Nationwide WiMAX: Who Benefits?

Who benefits the most from the recently announced Sprint (S) / Clearwire (CLWR) deal? It may not be who you think.

This massive ($3.2B) infusion of money seems like a lot, but it’s just the beginning for this boondoggle. WiMAX is a nice technology that works in some circumstances, with the right business model. But then so will WiFi, and it’s much cheaper. Besides, the mobile providers have a huge head start. Why buy new cards and sign a new contract when I already have what I need from my cell phone (or hotspot) provider?

In terms of becoming a successful business, WiMAX is vying for the “most hyped” award with social networks. Expect more bags of money to be tossed into the trough before long.

So who gets what?

Sprint (S) - Removes one monkey from the back of CEO Dan Hesse as he is now free to focus on why Sprint has been shedding customers for so long. Also distracts everyone from noticing the delays in its own WiMAX buildout.

Intel (INTC) - Intel has been peddling WiMAX like a desperate streetwalker to anyone with an open car window. And its been seen hanging around the Clearwire convertible before. Intel wants to be the undisputed standard for WiMAX chips, a role it failed to capture in WiFi. Not to mention selling lots of new processors for next generation laptops and smart phones.

Google (GOOG) - Yes, critical mass for Android will help extend its search and advertising dominance into mobile. And this network might turn out to be actually open. Despite Google’s game playing at the FCC auction, the “open” spectrum Verizon won will–in practice–be anything but. Fundamentally, Google has become a VC firm. A billion here, a billion there, something just might stick. All it takes is one 10-bagger to make it work. This ain’t it.

Time Warner Cable (TWC), Comcast (CMCSA) - the Rosencrantz and Guildenstern of mobile will be exactly as successful here as they were with Pilot, the failed MVNO venture with Sprint. And for the same reasons.

Clearwire (CLWR) - Now we’re getting somewhere. Big cash infusion, lots of media attention. The rights to resell Sprint 3G will allow it to grow its top line, giving it time to progress on the buildout. In the end, though, even with a working network it won’t be enough to either satisfy consumers or to make it a viable competitor to the telecableco ISPs. (And I’m not alone in my thinking, here.)

But you see, by then Craig McCaw will have made his money.

McCaw has a history of promote, build, and sell. Usually at the top. And always with someone else’s money. He’s going to extract himself from this before long, and come out smelling like a rose.

Or a crisp thousand-dollar bill.

Regardless of what happens, whether the network succeeds, whether or not anyone else makes any money, you can be sure of one thing: McCaw has this all mapped out. There’s your winner.

Disclosure: I hold no position in any of the stocks mentioned here.

Comments

[DeltaCharlie:]

Ever use an iPHONE? Now, if only I could access the Internet without having to spend a few bucks for a coffee or staying overnight at a hotel with complimentary WiFi... even then video streaming kind of sucks. I'd like to watch video news now and then. WiMAX is the only wireless broadband that can deliver this -- 3G was an absolute joke. Glad to see someone's getting it right for once. You stick with your pen and paper -- clearly, you know nothing about technology, and here you are advising your readers. Read a book, or talk to people in the industry for a more balanced perspective.

2008 May 11 11:14 AM

[2008traveler:]

Had a friend in Honolulu that tried Clearwire's Wimax service for over a year. They were located right in the middle of a flat metropolitan terrain with no obstacles and they said it was lousy. So weak that they could only get reception with the modem in one corner of their townhouse. Even that was spotty at times. Seems like Google should have pumped some money into a build out of Boingo. They would have had an instant impact and we all could stick with our wifi devices.

2008 May 11 01:21 PM

[Saturn V:]

You seem to have a big lack of vision. I ran into a lot of people with a similar mindset 20 years ago, when cellular telephony was in its infancy. A lot of financial analysts and rag writers, commented, " I have a phone in my house, and I have a phone on my desk. Why would me or anyone want a phone for the car or else where."
There is built in market for Laptops. I love WiFi but its limited range and availability, and a lack of a standardized carriers are real problems. I have a tough time using my Laptop at Airports consistently. Elsewhere it is a real doubtful case. WiMax ends those issues.

iPhone is just the leading edge of devices, which will make WiMax look brilliant. Presently internet access on cell phones is a joke. Newer devices will make Wimax just as ubiquitous as cell phone coverage.

