BROADBAND WIRELESS WINS ENDORSEMENT

After years of laying low, entrepreneur Craig McCaw has re-emerged in the wireless industry, bringing his stamp of legitimization — along with his hypertrophied reputation and wads of cash — to broadband wireless, a sector of telecom that has done nothing but languish since the telecom bust. But despite all the hype his announcement generated last week, McCaw's actual plans for his new venture, Clearwire, remain relatively vague.

Visibly discombobulated from a sinus infection, McCaw made a rare public appearance at the Wireless Communications Association conference in Washington, D.C., last week to deliver a somewhat cryptic keynote speech on the launch of his broadband wireless venture. Interspersed with colorful attacks on RBOCs and morbid depictions of the competitive marketplace, McCaw laid out plans to launch a wireless carrier with networks both home and abroad using point-to-multipoint technology developed by NextNet Wireless deployed over 2.5 GHz MDS, or multipoint distribution service, and ITFS, or instructional television fixed service, spectrum.

“We're going forward very slowly through the littered wasteland of bankrupt companies,” McCaw said. “As we're walking over the bodies of our brethren — all of whom have arrows in their backs — we're asking, ‘How can we avoid this?’”

But McCaw was short on details. Clearwire and Eagle River Investment, McCaw's holding company, ignored subsequent requests for interviews. The little information that McCaw and his companies have released, however, reveals that McCaw has been quietly collecting spectrum in the 2.5 GHz to 2.7 GHz range for the last couple of years, culminating with his purchase of Clearwire, which held a significant leasing agreement with ITFS spectrum holders. And he will use non-line-of-site OFDM gear from NextNet, a vendor McCaw acquired earlier this year. Clearwire plans to launch two markets in the U.S., one in Jacksonville, Fla. — replacing the company's current IP wireless system there — the other in St. Cloud, Minn. McCaw also is involved in several ventures in Mexico, Canada, Asia and Africa, all deploying NextNet equipment over MDS spectrum, though his exact relation to the company — either as an investor or vendor — is unknown. As for its roadmap, McCaw said Clearwire planned to expand in a number of other markets in the U.S. and internationally by the end of the year.

McCaw's critics, supporters, potential vendors and competitors all agree that his rejuvenation of Clearwire and the proposed launches will spur the industry forward.

“Don't underestimate Craig McCaw,” said Carlton O'Neal, vice president of marketing for Alvarion. “It makes sense. McCaw comes into this industry saying, ‘I have enough money and enough chutzpah to put all of it together and make it work.’ From a legitimacy standpoint, he could add a lot to this industry.”

But the industry was already surging on its own momentum, O'Neal said. Intel's commitments to tackle WiMAX the same way it committed to Wi-Fi will spur the industry far more than a new network from McCaw, he said, adding that while McCaw has been successful in most of his ventures, sometimes the Midas touch escapes him. “Craig McCaw was in XO, too,” O'Neal said. “He hasn't hit all home runs.”

XO Communications, which McCaw helped found, still owns a good deal of the country's licenses for local multipoint distribution service spectrum, but its business plan to deploy point-to-multipoint systems as a last-mile solution never panned out. While XO now plans to use that spectrum for Wi-Fi backhaul, most carriers have discarded the notion of using the high-frequency spectrum as an access medium.

McCaw, meanwhile, is moving far lower in the spectrum charts for his new venture, though no one outside his organization knows exactly how much spectrum McCaw owns or has access to at home or abroad. But judging from the scope of the rollout Clearwire has hinted at, it could be on par with the two major MDS license-holders in the U.S., Sprint and Nextel.

“You have to understand how much spectrum he actually has, which is a lot more than people think,” said Barbara Heine, director of marketing communications for NextNet.

NextNet's gear provides a 1.5 Mb/s data stream with a range of up 20 miles, depending on configuration. Most important, the equipment is plug-and-play, self-configurable and requires no truck roll. That make the equipment applicable as a DSL or cable modem replacement, allowing Clearwire to offer it to both residential and small business customers.

That could present a challenge for McCaw, however. While most wireless carriers have gone after businesses, the consumer market — at least outside rural areas — has so far been impenetrable. However, some carriers believe the technology to address that business model will be ready soon.

“Consumer has a lot of potential,” said Philip Urso, CEO of TowerStream, a wireless carrier selling to businesses in dense urban areas. “It's all 100% contingent on the price of the CPE. That's why WiMAX is so exciting for the consumer market. The price of the CPE will come down to practically zero. It will be built right into the laptop.”

While WiMAX eventually will result in cheap equipment due to standardization, it's still a long way off. The WiMAX Forum is expected to finalize its standard later this year and begin certification next year. The standardized equipment and chipsets won't start coming off the assembly lines until 2006.

Air2LAN is building up a consumer business in its 14-market broadband wireless access footprint in the southern U.S., but it's mainly targeting apartment complexes and condos. Making the business model for individual homes and competing head-to-head with residential cable broadband and DSL is much more difficult, said Air2LAN CEO Jai Bhagat.

“If you look at where the industry is, broadband wireless has a very small market penetration,” Bhagat said. “With his credibility and his money, [McCaw] can give a boost to the industry — increase its awareness and bring in more capital. But the consumer side is still a tough nut to crack.”

McCaw's rollout plan for the service may be cloudy, but his ultimate business aims are even more obscure. McCaw is approaching the market as both an equipment vendor and a carrier, something the earlier incarnation of Clearwire tried and failed. Because much of the remaining 2.5 GHz spectrum is in the hands of nationwide license-holders like Sprint and Nextel or regional giants like BellSouth, they will become direct competitors with Clearwire when they deploy. NextNet might face conflict of interests if it sells to other carriers. NextNet's Heine, however, said the company would have plenty of business selling only to McCaw properties if it chose to do so.

McCaw also has to deal with problems afflicting the 2.5 GHz band. Currently the spectrum is a hodgepodge, with IFTS broadcasting bands dispersed randomly among the MMDS bands designated for broadband. The FCC is expected to vote this week on a proposal to clean up the frequencies, isolating IFTS to the middle of the band.

There also was speculation at WCA that McCaw is pushing a plan that would re-allocate two 6 MHz channels of the spectrum for re-auction. The issue sparked enormous controversy at the conference, especially among smaller carriers afraid they would lose a portion of their spectrum. When asked at his keynote, McCaw said he would never support such a plan. FCC Chairman Michael Powell also addressed the conference but glossed over the spectrum issues in his keynote.