The big news last week as I was graduating and taking my final law school exam was a consortium’s creation of a WiMax network.
The consortium is made up of Sprint/Nextel, Google, Intel, Comcast, Time Warner, and Clearwire. The deal is valued at $12 billion. For basics on the deal, read this from the New York Times. Why did this deal happen? Simple — economics. Sprint was attempting to build their own WiMax network, Xohm, with a spectrum footprint that covered about 60% of the US (that number is not precise). Clearwire was attempting to do the same using spectrum that covered the other 40%.
Sprint was planning on spending $5 billion to build out their 60%. However, there was one problem with this scenario — imagine spending $5 billion to build a wireless network that did not work everywhere in the US. Would you buy a cellphone service plan that only worked in certain areas? Some people would (see Metro PCS) and frankly there might be a business plan for someone to come out with local only wireless broadband (see any of the failed municipal WiFi networks). Unfortunately, as the failed WiFi networks illustrate, the time is not yet ripe for local wireless broadband.
Consumers need devices that will make them want to go online anywhere (see the iPhone or a Nokia Internet tablet). Those devices are just starting to proliferate as people begin to need the internet anytime, anywhere. As relatively early adopter, I don’t know what I would do without internet/email on my phone. Once everyone else gets a taste, they will need it as well. The problem with the Sprint or Clearwire plan when standing alone is that few people would want to buy a device that only works in part of the country. Imagine taking your $300 WiMax Sprint enabled device from DC to Seattle only to find that you will have to sign up for Clearwire service to use the device. Bummer and a barrier to entry.
Sprint and Clearwire needed to merge their WiMax divisions. WiMax investment is not cheap (although Sprint’s original $5 billion is much cheaper than the $18 billion Verizon is spending to roll out FiOS). Plus, you need devices with WiMax chips built in (Intel) with awesome cloud software to make the experience worthwhile (Google). Throw in some marketing partners (Comcast/Time Warner with a nice quad-play offering) and you have a WiMonster.
Why a WiMonster rather than a WiPrincess (or maybe a WiiMaximus to be very vogue)? Well, operational HQ for the new venture is in Virginia (Sprint), while strategic HQ is in Seattle (Clearwire). Intel, Google, Cable guys are also located all over, have strong leaders with strong opinions, and disparate interests. This deal holds plenty of potential but also myriad risks. The new leaders need vision and strength.
I hope for the best (plus I like rooting for the underdog, aka Sprint). I want WiMax everywhere as I am tired of being tied to my home Wifi connection and I won’t pay for a 3G connection. I want every device I own to be connected — from my computer to TV to my fridge to my AC. Cross your fingers and prepare for the future!