Why Google Invested in Clearwire

Google (GOOG) wants to usher in the world of wireless broadband so much that it is willing to spend vast sums to make it happen. It bid more than $4.6 billion in the recent FCC spectrum auctions (which it ended up not having to pay because it lost to Verizon)(VZ), is backing the WiFi 2.0 initiative, and today it announced that it plunked down $500 million to shore up the new Clearwire-Sprint WiMax business.

Google is very clear about why it invested—to ensure that the resulting broadband network is as open as possible and accepts Android handsets and devices. It also sounds like Google may also be the default search engine on devices connected to the network.

This morning, it explains all of this on the Official Google Blog:

In addition to our $500 million contribution as part of the investment group, we will provide search and applications to the network’s users, and will work with Clearwire to offer additional services and applications. This will include jointly creating an open Internet protocol to work with mobile broadband devices (including Android-powered devices) and implementing other open network practices and policies.

We believe that the new network will provide wireless consumers with real choices for the software applications, content and handsets that they desire. Such freedom will mirror the openness principles underlying the Internet and enable users to get the most out of their wireless broadband experience. As we’ve supported open standards for spectrum and wireless handsets, we’re especially excited that Clearwire intends to build and maintain a network that will embrace important openness features. In particular, the network will: (1) expand advanced high speed wireless Internet access in the U.S., (2) allow consumers to utilize any lawful applications, content and devices without blocking, degrading or impairing Internet traffic and (3) engage in reasonable and competitively-neutral network management.

Google desperately wants access to future wireless broadband networks of all stripes and sizes,but it wants to avoid having to build and operate its own. Deals like this show that it is willing to pay to play. If Clearwire (CLWR) should ever go bust, though, that’s $500 million down the drain.

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Comments

[Philly Jim:]

If cities in the U.S. play this right, and deploy wimax in place of their existing worthless wifi citywide networks, it will revolutionize the way we get information and advertising in America. Google just needs to be sure that access will be provided at reasonable rates if not totally free and paid for by advertising; which by the way would be really cool! The U.S. has a lot of catching up to do with global cities, we are losing our cities to the infestation of criminals and worthless bodies. Making the cities hi-tech will retain some of the young pros and productive workers by making life a little more convenient/cooler.

2008 May 07 09:58 PM

[Paul Lopez:]

Google has too much money, they were better off with another moon shot. The FCC bidding was just a move to open up the spectrum, they don't need Sprint or Clearwire to grow. They will have to get better Android development tools to market fast to compete with Apple iPhone.

2008 May 07 10:01 PM

[Rafael Grillo:]

As dominant leader in the online search and advertising market, Google's fundamental strategic opportunity to generate huge growth is to increase distribution: have more people spending more hours online. Not that different from Coke -or any other mass-appeal marketer for that matter- placing vending machines in everyone corner. In that sense, tearing down any barrier that might keep consumers off-line plays directly in Google's favor. Google will throw all its muscle behind any opportunity that allows them to capture what is now dead off-line time: think commuting, travelling, lunch, leisure, etc. Literally billions of ad/hours (clicks in their ads!) they are not reaching now. Their dominant market share would assure them by default 70% of that new revenue stream. That is the limitless promise of WiMax. All the points made in the article are valid, but basically basically point in the same direction: expanded distribution is the main driver behind these investments. This is a real smart use of resources. Gosh, they're good!

2008 May 07 11:00 PM

[sunrises:]

Hi Eric,

Thanks for the update. Like Google except when will google get back in $600s? Awaiting to reduce some deep sinking margin & get back in later.

2008 May 08 01:18 AM