What's With Clearwire?

Peter : On Rad's Radar?
Peter
| Peter Radizeski of RAD-INFO, Inc. talking telecom, Cloud, VoIP, CLEC, and The Channel.

What's With Clearwire?

clearwire truck
What's up with Clearwire? It started out as a McGraw deal with big investors: Top 5 cable companies, Sprint, Intel and Google. (Did you know that Telesphere's CEO Clark Peterson was President of Clearwire and one of Clearwire's founders?)

Clearwire has about 100 MHz of spectrum pretty much nationwide. That's a huge asset. It's more contiguous spectrum than most other cell companies.

Here's the rub: it costs billions to build out a nationwide network. Sprint, which owns a 54% non-controlling stake, is the number 3 cell company in the US, wearing $20B in debt and has 48 million subscribers (wholesale, pre-paid and post-paid). T-Mobile is the 4th cell company with 33M subs and a problem because it hasn't rolled out its AWS spectrum for 4G yet to that many markets (despite commercial claims). By the way, that spectrum comes with a timer - it has to be rolled out or given back.

AT&T and VZ combined have more than $100B in debt. It is estimated that they both spend about $5B and $7B, respectively on cellular network CAPEX. Think about that. And they HAVE a nationwide network already. (That's why when Hundt and company talk about building another nationwide network I laugh. Who has $40B to spend on one?)

Now back to CLEAR which just announced layoffs and lost a truck. Clearwire has less than 4 million subscribers of which 1.83 million are wholesale customers bringing in $4.46 each and 1.01 million retail with $42.74 ARPU, according to this article.

Recently, its investors told Clearwire to stick to the knitting, which is to say be a wholesale carrier. It is expensive to go retail while also trying to be wholesale. Basically, you are running two companies. So Clearwire laid off 15% of its 4200 workforce and cut out marketing (supposedly altogether), leaving its partners like Best Buy, Cbeyond, Sprint and the cablecos to market 4G to consumers.

Clearwire will need a few billion more to build out the rest of the network. The cable companies, Intel and Google said no more money. Is Sprint in any shape to fund that build? Speculation is that a Clearwire default becomes Sprint's mess to clean up. Hence, the rumors that Clearwire is privately selling spectrum and shopping for funding or financing.

When the ARPU is looked at, the difference of $4.46 and $42.74 makes people lean toward retail. But the costs are different. There are higher costs for retail sales plus support of retail customers, device fulfillment, and more. Wholesale means that the partner handles all of that. In addition, Clearwire has twice as many wholesale customers as retail. That means their retail marketing isn't as effective. Use the money to build the network.

It's partners need the 4G network. Not just Sprint but also the cable companies to be able to offer some fourth play beyond the terrestrial services that they now offer. It's a race for the total telecom spend of a family.


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