Home >> More Business news >> This Article

New WiMax Players Could Emerge as Sprint, Clearwire Split

Published on:

Note -- this news article is more than a year old.


NEW YORK (Dow Jones) The early end to the partnership between Sprint Nextel and Clearwire opens the possibility of others getting involved with WiMax, a longer range version of WiFi seen as an attractive way of connecting consumers online.

Those who might pursue a WiMax partnership include Google, cable companies or satellite TV providers. Clearwire - which builds and operates the WiMax network and service - also could try to expand the business itself, and then there's the possibility that Sprint, after it finds a new chief executive, could seek a reconciliation.

"It's fair to say we are looking and exploring all of our potential strategic options," Clearwire Chief Executive Ben Wolff told analysts on a Friday conference call. "There's quite a lot of focus on this space now."

The attraction of WiMax isthe ability to provide an alternative road to the Internet, freeing a number of industries from the stranglehold placed on them by the telecommunications and cable companies. The potential to offer mobile phone service over WiMax is attractive to cable. For Clearwire, Kirkland, Wash., partnering with a household name gives it instant credibility and the means to acquire additional wireless spectrum.

But the cost of building out the network may serve as a detriment to some, and was likely a concern that Sprint, Reston, Va., factored in when ending its partnership.

Sprint's departure is a huge blow to Clearwire. Shares are down 25% to $13.46.

Google In Play?

Of all the possible alliances, the most intriguing is a potential deal with Google. The Internet giant recently unveiled its Android mobile phone operating system and the Open Handset Alliance in an effort to push its philosophy of an open network, which would fit well with WiMax wireless technology.

Google also plans to participate in the upcoming Federal Communications Commission auction for wireless spectrum, which could give it the necessary spectrum to build a national network, although it has little interest in building one.

Enter Clearwire, which could handle the deployment and run the service for Google. In return, it would get the backing of a high-profile company and nationwide reach. Industry observers say that the expanded reach is critical when launching a new service, and that a local market approach won't cut it.

"If you build a national product, you need a powerful brand, or be willing to work with multiple partners with powerful brands who can attract a large customer base," said Rory Altman, a partner at consulting firm Altman Vilandrie & Co.

Google couldn't immediately be reached for comment. Wolff, on the call, said the company doesn't comment on any potential partnerships.

Cable, Satellite In The Mix

Clearwire also has a partnership with DirecTV Group and EchoStar Communications in which the satellite companies will bundle its television service with Clearwire's WiMax connection, giving it a pipe into the home.

An independent Internet pipe into the home is critical for the satellite companies because their major bundling partner, the telecommunications companies, are building their own TV service.

"Without (another Internet connection), they risk economic foreclosure in the 40% of the country where the telcos build fiber, as the only two broadband pipes available in that portion of the country will be tied - potentially inextricably - to competing video offerings," Craig Moffett, an analyst at Sanford C. Bernstein & Co. LLC, said in a note.

The satellite companies could strengthen its relationship with Clearwire and help it acquire more spectrum in the FCC auction. It attempted to buy spectrum in the last major auction a year ago, but was quickly outbid.

Both EchoStar and DirecTV say that they haven't changed their partnership with Clearwire, and declined to comment beyond that.

Sprint backing away from Clearwire opens up the possibility that the cable companies could get involved. The cable companies could work with Clearwire, but the more likely path is hooking up with Sprint. Moffett, while acknowledging it's quite speculative, said the cable companies could use WiMax to as the "answer to the wireless question."

A deal isn't without complications. The existing relationship - a cellular joint venture called Pivot - has been a disappointment, and Sprint recently stopped the expansion of its service. But the two parties remain close.

"Cable, despite the evident difficulties in getting their voice-based venture with Sprint off the ground, remains allied with Sprint," Moffett said.

Time Warner Cable declined to comment. But on Wednesday, Chief Executive Glenn Britt told analysts the company was exploring different wireless technologies.

"There's an alphabet soup of this, but it's WiMax, 4G, et cetera, et cetera, and it's different flavors I don't think anybody in the whole world really understands exactly where the technology is going."

Comcast also declined to comment

Clearwire On Its Own

Clearwire could attempt to expand alone but would be relegated to a local player.

"Clearwire returns to more of a local market model," said Jonathan Schildkraut, an analyst at Jefferies & Co. "We're still seeing the early stages of that model coming together."

The company is deploying in smaller markets but still has few customers. In the third quarter, it added 49,000 subscribers to bring its base to 348,000. Because of the wireless spectrum it owns, it can only serve smaller markets.

Clearwire operates like a local wireless provider such as Leap Wireless International, building from market to market in a slow expansion.

Sprint, meanwhile, said it is on track for a soft launch of its Xohm WiMax service, considered a longer range version of WiFi, by the end of the year, with a commercial launch expected next year. Spokeswoman Leigh Horner declined to comment beyond those plans, only saying that the company would further review its deployment next year.

The best move may be a reconciliation. Sprint and Clearwire fit together well both in terms of their complementary wireless spectrum and their experience with the technology, and they will likely still work together down the line. Sprint would have given Clearwire a national presence and depth in spectrum, as well as access to Sprint's backhaul network infrastructure.

"We are continuing to discuss with Sprint on how to best collaborate on building a WiMax network," Clearwire's Wolff said. "I can't say if a deal will be reached."

He noted that all of the reasons that brought the two parties together still remain, but that the company has to move forward.

"At the end of the day, Sprint and Clearwire will figure out ways to work it out," Schildkraut said. "I do not think that Sprint is going away in the WiMax world."

-By Roger Cheng, Dow Jones Newswires; 201-938-2020; roger.cheng@dowjones.com

(Shira Ovide contributed to this story.)

(END) Dow Jones Newswires­

Sign up for our free email news alerts

Sample Copy


Tags: android  clearwire  leap wireless  sprint nextel  comcast  fcc  satellite  wimax,  nextel  ben  operating system  wifi  time warner