The Wall Street Journal is confidently predicting that a consortium of tech companies including Google, Comcast and Intel will contribute $3.2 billion in seed money to back a WiMax consortium that will combine the WiMax assets of Sprint and Clearwire. This long-rumored investment makes sense from multiple angles, and was the core feature of our recent report, titled “Xohm Or Go Home: Why 2008 Is WiMax’s Breakout Year in the U.S. — Or Else!”
While the entity will apparently take Clearwire’s name (thankfully shedding Sprint’s awful “Xohm” moniker), it will make use of Sprint and Clearwire’s large holdings of 2.5 GHz spectrum to deliver fast broadband to a wide market. The lure for the investors, as we said in the report, is clear:
The potential upside of a large WiMax-based network is theoretically huge, especially if the key rumored partners of Comcast and Time Warner, or Google and Best Buy sign up to help with seed money, technology and marketing. While the need and desire for more forms of broadband access is already marketable today, the promise of true mobile broadband — a combination of Wi-Fi-type speeds and cellular-style reach — could open up markets for devices and applications that are only starting to arrive in forms like Apple’s popular iPhone.
Why would cable companies and Google want to invest in a wireless network? Over at GigaOM my pal Om thinks they are dealing from a position of fear. But they could also be looking for new ways to expand that put them out of the reach of FCC chairman Kevin Martin, no friend of the cablecos. Again, from our report, some more thinking:
For Comcast and Time Warner, a Xohm investment could be a positive in several ways — on one hand, it could give the cable providers a true “quadruple play,” with the ability to add wireless access to their current “triple play” offerings of voice, video and data. And since cable companies are currently restricted by law from growing too big (regulations say no provider can have more than 30 percent of the overall U.S. market), a WiMax investment in a standalone provider could be another way to gain indirect market share.
Our quick take is that this is a deal that makes too much sense not to happen, even with the big numbers and uncertain future ahead. Winners and losers that we see include:
Clearwire – Craig McCaw plays another winning spectrum hand into a cash-out deal, while the folks at the company now have the capital and marketing might to see if this thing really can work.
Intel – By “doubling down” its own investment, the chip giant has brought a bunch of deep-pocketed friends to the table to help advance its WiMax plan.
Motorola — Partnering with Intel and Clearwire early on now assures Moto of a steady stream of WiMax infrastructure sales.
Samsung — At the very least, Samsung is now assured that its POs for all that WiMax gear being put into place in New York and Boston will be paid for.
Comcast – Brian Roberts puts his money and deal-making sense in the same place to help build another tool to attack the phone companies with.
AT&T and Verizon — If $3.2 billion is all it took, why couldn’t the telcos have bought out Clearwire and Sprint? We should start running a tab right now on the advertising, lobbying and other persuasional spending that the telcos will burn trying to convince the public, the FCC and Congress that WiMax is bunk and everyone should wait for LTE.
Sprint – You can say that caving in got them some money for their grand WiMax plan, but there is a hint of desperation in the air surrounding the surrender of the Xohm name to Clearwire.
Stay tuned to this channel for more news and analysis as details of the deal flow out (according to the Journal announcements are expected as soon as Wednesday morning). To wrap it up, we’ll offer the final conclusion from our report:
If WiMax delivers on service providers’ plans of being cheap, easy and pervasive, then there are big opportunities today for venture investors, businesses, application and device developers, as well as infrastructure and service-provider players, who still have time to get in ahead of the mass-market adoption part of the curve. How high up that curve will go is something for history to record. But any look back is likely to signal 2008 as the year WiMax started its climb in earnest.
UPDATE: Interesting reading from Google, with an official company blog post that seems to answer at least the basic questions about whether the new Clearwire network will be open and neutral.