent lawsuits, so at least the WiMax pool party will have someone around who knows how this game is played.

UPDATE: Cisco and Intel hosted a very disjointed press conference/webcast, with some speakers live in studio, some on the phone and some on webcast. Questions had to be submitted to a moderator, which meant that execs on the conference could dodge questions without complaint. (I asked the panel about what would happen if a non-alliance member sued an alliance member, and whether the alliance would help fight the lawsuit, and got a non-answer answer. Press release on the alliance is here on the Cisco site.)

Need to know more about WiMax? Order our recently updated WiMax report, with full analysis of the “new” Clearwire deal and the motivations for investors Comcast, Google, Intel and others.

There was no shortage of headlines after the historic May 7 announcement of the joint venture and $3.2 billion in funding that formed the “new” Clearwire, and its plans for a nationwide WiMax network. But in the course of putting together our comprehensive research report on the topic, we uncovered several interesting factors you may not have heard about, in regards to both the big new investors — Google, Comcast, Intel and Time Warner Cable — as well as Clearwire’s top competitors, AT&T and Verizon.

In no particular order of importance, here’s our list:

1) The new Clearwire network will use the “mobile” version of WiMax.
There seems to be a lot of confusion around this point, mainly because the “old” Clearwire had been using a so-called “fixed” version of the wireless broadband technology in the networks it’s been building since 2004. The new networks (including those inherited from Sprint’s Xohm operations) will use equipment based on the newer, mobile standard, which supports cellular-like roaming. Clearwire had previously said it was upgrading its networks to Mobile WiMax anyway, so this is not a big change. But when the mobile gear goes live, it will offer a much different experience than previous WiMax deployments.

2) Despite its stated strategic direction toward the long-term evolution (LTE) 4G cellular technology, AT&T currently runs several commercial WiMax networks in the U.S., in Nevada, Alaska and other locations.
Right now there doesn’t seem to be too much to look into here, except for the fact that AT&T may be hedging its bets by keeping its toes wet in matters WiMax. This may be more important in the future, when WiMax standards at the 700 MHz level emerge.

3) There is more bandwidth currently available at WiMax’s main frequency than at the much-heralded 700 MHz band.
This point is a hard one to make, since most people talk about the characteristics of specific spectrum slices, like the ability of 700 MHz signals to penetrate building walls. But when it comes to being able to offer more bandwidth to more folks, the amount of available spectrum may matter more — and right now, there is about 198 MHz available at WiMax’s 2.5 GHz band, as opposed to 60 MHz that is being freed up at 700 MHz. So WiMax may be better able to scale to support more users.

4) WiMax mobile devices are already under development, and should be ready about the same time the Clearwire network launches.
There’s a bit of a trust factor involved here, but we are going on the research we did with Sprint, who said that they had more devices in their labs for testing than they had time to certify. And the debut of Nokia’s WiMax tablet at CTIA in April seems to show that device manufacturers are ahead of the curve here.

5) The new Clearwire will offer day-pass and casual-use billing, which is a departure from the past long-term contracts.
Because Clearwire doesn’t have to subsidize the costs of all the expected WiMax-enabled devices, it can offer ad hoc contracts without the worry or expense of paying for end-user equipment. While it may take a while for Wall Street to wrap its mind around “occasional ARPU,” the incremental adds should bolster, not detract from, a provider’s bottom line.

Sidecut Reports is pleased to announce the new, updated version of our WiMax report, which includes a comprehensive study of the “new” Clearwire WiMax deal and its $3.2 billion of investment from a group that includes Google, Comcast, Intel and Time Warner Cable.

Motivations behind the investments and the combination of WiMax assets from Sprint Nextel and Clearwire Corp. to form the “new” Clearwire are explored and explained in the revised edition of Sidecut’s previous in-depth look at the U.S. WiMax market, a report that all but predicted the inevitability of the deal announced May 7, 2008. In the new report readers will learn:

– The new opportunities and challenges for Clearwire’s national focus, which is a departure from previous plans

– The motivations for Google’s $500 million investment, which go beyond business goals for search and mobility to include public-policy goals

– Why the big telcos, AT&T and Verizon, may not see WiMax as a prime competitor (even as they step up marketing and lobbying efforts to make life harder for WiMax)

– Why cable providers like Comcast may be looking to WiMax to expand their user footprint beyond its current regulatory limits

The report also contains a WiMax technical and historical backgrounder, as well as an updated look at the WiMax business opportunities for enterprises, investors and entrepreneurs in markets including mobile Internet businesses, software development, and mobile device manufacturing. Titled “Game On, WiMax! Why the “new” Clearwire gives WiMax its best chance at success in the U.S. marketplace,” the new report is available for immediate download from our website.

Sidecut Reports, a new independent editorial research firm, all but predicted the blockbuster WiMax investment announcement in our original report, which came out a week before the historic agreement.

“Perhaps the new investors came to the same conclusions we did at the end of our initial report,” said Paul Kapustka, founder and editor of Sidecut Reports. “While there are significant challenges for starting any new network, the already-working nature of WiMax combined with the breadth of spectral and infrastructure assets of Sprint and Clearwire made investing in such a joint venture something close to an even-money bet.”

