Clearwire’s Spectrum: The Crown Jewels

Way back when — oh say earlier this spring — there was no shortage of folks willing to toll the final bell on Clearwire’s market chances. Most of these predictive ramblings had little to do with actual market launches or marketing of the company’s WiMAX services, but instead focused on the cash Clearwire had on hand at its creation-merger closing — $3.2 billion — and speculated whether that would be enough to get Clearwire across the finish line. Now it seems like Clearwire might have a fairly bankable asset — its spectrum, which it is now rumored to be of great interest to T-Mobile on a rental basis. Such a fee might produce a nice chunk of change that could go a long way toward meeting Clearwire’s own capital needs.

Here at Sidecut Reports we always thought the woe-is-Clearwire views were short-sighted, and thought such opinions ignored the company’s biggest asset, its huge chunk of wireless spectrum in the 2.5 GHz range. This spectrum has an interesting history — some was initially owned by Worldcom, which was then obtained by Nextel and then by Sprint through various mergers and deals — but it is now all under Clearwire’s purview, with total DEPTH of anywhere between 100 MHz and 150 MHz in most major U.S. markets.

Why is the depth important? When it comes to wireless services, the depth of spectrum that you have dictates how wide a pipe you can offer customers — with more spectrum DEPTH you can have faster speeds, more customers, etc. Right now your iPhone 3G experience in many U.S. markets stinks in part because AT&T doesn’t have a lot of spectrum depth at the frequencies it is using, so in a simple sense the channels and towers get clogged up. Even the company’s spectrum holdings at 850 MHz, which it is touting as a “high quality” savior for 3G chokepoints, only total between 25 MHz and 50 MHz of depth in major markets, according to AT&T senior vice president Kris Rinne, who confirmed those totals in an interview last week. While that might be enough to let a few more iPhone calls go through, compared to Clearwire’s holdings it’s pretty thin gruel.

At the 700 MHz range, where AT&T and Verizon plan to deploy Long Term Evolution, the two big operators only have spectrum depth holdings of around 20 to 25 MHz each. As we’ve said before, this somewhat narrow depth of spectrum will initially mean LTE speeds far below the theoretical peak numbers that get tossed around in meaningless test situations.

Clearwire, on the other hand, has so much spectrum depth that it can deploy WiMAX today in big, thick channels while reserving enough spectrum depth to later deploy LTE if that makes sense, or perhaps now make some dough renting the spectrum to other players like T-Mobile. While spectrum alone won’t make WiMAX or Clearwire a successful business, we noted long ago that by itself the spectrum of the merged Clearwire-Sprint entity made the combination an even-money bet at worst. Now as other operators scramble to satisfy the growing need for mobile bandwidth, suddenly Craig McCaw’s latest spectrum play looks like a winning bet.

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