WiMax is going nowhere fast but that is not stopping a consortium of cable and tech companies from considering a plan to invest $3 billion more into a proposed bailout-through-merger of Sprint Nextel’s WiMax business (known as Xohm) and Craig McCaw’s Clearwire. The consortium that is reportedly being put together would include Comcast ($1 billion), Intel ($1 billion), Time Warner Cable ($500 million), Bright House Networks and Google ($500 million).
This latest plan comes after Sprint Nextel’s disastrous $30 billion write-down last quarter of its Nextel acquisition, and is an attempt to salvage something out of that train wreck. It also comes after Intel recently balked at putting up $2 billion itself. Intel wants to sell WiMax chips and has already sunk $600 million into Clearwire. But even Intel has its limits.
WiMax is a promising technology and these are early days. But even an extra $3 billion won’t be enough. Building out a nationwide WiMax network could cost as much as $8 billion to $12 billion. And there could be more technical hiccups. (An Australian WiMax provider is already giving up).
Clearwire, which is already operating its broadband wireless service in parts of the country, lost $727 million last year, on revenues of $151 million. So far, it has raised at least $2.75 billions dollars through private investors ($900 million in 2006), an IPO ($600 million), and a $1.25 billion line of credit. As for Xohm, it has only soft launched with employees in three cities. Nevertheless, last year it cost Sprint Nextel $577 million in capital expenditures and operating expenses.
I can see why Google might throw its hat into the ring here—anything to promote more broadband wireless networks. But Comcast and Time Warner Cable should stay away. The logic behind the investment seems to be that the cable companies could use the WiMax network to counter the moves by Verizon and AT&T into their turf (with TV service over phone lines). It is being suggested that the cable companies would be able to launch their own white-label mobile phone and high-speed Internet services over WiMax , or use it to distribute their TV content to computers and new digital devices.
Here’s where that logic breaks down:
1. WiMax is more an alternative to fixed broadband Internet access than it is to mobile phone service. Verizon and AT&T have a huge head start and customer lock-in when it comes to cell phone service. WiMax mobile phones would take decades to chip away at that even if they do offer faster data speeds. Today, Clearwire is only offering at-home phone service, not mobile. As for broadband Internet and home phone services, Comcast and Time Warner already compete effectively against the phone companies today with their alternative services over cable.
2. It no longer makes sense to try to own all the pipes because pipes are becoming a commodity. Yet pipes are an expensive commodity. If the idea is to create a new way to stream TV and movies to people, the cable companies no longer have to build out the infrastructure themselves to do that. It would be much cheaper to let the WiMax business prove itself to be viable on its own and cut deals for distribution.
(Photo via Erik Charlton).
wow, you have scored lot by posting this man. its really cool
how does the recent government auction of the analog TV airwaves to Verizon and AT&T fit in to all of this?
I hope Wimax Succeeds and who ever needs to get it up and running for Sprint that is fine. Cable T.V knows it will be dead soon and that is why it wants in on Wimax. The future is wireless not WIRES, and Cable companies knows this. Also more competition is better. I mean LTE isn’t coming for about 3 years, and Wimax could be up much faster. I want a choice what if LTE is way too expensive. Also Wimax is a move away from just Voice. The idea is that a phone should be a Computer and have voice on it. Basically sprint is going to be the service and you could do what you want with that bandwith whether it is in a computer phone EEPC or Router at your house. Do you really want to have Verizon to take it all and continue with petty text messages and picturre message over charges, and band with limit and outrageous fees. I want an all in one package. Imagine if when you were on your computer and every instant message cost 10 cents or an email cost 5 cents, or hey watch a youtube video for 25 cents an hour. The Cell phone revolution is coming to an end
Oh yeah that Wimax who said Wimax sucked is a moron. He was on a bad spectrum and also decided not to spend extra money to get it right. The company that sold them the parts said he was a moron and that they tried to tell him that all it wasn’t going to work well with what he had.
The future is indeed wireless. America was wired because of the railroad, the telegraph and the interstate highway. (Most fiber is buried along the interstates). Still, though, mobility is a basic human need and I believe that given the choice, the majority of young Americans would gladly ditch their PCs for iPhone-like devices.
Also, media consumption in the 21st century is increasingly an individual experience (Long Tail), whereas in the 20th century it was more of a group experience (think of movie theaters, TV in the living room, listening to music on home stereos with friends). That’s the main driver behind our need for bandwidth. Broadcasting is dead and multicasting never caught on.