As we rework our recent WiMax report to include the details of last week’s game-changing announcement, it’s a good time to ask what comes next for the new Clearwire and its bigger, grander plans. After comparing the news to the research we did for our initial report, two changes stand out: First, the new Clearwire will get a bit more time to launch, given the complexities of the funding and the technical aspects of the new joint venture. But second, the company will have to meet more ambitious goals of nationwide coverage and roaming, features neither Sprint nor Clearwire had planned to offer in their early 4G WiMax iterations.

More after the jump, including some housekeeping details on when our revised WiMax report will be ready. (Hint: you can order the old one today, and get a new one free when it’s fully edited)

Read the rest of this entry »

It’s good to see that AT&T, as we predicted in our recent WiMax report, has responded quickly to 4G challengers by stepping up the hype on their own planned offerings. At an analyst conference Wednesday, AT&T said its 3G data network could reach download speeds of 20 Mbps by 2009, according to a report from AppleInsider.

The report quotes Ralph de la Vega, AT&T Wireless President and CEO, telling attendees at a Morgan Stanley communications conference that AT&T engineers already have a HSPA (High Speed Packet Access) 3G network running in their labs, at speeds of 7.2 megabits per second (which is about double of AT&T’s wireless network capability today). The report adds that “AT&T plans to transition to HSPA release 7 sometime in 2009, which will deliver even bigger speeds “exceeding 20 megabits per second,” according to the executive.”

While AppleInsider quotes de la Vega as saying the upgrades will require “few if any hardware modifications to the company’s infrastructure,” there has been widespread questioning of late whether or not network providers have sufficient backhaul to supply the wireless-data demands. Of course, since this is theoretical at this point de la Vega doesn’t actually have to deliver the bits today. But the hype, clearly, will arrive as scheduled.

With all the headline basics of the New Clearwire Deal fully digested, I took the time Thursday night to listen to the entire conference call from Wednesday morning, and came up with a bunch of interesting tidbits. A big one was CEO Ben Wolff’s declaration that the new Clearwire will not just go after consumers (which was both the Xohm and old Clearwire plan) but will also pursue SOHO, SMB and enterprise customers for its 4G wireless broadband service, using Sprint’s existing enterprise sales force to go after Fortune 1000 accounts.

This is either good or bad news for pure business-access WiMax player Towerstream, which now becomes a potential partner, competitor, or acquisition target. Since Towerstream CEO Jeff Thompson had hinted at the former during his interview for our recent WiMax report, that’s where I will guess first.

Other nuances buried in the call include:

– Most of the investors will actually contribute through some kind of LLC process whereby they can earn tax credits for the new Clearwire’s expected losses; only Google invested directly, which (and this is a guess) is what you can do when your stock is north of $500 per share. Guessing we will hear more about this when SEC document hounds get their teeth into the meat.

– Sprint will lease cell-tower space to the new Clearwire at a discounted rate “that is still above our cost,” according to Sprint CEO Dan Hesse. Since Sprint is a majority owner of the new Clearwire, isn’t that kind of like selling stuff to yourself? Talk about bottom-line gymnastics!

– Sprint’s Hesse said it that by the end of 2008, the company would have WiMax networks up that could reach 15 million potential customers; since the soft-launch markets of Chicago, Baltimore and Washington D.C. have a combined population of about 4 million, that means there’s work being done somewhere else (New York, Boston?) as well. Remember the old Clearwire had already planned 2008 launches in Portland, Ore., Las Vegas and Atlanta, so add those into the mix.

Clear(wire)ly, there’s a lot still to digest and we of course plan to incorporate all the details, as well as more analysis of winners, losers and opportunities in our ongoing coverage of the wireless broadband arena. If you are behind the knowledge-curve and want to get a jump-start on all things WiMax, just order our recent WiMax report, which covers everything leading up to Wednesday’s announcement, including a WiMax technology and history backgrounder, as well as deep-dive details on the economic advantages of WiMax and the potential new business opportunities. All past and new subscribers will of course receive any ongoing revised versions of the report, since a purchase at Sidecut isn’t just for one report but for a year of coverage.

While the continuing explorations by Dan and Om about potential backhaul hurdles for 4G wireless are required reading, I wonder if the lack of available front-end spectrum — that is, the spectrum used to deliver services to end-users — is going to be a bigger concern going forward, especially for those providers planning to use the recently auctioned 700 MHz spectrum.

One slide that stuck with me during my research for our recently released Sidecut Report on WiMax is one from Clearwire, copied below, that shows the relative spectrum width available for current 3G networks, 700 MHz networks, and WiMax networks, which right now in the U.S. is mainly the spectrum at 2.5 GHz (where Sprint and Clearwire have most of the licenses).

The question raised here seems to be whether or not the planned 700 MHz deployments will be able to scale to handle multiple numbers of users, and how much bandwidth each user will get. With 3G nets already running into capacity problems, the answer may not be as large as the pre-delivery hype may suggest.

For more information on WiMax, please purchase our inaugural Sidecut Report, titled Xohm Or Go Home: Why 2008 Is WiMax’s Breakout Year in the U.S. — Or Else! You can buy the report via direct download by clicking on the blue box to the right.