Sidecut Reports

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.

There’s a pretty funny picture in today’s TechCrunch post about the explosive potential of the proposed Comcast-Sprint WiMax deal, but the analysis from Erick Schonfeld does’t really make the dynamite go boom. (Of course, any post that starts out by saying “WiMax is going nowhere fast” is probably not going to be long on thorough analysis; usually we see more-balanced stuff from Erick.)

If you’ve read any posts here you’re aware that I am working on a long report on WiMax deployments in the U.S. — have delayed its release a bit while this whole Xohm thing shakes out. But in the course of lots of interviews and general research, it’s clear to me that WiMax isn’t going nowhere, but instead is more likely to emerge for real this year, starting with the Xohm launches in Chicago, Baltimore and D.C., as well as other cities before the end of 2008. One source says there are already antennas and base stations being put up in places like New York and Boston; the real question is whether Sprint can fully fund the launch on its own, or whether it needs some friends (like Comcast or Intel) to help.

While there are certainly questions to be raised about WiMax, a quick rip job shouldn’t pass for analysis. It almost seems like Erick wants to cut WiMax some slack — he calls it promising and “early days,” which of course it is — but then he goes back to swipes, citing some statistics about a lot of money being spent with not much to show. But it seems to make sense that anyone launching a new network would spend a lot of money on towers, infrastructure, etc., well before the launch. So why dog Sprint for spending $577 million last year on capex and opex? If they hadn’t, wouldn’t they be even farther behind?

Erick’s last two points also fail to really explain the situation: When he claims that “WiMax is more an alternative to fixed broadband Internet access than it is to mobile phone service,” he is correct but not necessarily accurate — WiMax isn’t meant to be a cell-voice competitor, so why compare apples and oranges? Since we don’t know all the details (or if the deal is even real), it’s still a guess as to why Comcast might be interested. Maybe a video-device deal, like Amazon’s Kindle? But since WiMax is more about mobile data than voice (though VoIP should do well if WiMax works as advertised), saying cable shouldn’t be interested because it’s not cellular seems a weak argument. An alternative interest may be the “enemy of my enemy is my friend” idea — since cable companies can only get so big, maybe funding a WiMax play is a way to chip away at telco businesses in markets where Comcast has no presence.

As for Erick’s second point — “It no longer makes sense to try to own all the pipes because pipes are becoming a commodity” — I have to disagree wholeheartedly. Pipes may be a commodity, but they also throw off huge amounts of revenue, billions and billions that from any standpoint looks like a good business. Since WiMax (or other standards-based technologies) can benefit from Moore’s Law improvements and economies of scale, opex for WiMax nets should decrease over time — already in the past few years, CPE prices have come down from $500 to around $150, for example. Erick’s contention that the cable companies should let WiMax build on its own and then cut deals for distribution misses the idea that WiMax nets may be a good investment — does anyone see the need for bandwidth decreasing, ever? If a new pipe can get built, why not invest early when the return multiples are higher?

(If you want to receive an email when our WiMax report is ready, drop me a line; look for it soon after the Sprint announcements at CTIA next week.)

ADDENDUM: Our pal Andy Abramson said last year that cablecos are behind the curve when it comes to local wireless broadband (hat tip to Esme Vos for the link).