Maybe cell phones will even dissappear, having being absorbed into iPhone type devices. That is why existing Carriers like Verizon and ATT are the biggest opponents of WiMax. They see the future and are terrified. So they are doing their best trying to derail WiMax. They dont have much of a hope, because WiMax will take off in places like India and other countries without mass internet coverage. This will give WiMax the huge international economies of scale, that the solutions proposed by Verizon, ATT will never take off.

2008 May 11 04:41 PM

[Nextel Acce...:]

WiMax is the future!

2008 May 11 06:34 PM

[Vladimir Se...:]

Guys with negative comments seem to be missing the key point of the article. The question the author was trying to answer isn't about wimax being great or not for consumers.
I'm sure this will not be a negative for the consumer. It will either be useless (worst case scenario) or great (best case scenario) or somewhere in between. Either way consumer doesn't lose. Question the article attempts to focus in is that of investment. Lots of folks invested have in this technology, one way or another. Some industry players who haven't invested in it directly might be able to benefit from its rollout. All the author was trying to do here was to figure out who stands to benefit from their investment or market position, if anyone. Yes he ends up with a cynical conclusion, but that doesn't mean he is wrong.
I sort of agree that Intel is more likely to benefit from this long term versus, for example, Sprint.
Consumer might benefit eventually, but that will require someone other than Sprint to roll out another wimax network. I doubt switching to wimax from other technologies, fixed and to a lesser extent mobile, will make sense until Sprint has some competition there.

2008 May 11 08:17 PM

[bigger picture:]

So short sighted is this article only focused on consumers. While this is definitely being marketed to comsumers and there are many new products these chips will go into besides laptops and phones (cameras, book readers, media players [tv, music], to name a few)... BUT, The real enchilada is the back haul relief for cell phone transmission and business services. This IS a new 'last mile'. Sprint and it's partners, will finally break free from the children of the of big old expensive telephone company (Verizon and at&t). Sprint has a long history of developing the best cutting edge technology, unfortunately those pesky customers seem to be an afterthought (billing, customer focus, etc). This new network has the ability to reduce expenses substantially for an operator like Sprint, giving it back the resources it needs to rebuild customer service, and maybe even cut prices.

2008 May 11 08:34 PM

[Mobile Expert:]

I'm believe in people who are visionary and make the right predictions on how technologies will evolve and be successful.

The folks who never belived in cell phones, Wired broadband and WiFi were quite many in the technologies early days. But value for the consumer and right pricing enabled all the 3 technologies to succeed.

In a world where connectedness is essential rather a luxury WiMAX will be a success as it extends the capabilities WiFi gives us and also provides QoS.

If HD improves picture quality for Standard definition video. Then one can say WiMAX provides reliability, QoS and ease of use (authentication etc) for mobile broadband. So its got all the ingredients for being a future success.

My prediction, WiMAX in next 3 years will be a mandatory feature in every single Laptop sold on the planet. Mark my words it will succeed.

So will benefit, end users will be the first to benefit, because price of the service will be low, due to the operator needs to grow subscribers. Intel will benefit because of maximal platform sales. TEMs and operators will benefit because now, they have full mobile internet platform to innovate without boundaries as opposed to the telecom technologies where innovation was more contained.

2008 May 11 09:40 PM

[Pullease:]

Scott....you have absolutely no idea of which you speak...or you are a shill / consultant for the legacy crap. Wimax works...at 60 mph...at fantastic speeds. Would GOOG/INTC/etc invest Billion$ in a technology that "that works in some circumstances"? Our country is quickly losing all edge in mobile broadband with the legacy complacency you spew...nice work!

