Sidecut Reports

Readers of our Sidecut Report on WiMax weren’t surprised to read in USA Today that the big telco likes WiMax, despite a strategic direction tilted in favor of Long Term Evolution (LTE) for its main 4G strategy.

In our report, we offered some details of AT&T’s current WiMax deployments, which include one in Alaska and one in Pahrump, Nev. In our post “Five Things You Didn’t Know About the Clearwire WiMax Deal,” we added more analysis, saying 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.”

In the USA Today story (a sidebar to a longer interview with CEO Randall Stephenson) new AT&T CTO John Donovan talks about how WiMax is appealing in rural deployments, especially where AT&T may not have copper assets. The USA Today story also says that WiMax is “cheap to install and maintain,” an idea that our readers know about (and we highlighted in a report excerpt about the WiMax TCO Advantage.)

If nothing else, Donovan’s affinity for WiMax should give cheer to WiMax gear manufacturers, who may sell their equipment side-by-side with all that LTE stuff Ma Bell plans to deploy. And maybe they can stop believing those LTE will kill WiMax stories whose sources are suspect.

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.

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.

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.