Clearwire, the WiMAX provider owned by Google, Intel, Comcast, Brighthouse Networks, Sprint, and Time Warner Cable, recently announced that it would cease retail expansion and focus on wholesale operations going forward. Clearwire currently provides wholesale WiMAX service to several companies, like Time Warner Cable and Sprint (which has an exclusive right to market to segments of the business marketplace for a pre-defined term).
But once Clearwire also elected to build out retail operations in some of its markets, it created significant channel conflict with key owners/authorized resellers that directly serve the mass market. The company’s retail efforts also weren't wildly profitable, since it's been searching for new infusions of cash for many months. Clearwire recently raised over $1.3B in bonds and exchangeable notes, but it needs more cash to roll out service in new markets. As a result, it has considered selling some of its spectrum, which to a wireless provider is like selling the family jewels. Finally, the company’s foray into retail also posed considerable conflict for prospective investors or reseller partners, like T-Mobile US.
Thus Clearwire's decision to focus on wholesale allows all parties to concentrate on their respective strengths (Clearwire--building out and operating a network, others--selling to and servicing customers), and opens the door for it to receive additional funding from current owners or new investors. It's a win-win on the service provider front. It's also a win on the customer front, because the value proposition for using the service can be more straightforward, and hopefully also more compelling.
But what a return to the company's wholesale roots doesn't change, in and of itself, is the technical direction of the underlying asset:
(1) Is the current offer better positioned for fixed line replacement (T1 and Broadband) than for mobility? Given the paucity of markets Clearwire currently operates in, and existing intra-market coverage issues, I think so. Even if the service was available in all of its footprint today, there are important cities in which Clearwire has no spectrum. To a business customer, this dilutes the potential utility of a "nationwide" mobile WiMAX service and drives them to other mobile data suppliers in droves. Clearwire announced the availability of WiMAX service over 2 years ago, but its slow service rollout across the country has largely frittered away any advantage an early technology lead might provide. This has not only damaged Clearwire, it damaged its reseller partners. In looking at how Clearwire has operated over this period, the irony has been that it has been selling the value of (limited) mobility while from the perspective of coverage, acting much more like a fixed service provider. Go figure.
(2) What about adopting LTE (vs. WiMaX)? Following up on my point about frittering away a potential early technology lead, I don't think there’s any question of direction. LTE won as soon as Verizon Wireless made its "4G" technology decision. But for Clearwire, there is a question of timing a migration to LTE, at least given cash constraints (among other critical factors serving as significant ballast). In many ways it's unfortunate that Clearwire hasn't already embraced LTE, but you can't re-write history. So the sooner it moves down this road, the better. If the company waits much longer, there’s ample reason to be concerned that a once-promising future will forever remain illusory.
Clearwire has precious few real valuable assets today. Given its history of inertia, the only asset of any appreciable value it could soon have is its spectrum (and that’s not what it once was). The writing has been on the wall for so long that it will soon begin to fade. It's high time for Clearwire to run like the wind towards change.
Lisa Pierce is President, Strategic Networks Group consultancy.