Erick, Great detailed post.
less cancer in the air = better
The wireless carriers have a long road ahead if they want to be players in the future wireless data markets. The wireless carriers have put up roadblocks for all kinds of tech services OTA, and poor services has long angered the customers. I would switch my cell phone service in a heartbeat to a open data network with speeds to support a variety of services at once. Convergence and unified communications systems coming to enterprise could be easily extended to mobile platforms that are on an open high speed data network. I already use a modified form of convergence that routes my calls to my cell or my PC (I don’t have a landline, but could use it there also). When in a wifi network, my calls get routed over a SIP account to my cell phone. With access to a high speed wireless network, there would be no reason for me to have cellular service. The cell carriers have prevented any new technologies like this from hitting the US due to the restrictions they put on handset software (I have an unlocked cell, but it does not have the frequencies needed for US UMTS, HSDPA or EVDO)
Tata rolls out “world’s largest” commercial WiMAX network in India
http://www.techcrunch.com/2008.....uldnt-mix/
Tata, Indian Conglormate, is betting big on WiMax in India. They have deep pockets to make it go through. They did just buy Jaguar and Land Rover from Ford.
A WiMax breakthrough in India
http://inhome.rediff.com/money.....6wimax.htm
I need to take a deeper look into WiMax. I have been under the impression for years that this was the most sensible solution to the “last mile.” As a result, I have been confounded as to why it hasn’t taken off.
I 100% agree. The cable companies should be focusing on the software and cloud services to promote and distribute their content to ANY network on ANY device vs. owning all the pipes. It’s a ridiculous move by the cable co’s. See my post on this topic here: http://www.georgetuvell.com/sh.....-wireless/
Whatever technology comes along that brings down the cost of mobile broadband is good for our economy and the tons of innovation that will continue to occur in the mobile space.
Im in Baltimore a supposed test market for Xohm..I am eager to sign up! Hopefully it is just a solid as EVDO with faster speeds. EVDO is great, but expensive!
It seems the Australian provider who gave up on WiMax was just an idiot who didn’t understand technology.
WiMax Critic Gets Blowback
http://www.dslreports.com/show.....back-92971
WiMax will be great if it offers stable data connections everywhere, the way that Xohm promises 2 Mbps in all Chicago and the surrounding suburbs - with a seamless handover between cells. Then you can trash all other devices and and phone contracts. Just plain VoIP on an iPod touch like device, which is free when both callers use the same provider.
If WiMax doesn’t succeed we can do the same with LTE. Only that the market will be different then. The incumbents cannot sell per minute and MB anymore because that many people have tasted the WiMax experience.
Cheap flatrates on everything!
As far as Wimax is concern, India is going great guns - the whole world is watching how India is implementing nationwide Wimax - I dont understand why someone will invest billions if an Australian co. is giving up on the technology, there has to be something more than that.
visit http://www.rediff.com/money/2008/mar/26wimax.htm
More on the Aussie WiMAX Basher
http://www.wimax360.com/forum/.....ic%3A68708
The point that I think you missed is the existing cable providers treatment of their customers. Cable companies typically have a monopoly in the areas they provide services. They use this position to hike prices on even the smallest blips in their financial books. Not to mention recently they have stripped content from their basic services to force customers to upgrade (Comcast: MSNBC, Oxygen, etc.,). Wimax was my hope for an alternative to crummy monopolized service which the government has turned a blind eye to for years; now it looks like Broadband over Power Lines (BPL) is my last hope.
Since when did owning broadband pipes become a bad business? Last time I looked, telcos and cablecos were still raking in billions, and judging by the billions spent on 700 MHz spectrum, they still think there is money to be made by owning the infrastructure.
It’s good to raise questions about WiMax and Sprint’s viability, but this post seems to miss the point on the main topics. More at my blog.
There’s another motive to the entrance of comcast and Timewarner - to be early entrants to profit / control any opportunities that might arise out of the technology / owning the pipe. To the best of my knowledge, Comcast and Timewarner hate a new age media company like Google and will definitely want to jump in if Google is interested.
For what its worth, we have Clearwire at our office here in Raleigh, NC, and its terrible service. I would highly discourage anyone considering signing up with them to forget it and pay Time Warner or whoever for decent broadband.
In our experience, the level of service compares vaguely with DSL, but is nowhere close to on par with cable internet. Furthermore, if we upload a certain amount per day (about 30MB) they start capping our upload speeds to 8k/s. As a web design firm, we blow past this limit very early in the day, and it drives us crazy. They also throttle BitTorrent and video streaming, and while this is not a big issue for us at work would probably anger a lot of home users.
One advantage of Clearwire over DSL or cable is the portability, where we should be able to take our internet with us to a meeting and not have to mess with getting on the clients wireless network. But we’ve found their coverage to be so unreliable, that we don’t even try anymore. We get service at the office, but thats about it.
