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.

It was sort of a perfect storm of WiMax information Monday, as an Intel Centrino2 briefing followed our personal interview with Clearwire CEO Ben Wolff, the latter for an update on the progress of the new Clearwire national WiMax network. While it will take a day or two for us to process all the info from our call with Ben Wolff (we are still not up to Centrino speed around here), there were some nuggets from both interactions that are worthwhile to note:

Intel’s WiMax silicon is still not available. As the company has stated before, on Monday it reiterated that its dual Wi-Fi/WiMax silicon for notebooks will not be available to notebook OEMs until sometime in the second half of 2008. While Intel PR folks did confirm that the company’s promised reference design of a WiMax PC Card is now available to device manufacturers, the board-level silicon gap means that there won’t be WiMax-enabled PCs ready to ship when the first WiMax networks come online in the U.S. this fall. Is this a major problem? Probably not, since there won’t be much in the way of WiMax networks available until later in 2009 anyway. But it’s not a positive development, either.

Clearwire and Sprint must still operate separately until the “new” Clearwire deal closes in Q4. This has always been a somewhat murky question, but Clearwire CEO Wolff cleared it up — Clearwire will not have access to any of the new investment capital and cannot coordinate ongoing activities with Sprint until after the deal passes DOJ, FCC and shareholder approval. That means that for 2008, the “old” Clearwire will be looking to launch Mobile WiMax in Portland, Ore., while Sprint will keep its Xohm name around until at least January, with a September launch in Baltimore and later launches in Chicago and Washington, D.C.

Sprint’s Xohm network is on schedule for September launch in Baltimore. Sprint Xohm guru Barry West was on stage at the Intel event Monday, and said the network will launch “between [September] 1st and the 30th,” and will have 150 cell sites offering “in-building coverage as well” in downtown Baltimore. “Despite what you’ve heard, WiMax is alive and well” and will launch in Baltimore, Chicago and Washington, D.C., West said.

Clearwire is already beta testing its Mobile WiMax network in Portland, Ore., and is pointing to a commercial “soft” launch by “early Q4.” “We’ve already started loading customers on the network in Portland,” said Wolff, who hopes to have a commercial “soft” launch by “early fourth quarter.” Clearwire will then take its learning experiences from Portland to its next scheduled launches, in Atlanta, Las Vegas and Grand Rapids, Mich. (ed. note: Better get that Vegas network ready by CES!) All Clearwire’s launches going forward will be Mobile WiMax, Wolff said. More on Clearwire from Ben Wolff in the next day or so! Promise!

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.

We now have an official “starting date” for round two of the net neutrality debate: Aug. 1, when the details of the FCC’s order against Comcast should be made public. News reports Thursday said that FCC chairman Kevin Martin is expected to announce on that date some form of penalties and punishment for the cable operator’s now-infamous blocking actions of peer-to-peer traffic on its broadband networks; but instead of putting a close to the matter, the FCC order is widely expected to just be the start of a fresh round of net neutrality gymnastics, which likely won’t reach a conclusion until after the November elections and into 2009, when the FCC will likely have a new cast of commissioners.

Though Martin said Friday he wouldn’t seek any fines against Comcast, the devil will be in the details of the order, especially the specifics about how Martin interprets how Comcast might have violated the FCC’s 2005 Internet policy principles order. The most immediate question after the order is released is whether or not Comcast will file a lawsuit against the FCC, challenging the agency’s jurisdiction over cable operators; as our analyst friends at Stifel, Nicolaus said in a note today, such legal actions may not be the best move for Comcast, since if the company was victorious in having the order revoked, it could spur Congress into taking more direct net neutrality action, passing legislation giving the FCC clear authority over cable operators.

There are also questions about how the order might affect operators of wireless networks, and how a new President and new Congress will deal with the issue going forward. To quote the conclusion of the Stifel, Nicolaus report today, no doubt penned in part by our good friend Blair Levin:

We see the real significance in how the order and the subsequent court decision sets the stage for how the new Congress and the new FCC may wish to address the wider network neutrality issue.

Sounds like a perfect time for a Sidecut Report on net neutrality, giving you all the background info on the issue as well as in-depth interviews with major players on both sides of the debate, along with analysis on how the topic will affect businesses, entrepreneurs and investors in entities that will be affected by new communications legislation or regulation. If you’d like an email notification when our report is ready, drop me a line at kaps at sidecutreports.com and I will ping you personally.

From the looks of it, the second round of the Net Neutrality debate is going to be a lot like the first: Lots of blather and not a lot of attention paid to facts, as warring factions try to tilt public perception in their favor. Surprising? Hardly, given the stakes of the game. Disappointing? Certainly, especially for those who were hoping that there could be more consensus-building discussions instead of the he-said/she-said arguing of the past, which hasn’t really served either side well.

