Clearwire is publicly stating that its proposed (but challenged) merger with Sprint's Xohm WiMAX unit will be completed before the end of the year, and cable operator Comcast (an investor in the new company) is saying the same. The 4G WiMAX systems deployed by the new company will come at least two years before the competing 4G Long Term Evolution (LTE) systems rolled out by wireless companies like Verizon, and that means a narrow window has opened. Can the cable operators crawl through it before it comes crashing back down?
We've covered the New Clearwire merger plan extensively, and we've talked with Clearwire's CEO about the company's ambitious plans for the future. WiMAX promises good speeds, home and mobile access, a fully open pipe, ability to work with any device, and wholesale reselling of service. While the entire proposition is interesting, it's the wholesale bit that could turn out to be most disruptive, and it's an aspect of the deal that hasn't been discussed enough.
When companies like Comcast, Time Warner, and Google agreed to invest in the new company, their interest was in wholesaling its service, then rebranding it and selling it under their own names. Google will probably not take advantage of the arrangement, preferring to boost broadband availability without actually getting involved in the ISP business, but the cable companies aren't interested in anything like "boosting broadband access for everyone." Their interest is competitive; as wireless Internet gets big, how can they keep users from defecting to a telephone company?
The Clearwire deal suddenly gives them access to a nationwide spectrum footprint. Comcast and Time Warner want to make sure that when you leave the house, you don't leave their services behind. Right now, wireless broadband is offered through wireless phone carriers, but once a customer has signed on with someone like Verizon Wireless, that person is more likely to get cell phone service as well. This might cause them to ditch a landline and therefore not pay for Comcast's VoIP product. It might also mean that, as video content increasingly moves to the Internet, and wireless home Internet access becomes a reality, Comcast's video and Internet businesses could also be affected.
Under the wholesale deal, the cable operators can resell service under whatever ridiculous name they choose (and, if history is a guide, it will probably have a ridiculous name). Phones (think VoIP over WiMAX handsets) aren't the only target here; it's also about devices. Intel is also a huge, $100 million+ investor in Clearwire, and it's building WiMAX access into its new wireless chipsets.
Cable operators are facing up to the reality that it's all about the pipe that can deliver Internet Protocol, whether that pipe be cable, a telephone line, or a bit of electromagnetic spectrum. This convergence has already brought them into sharp competition with the wireline telcos, but cable hasn't yet been forced to take on wireless phone companies in the same way.
Soon, it will, and the Clearwire deal is a forward-looking attempt made by cable companies to have a wireless solution in place. The window could be brief, though, as the wireless phone operators are moving quickly to roll out 4G networks across the country. If cable operators want to establish themselves as competent providers of wireless 'Net access, something far outside their traditional core competency, the next two years gives them a bit of space to make the case.
Until LTE systems come online, the Clearwire resellers will only be competing with 3G services like EV-DO—fast, but not truly "broadband" fast. Of course, the WiMAX rollout is still something of a wildcard. The tech has been talked up for years, but services like Xohm still have yet to flip the switch and demonstrate to a watching public that they can provide a compelling wireless data experience. That should begin to happen by the end of September in markets like Baltimore, and by year-end in other markets, at which point we'll have a better sense of whether the cable companies are likely to gain much from their investment.Posted on