Clearwire-Sprint WiMAX deal reborn

The partnership is not just financially complex, but operationally complex. The deal involves numerous wholesale and cross-service agreements. The Xohm brand and business model will follow Sprint’s WiMAX assets to Clearwire, and Clearwire will be the only company allowed to sell 4G access as a standalone service, West said. Sprint will essentially access the network as a mobile virtual network operator (MVNO), selling combined 3G and 4G access plans. The cable operators will be able to bundle mobile WiMAX services as well as Sprint voice and 3G data services as part of their programming and cable modem bundles, essentially reviving the Pivot joint venture that died last month. Even Intel and Google have the option of launching their own branded services as MVNO, though they must package the access as part of some other service.

On the operations side, Sprint will give Clearwire access to its tower sites and leases as well as its extensive fiber network for backhaul, all at below-market but above-cost prices. Comcast and Time Warner also both own fiber networks that penetrate deep into neighborhoods, but no mention was made of whether those assets will also be available to Clearwire.

As for content, Google will become the primary Internet services and portal supplier, becoming the default Web and local search provider on WiMAX devices sold on the network. It will also build the network’s mobile advertising framework, creating an additional revenue stream beyond the subscription model. Sprint’s infrastructure contracts with Nokia Siemens Networks and Samsung will also carry over to Clearwire, giving the operator two more vendors in addition to Motorola.

While the entanglements between all of the players are numerous, so is the potential number of sales channels. Comcast, Time Warner and Bright House already service a large portion of the broadband customers in the country. Google is the most visited search engine and Sprint not only has more than 50 million wireless subscribers but a huge retail distribution network.

It will take some time before Clearwire can take advantage of those new channels though. Sprint and Clearwire have only launched trials so far, Clearwire in Portland, OR, and Sprint in Chicago, Baltimore and Washington, D.C. According to Wolff, Clearwire today has networks covering 30 million pops either completed or under construction, but all of those networks are built using the proprietary NextNet technology supplied by Motorola, not true WiMAX gear.

Even as more WiMAX networks go live, Clearwire will have a limited number of devices to sell on it. With the exception of Nokia’s new Internet tablet, the only WiMAX devices released have been PC cards or desktop gateway modems, meaning the initial WiMAX connections will be primarily be pure access connections, similar to the 3G laptop services Sprint, AT&T and Verizon Wireless sell today. Wolff said he expects the first WiMAX-embedded laptops to be available by the end of the year, thanks to the efforts of Intel, and the first dedicated WiMAX handsets and consumer electronics to emerge in 2009.

While both AT&T and Verizon Wireless readily admit WiMAX will be ready before their own 4G networks go live, both have said there 3G networks will keep them competitive with any WiMAX service for years to come. VZW’s EV-DO network is already nationwide, and AT&T’s 3G high-speed packet access (HSPA) is in its final stages. Meanwhile T-Mobile is beginning its 3G rollout, launching its first HSPA market in New York earlier this week. HSPA and EV-DO networks have the capacity to offer broadband speeds and both have the advantage of huge device ecosystems. Verizon Wireless is expanding its broadband plans through a new open development initiative intended to bring new data-centric devices and applications to its network.

But Wolff said WiMAX’s competitive edge isn’t in its ability to deliver capacity, rather its ability to deliver capacity cheaply. He said the WiMAX network can deliver four times the capacity for the equivalent cost on a 3G network. That cost-advantage is already starting to show up on Clearwire’s pre-WiMAX NextNet network, over which it has been offering laptop connectivity services since September.

“We’re finding we’re able to get customers at the same general revenue levels or ARPUs as the 3G customers because we are delivering a much greater bandwidth and overall user experience with much more capacity even though we have a much smaller footprint,” Wolff said. “So there is a class or category of customer at least today that is saying ‘I might not be able to roam or go from market to market or even have as big a footprint, but because I spend 90% of my time in this areas where Clearwire is built today, I’m willing to pay $60.”

$60 a month is what all of the major operators charge for their 3G broadband access services though many of them have overall data caps and require voice contracts. As Clearwire continues to go head-to-head with those providers it can easily scale back capacity it offers to individual customers and lower its prices.

“We have the ability to compress pricing if we need to attract customers,” Wolff said. “We’ll see how it goes. We’re not making any pricing commitments today, but the economics of this business are very attractive.”