Today’s editorial by Richard Bennett in the San Francisco Chronicle is a case in point: While Bennett, a self-proclaimed networking expert, makes valid points about the need for regulators to closely examine the market power of Google’s search advertising deals, his emotional one-offs on several items raise two red flags: Not only are some of them inaccurate, but their almost word-for-word mimicry of similar opinions voiced recently by the major telcos, AT&T and Verizon, shows there might be more to his argument than just the concerns of an average netizen.

In recent interviews for our upcoming Sidecut Report on Net Neutrality, I was reminded once again just how good the telcos are at playing the lobbying game by synchronizing their messaging. In separate interviews at the recent NXTcomm show, the top policy execs for both big telcos — AT&T’s Jim Cicconi and Verizon’s Tom Tauke — both stressed the ideas that A) the Net Neutrality debate was started by, and mostly run by, Google; and B) that privacy concerns, especially those related to online advertising, were a much bigger problem than net neutrality, which was already being solved anyway by business-to-business solutions. Clearly, I thought, these are the new marching orders for the telco side of the issue.

Both those ideas are embodied in Bennett’s essay, in which he accuses Google of a “political head-fake,” using net neutrality to distract regulators from the privacy concerns. I would posit that you could flip that coin on its head, and say that it’s the telcos who are raising a big stink about privacy in order to try to move net neutrality to a back burner. To me, they seem like two separate issues that should be resolved on their own merits. But neither am I naive! Welcome to Net Neutrality, Round Two.

While I still hope to interview Bennett for the upcoming report — it’s clear from his writing and public testimony that he knows more about networking than your average law professor — there are several points in his column that shouldn’t go unchallenged. The first is his claim that net neutrality is a topic that “Google thrust into the political spotlight two years ago.” The reality is that Google, if anything, was late to the game and supremely unorganized in its approach to net neutrality, not really getting its act together until it hired former MCI lobbyist Rick Whitt in early 2007. If anything, it was former AT&T CEO Ed Whitacre’s not on my pipes bromide that made net neutrality a front-page topic, more so than anything Google did or said.

Bennett also says Google gets a free pass from the tech press, and that despite its “squeaky-clean” image, Google also has relations with “Washington power brokers,” perhaps an attempt to sketch Google as some nefarious broker of back-room deals. I’m not sure where Bennett is reading his so-called “cheerleading” for Google — most everything I can find in searches on the topic are straightforward, balanced news accounts, with plently of growing cynicism about Google and its endeavors in things like Street View. My pal Om has been anything but a Google cheerleader, like others questioning how Google will square its open networking ideals with the exclusive partner deals that were part of its $500 million investment in WiMax provider Clearwire.

On the D.C. influencer side, all I can say is it wasn’t Google who convinced Congress to change its mind and grant immunity to telcos in their FISA-related lawsuits. According to AT&T’s Cicconi, he oversees a staff of some 700 people. Google’s Whitt, on the other hand, is one of only three Google people “on the Hill,” and he is still the only one with a focus on the FCC. So who exactly is to be feared in Washington?

You could keep picking Bennett’s essay apart — claiming Google had “largely abandoned” net neutrality earlier this year is just laughable — but at some point you just get tired of the game, and wish there was a better way. Fortunately, many of the other players on both sides seem to be eager to work together to find solutions that don’t require political endgames; today’s surprise agreement between Vonage and Comcast to work together on networking concerns is just another signal that maybe there is a better place for the debate, centered around what is reasonable network management, and how it can be achieved so that both sides feel their concerns have been considered, and become part of the implementation. Other interviews we’ve done with folks like Public Knowledge and Comcast reflected such ideas.

Given Bennett’s past calls for more technical expertise and less political interference in debates about matters Internet, it’s surprising to read that he now thinks that regulators, and not market players, should intervene. But it is pretty clear who agrees almost exactly with everything he says today.

“The carriers try to frame this as being between themselves and Google — I’m a veteran of MCI so I saw this in the ’90s,” said Whitt in our recent interview. “They came after MCI as the poster child of the CLEC side, and unfortunately, they did a pretty good job.”

Will the same game work again? That will be one of the questions we ask in our upcoming report, which unfortunately has been slowed a bit by my recent surgery. If you want an email update when it’s ready, drop me a line at kaps at sidecutreports.com and I will ping you when it’s done.

It was interesting to read last week that one of the things that convinced Comcast CEO Brian Roberts of WiMax’s viability was a demonstration of how well mobile WiMax can work, even at 50 mph.

In a report last week from Light Reading’s cable guy Jeff Baumgartner, Roberts (whose company poured just north of a billion bucks into the New Clearwire WiMax deal) said “he became a believer partly due to a Clearwire WiMax demo that served up video as he and his test group zipped down the road at 50 miles per hour.”