The only real advantage to Clearwire is that DSL and cable internet providers charge businesses a lot more for the same service tiers. Clearwire doesn’t and that keeps their price point competitive. But all they’ve done here is show us why paying more for real broadband is worth it.
Until there’s a significant improvement in the technology itself, I don’t see any threat whatsoever to TWC and Comcast. Even if they did cover the entire country, their service is not worth paying for.
Sorry to be off topic, but any mention of Clearwire gets me going.
The point about WiMAX being more of a fixed rather than mobile broadband alternative is wrong. There is a WiMAX version in the works (called 16e) which is a mobile broadband alternative.
http://en.wikipedia.org/wiki/Mobile_WiMAX
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WiMax is very much a viable technology. It will be another 6 months before all equipment vendors really get a chance to truly interoperate but speeds tested thus far prove to be better than my DSL connection at home and close to cable modem speeds in my area.
I have issues with the cable companies jumping in on this. They tend to want to OWN the customer and then treat them poorly because they are a monopoly in their respective areas. For example when in a competitive cable area the same service costs me $79.00 compared to $139.00 when I moved out of the area under the same provider.
WiMAX and LTE standards are already looking at consolidation which would make upgrade to LTE after a WiMAX roll out very likely if this happens. Odds are Sprint and Clearwire would upgrade if they were at a competitive disadvantage.
Sprint does not seem to be willing to make the investment leap independently under current market conditions which is really to bad. The tried service consolidation years ago, but failed because of the last mile requiring DSL. WiMAX seems to resolve many of the last mile issues that they had before. Also with larger VoIP providers in the market that big box sprint tried to put in your house is now the size of a linksys router and MUCH cheaper. With no LEC to cut their users off Sprint and Clearwire could be pretty successful here. Adding the cable guys will mean trouble and lots of customer service woes even if they pony up the 2 billion.
Good article.
Technically speaking, if you want high quality voice and data, cables will always trump radio. That should go without saying, but some of the comments here suggest that ppl don’t understand that. There are non-technical issues that certainly have bearing - cable systems generally being a monopoly and wireless being historically voice-centric. WiMax, IMO, is just a temporary stop-gap to something better. Where I see the investments by cable operators into wireless *really* getting interesting is the overlay. For instance, why not put $200 worth of kit in the branch point? Now you can offer differentiated services to customers that compete with a variety of other services, reduce (admittedly low) churn, increase revenue and at a very small cost. Another very powerful force is unification of billing - at least as important IMO as unified communications. Having 3 or 4 bills for basically overlapping services is inefficient for everyone. AT&T is offering this, Sprint tried to (is still trying to?) and VZ is also trying to.
I’d also like to see an acceleration of the physical layer development w/ CableLabs. Technology in 3GPP is moving really fast, allowing for some incredible, and reliable data rates *over*the*air*. Imagine what you could do by leveraging those protocols over a *cable* that has *unlimited*bandwidth*! Forget about the 700MHz spectrum - TimeWarner and Comcast own the whole freggin rainbow. They ought to be able to provide terabytes/sec thru-put. Instead they cling to backwards compatibility, ridiculous constraints and out-moded protocols.
Another wimax projects is canned: Montreal’s city-wide planned wimax network is abandoned due to high licensing cost. Nomade had announced in the fall of 2007 the building of the wimax/wi-fi network by 2009, it announced on March 27th that it was dropping the idea.
Link: (sorry in French)
http://technaute.cyberpresse.c.....yberpresse
Saw an interesting post on this over at hyperconnectivity.com discussing if WiMax is the answer for Municipal WiFi and I had to agree. Granted they have to work out the spectrum issues so that the signal can travel better through walls first. Perhaps when TV goes digitial they can leverage that low range frequency to solve for this. Living in San Francisco we’ve been hearing about this for so long it makes you wonder if it will ever happen! Can WiMax be the answer? I don’t really care if the cable companies do it or not as long as someone does. What you all think?
first on the consortium, yes it would benefit to have a group like this come together for everyone involved. however i do believe that wimax is no place for cable companies to get involved in. comcast and twc shouldn’t be involved here but, i agree with whats been said earlier they know that cable will soon be dead so why not jump on the bandwagon?. one way to look at wimax is when fiber optics first came on the scene everyone was saying it was bad it was limited, it wasn’t bad it wasn’t limited, it was capped by the govt. wimax may or maynot be in the same position as well but cables don’t always beat rf out. just look at the satellites, they don’t use cable?
face it everyone is going to have their say either for or against anything new. while they do that i will be helping to build the wimax networks and leaving those behind.