This is a 4G technology that is available today...as opposed to the LTE "promise" of > 2 years from today. Comparing the offering of today's mobile providers and WiFi speaks to your knowledge of this OFDM mobile technology.

Boondoggle?...you will be eating your words.

2008 May 11 09:44 PM

[atlake:]

you are wrong, wimax and wifi have dramatically different performance profiles, business models, deployment models, and do different things. while the differences are subtle, its disappointing to see that somebody with a public forum such as this doesn't appear by your essay above to understand this. its this misunderstanding which is goading municipalities to spend way too much money rolling out wifi in an attempt to make something it was never meant to do. ironically, exactly what wimax will be great at (working reliably over large distances).

2008 May 11 10:42 PM

[TERN:]

Wimax will be an absolute godsent in the whole wide developing world, especially Latin America, Indonesia and the Philippines where fixed line broadband will never be part of the future.
Cheap iPones or iPhone-like devices will drive the rollout of Wimax.

2008 May 12 02:41 AM

[Scott Berry:]

Wow. Who ever thought sacred cow tipping could be such fun. Good thing Tony Stark lent me one one of his spare suits over the weekend.

@Vlad has this mostly right. Do I think WiMax would be bad for consumers? Hell no, I frankly hope CLWR succeeds, there's a huge demand for what it promises. I'll be first in line.

Do I think the technology itself will fail? No, not at all. I do question whether this implies that everyone who deploys it will succeed, or even has a winning business plan. But I'm happy to be educated.

Can someone point to an existing WiMax deployment that consistently delivers high bandwidth service--fixed or mobile--to an appreciable portion of the local consumer population? (Trials don't count, the ability to scale is important here.) And is the operator solvent? If WiMax is truly "available today" this should be easy.

A good portion of the advantage WiMax has over WiFi is in the higher power allowed in licensed vs. unlicensed spectrum. What is the additional battery drain on your laptop due to the higher power required to achieve this advantage? How much longer will you spend charging your batteries (keeping you wired)?

WiFi has had some successes and some (big) failures in both small muni and larger metro settings. Maybe it will take WiMax many such tries to get it right. How do we know CLWR isn't another WiFi Philadelphia? Plenty of smart people dumped money into that one. For that matter, how do we know it isn't another Metricom?

Finally, @Pullease--"shill for the legacy companies"? Them's fightin' words, mister.

2008 May 12 08:15 AM

[analysis101vp:]

Another complete waste of time reading worthless opinions. This Scott Berry is not the one with the money. I kind even believe this blog stuff is right underneath the headline section. Bottom line is that INTC and Google, the two tech giants with excellent growth potential, have enough knowledge about WiMax to invest billions in it. Not Millions, Thousands, or Hundreds like what Scott Berry may have, but Billions. Smart money goes where there is real future like WiMax. "No Money" goes on worthless blog articles like this one. Again, what a complete waste of time!

2008 May 13 10:17 AM

[Haro Futuro...:]

What the world nees is ONE, STANDARD wireless broadband solution, and WiMAX is the best bet.
The future will be wireless (except for the bunggy jump) and WiMAX (or whatever name it takes) will be there.
We can discuss if the technology works or not, but at the end it is nothing more than microwaves and as the technology matures it will get only better and better.

2008 May 13 10:18 AM

[Geddy doesn...:]

Scott-If you really believed that consumers would benefit, then it should have been on the list in your analysis, rather than a rebuttal to comments. It is stating the obvious that key stake holders i.e. Craig McCaw stands to benefit most--duh! The man had the vision to create a nationwide cellular network, which later became AT&T wireless. He invested in Nextel when no one believed iDEN would work...and it became the jewel of the industry prior to it's merger with Sprint--in terms of customer loyalty, operating margins, and wannabe imitators. Now he's invested in, and got other's to invest in, a proposed nationwide broadband wireless network. It's about time the U.S. takes the lead again in wireless technology. It won't do so waiting around for LTE. I believe US wireless customers would stand to benefit much.

2008 Sep 04 03:16 PM