While we’re not sure where Roberts’ demo took place (guessing Portland, Ore.), we were similarly impressed by the Motorola-Intel mobile WiMax demo at CES way back in January. From our most recent WiMax report, here is a small snippet about the WiMax drive-by (which one of our guest editors said should have been the first part of the report, because he liked the tale so much). Remember, you can order the report and get the whole story via immediate download. But here’s the excerpt, anyway:

When it comes to Internet use, watching a streaming YouTube video clip is a pretty mundane thing these days. But when you add in a significant degree of difficulty — say, watching YouTube without interruption inside a sport-utility vehicle driving around Las Vegas at 35 mph — then you start to realize the power and potential of Mobile WiMax in a very simple and understandable way.

The aforementioned experience was facilitated this past January by Intel and Motorola, who earned no small bit of publicity at the CES show by equipping a small fleet of SUVs with internal Internet connectivity powered by Mobile WiMax. The completely un-canned demo — reporters riding in the vehicles were allowed to use the connectivity in any fashion they desired on a range of devices — showed a high degree of confidence from Motorola and Intel that even a small, hastily constructed Mobile WiMax network would perform sufficiently well.

The report goes on to describe what you might find if you drove one of those trucks about an hour away… to a small town where a big telco is quietly running a commercial WiMax network of its own… if you want the details, you know where to find ‘em.

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.”

Great post from Glenn Greenwald over the weekend, adding up the figures to find out that AT&T, Comcast and Verizon have spent $13 million on lobbying so far this year, partly to help Congress see its way clear to offering the providers amnesty from the FISA lawsuits they are facing.

It’s a longish post but there is good stuff at the bottom too, about prospective Republican presidential candidate John McCain’s ties to — surprise! — lobbyists from the telco arena. Guess which way McCain is voting on amnesty.

Some of the same thoughts had been forming in my head lately, but pal Andy Abramson puts it all out in makes-sense order, seeing a WiMax-enabled offering from Apple in the near future, perhaps as soon as next month’s Apple developers’ conference.

Seeing rumors floating around about an Apple tablet also makes me think of WiMax, since such a device would be perfect for a Kindle-like iTunes experience — bundling in the cost of connectivity would appeal to the simplicity of Apple consumer gear, and such contracts were talked about repeatedly in research we did for our initial WiMax report. All of this is guessing, but wouldn’t it make sense to use the higher speeds of WiMax to power an instant-on iTunes video experience?

Two factors (one which Andy mentions also) seem to point to more WiMax inside Apple: The increasingly close relationship between Apple and Intel, the latter of which wants to push WiMax everywhere and is talking loudly about “mobile Internet devices,” of which there is really only one right now — the Apple iPhone. Second is the Google connection, as in Google CEO Eric Schmidt, who sits on Apple’s board. Since his company just poured a half-billion into the Clearwire WiMax deal, Schmidt would no doubt be in favor of getting Apple to help popularize the technology.

If you want more background on why WiMax makes sense for mobile platforms, order our inaugural WiMax report, which covers all the technology basics. We are in the process of adding our analysis of the recent Clearwire deal, and promise to ship the revised version before Apple’s conference starts.
Anyone who orders now will get both versions for the same price.

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 »

While it’s good to see “mainstream” tech blogs like TechCrunch paying attention to the new Clearwire WiMax deal, you can’t help but wonder why the blogger following the story doesn’t do some basic research first. It’s great and fine to be objective and skeptical, but ignoring simple, easy to find facts makes it seem like the writer is only interested in material that supports his initial negative take. I guess it drives traffic and lets them run the funny picture over and over. But I don’t see how it helps readers to keep getting some obvious points wrong.

In the course of interviewing lots of folks in and around the WiMax world for our recent report on the state of WiMax deployment in the U.S., I found some real facts that seem to oppose the points in the most recent TechCrunch post.

– While I don’t think there is any question that Clearwire hasn’t been a raging success yet, do we really have anything to compare it to? Seems to me like all the wireless data options are businesses-in-the-making. And Clearwire has been very straightforward about its intentions to move to a mobile WiMax base, with PC cards for local mobility, and ad hoc billing plans. In questioning them (and Sprint) about mobility, both claimed that local, not national mobility, is a bigger market. Sure, that’s something they have to prove. But to ding Clearwire about its past implementations when talking about the future seems to be an apples to oranges thing.

– To say WiMax isn’t an international standard and hasn’t proven itself elsewhere seems wrong; the standard allows for use at different spectrums, and some manufacturers are working on software-switchable chips that would allow for economies of scale. And big announced deals in Taiwan, Pakistan, Russia and Brazil seem to suggest some interesting experiments at the very least. Saying WiMax “hasn’t proven itself elsewhere” is like saying an NFL draft pick is a bust even before he plays his first game.

At the risk of being labeled a WiMax fanboy, I do think there are many questions to be raised about the deal — the most valid one in the latest post is questioning Clearwire’s mindset as a mobile data company (they do seem deeply rooted in telco-type talk and strategies). But I’ve never believed that naysaying is a replacement for actual research. It’s one thing to be skeptical and have reasons why, it’s another just to do rip jobs that sound right but fall apart under closer examination. Research like our reports does take significant time and effort and that is why we are charging for our services. TechCrunch, of course, is free.