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WiMax Takes Flight

5/09/2008 8:00 PM Eastern

Just days after scrapping their Pivot joint wireless-telephony venture with Sprint Nextel, a trio of cable operators jumped back into the fray last week. This time, they agreed to a new joint venture with Sprint Nextel, Clearwire, Intel and Google to create a nationwide WiMax high-speed network.

Comcast, Time Warner Cable and Bright House Networks made the much-anticipated announcement on May 7. One former Pivot partner, Cox Communications, was not part of the deal. Comcast will contribute $1.05 billion to the venture, TWC will contribute $550 million and Bright House $100 million. Intel will pony up $1 billion in cash and Google $500 million, according to statements made by the companies.

Clearwire founder and chairman Craig McCaw will serve as non-executive chairman of the new entity. Current Clearwire CEO Ben Wolff will retain that role in the new Clearwire.

Snapshot
WiMax venture
Partners: Sprint, Clearwire, Comcast, Time Warner Cable, Bright House Networks, Intel, Google.
Ownership: Sprint, 51%, Clearwire 27%, others 22%.
Cable contributions: Comcast, $1.05 billion; Time Warner Cable, $550 million, Bright House, $100 million.
Coverage: Able to reach as many as 140 million people by 2010.
Technology: High-speed wireless service.

According to a statement prepared by the companies, the network will cover between 120 million and 140 million people in the U.S. by 2010.

The cable companies shuttered the Pivot wireless-telephony venture in late April. That JV, announced in 2005, went through several months of trials but never managed to get off the ground. One plaint: Inflexible pricing, since Pivot service would compete with Sprint’s offering in any given market.

But the parties involved believe this joint venture is vastly different from Pivot in that each cable operator can decide independently how and when to roll out the WiMax product — as well as how to price it. Each operator will also be able to independently brand the offering, something that could not be done with Pivot.

WiMax is a relatively new technology but has the potential to surpass Wi-Fi, the current wireless-broadband flavor of the day. A single WiMax tower can offer service over a 30-mile radius — compared to a four- to six-mile radius for Wi-Fi — and at higher speeds.

But some questions still remain: No one offers the service on a broad scale yet and there is some doubt whether WiMax service can send signals effectively through windows and building walls, which could severely hamper its deployment.

While the JV participants appeared optimistic about the prospects of a nationwide WiMax network, several analysts were a bit more skeptical.

“Pivot, with five partners, could not even survive until its third birthday, in turn, is a WiMax joint-venture with four of the original five partners from Pivot plus three additional companies [Intel, Google and Clearwire] feasible?” Pali Research media analyst Richard Greenfield wrote in a research report.

Sanford Bernstein analyst Craig Moffett was a little more optimistic, but also expressed concerns.

While Moffett wrote that the JV appears to benefit Sprint the most — it frees the troubled carrier of the burden of financing the network itself — questions remain.

“There are also — and self-evidently — enormous governance challenges for an entity with this many cooks in the kitchen,” Moffett wrote.

But despite the questions, the JV appears to be a way for the cable companies to dip their toes in the WiMax waters without having to spend billions of dollars to build their own network. According to the announcement of the deal, after the deal closes, Clearwire will be expected to be self-sufficient.

“For the companies involved, the investment can be viewed as a one-time, closed-ended capitalization of a new venture, and not as an open-ended foray into wireless network-building,” Moffett wrote.

 

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