Will Sprint Buy the Rest of Clearwire?

TownHall Investment Research Analyst Gerard Hallaren says Sprint management has made comments that leading some investors to believe the company iss actively considering a bid for the rest of Clearwire.

"As best we can tell, the speculation is based on a perceived desire by Sprint control its own destiny by owning its 4G network and on synergies created by combining the two companies," says Hallaren.

Some people will contest the notion, as it flies directly against the rest of Sprint's recent initiatives to outsource operations that are not directly customer facing, and concentrate on marketing and customer-facing operations. It is worth noting, however, that Sprint has not acted to divest its actual ownership of facilities, with the exception of tower sites.

The Sprint "4G" marketing platform seems to be getting a lift from the HTC Evo launch, and that appears to be prompting the speculation about whether full ownership of Clearwire (Sprint now owns 57 percent) would add value.

Despite some possible strategic logic, namely the ability to use the Clearwire network anyway it wishes to, there would be obstacles.

Given Sprint's weak financial position, a dilutive equity deal would be required. Hallaren suggests a reverse takeover might be considered.

One issue is that the other Clearwire joint venture partners bought most of their stock at far higher levels, around $17, or $10 higher than the current price.

The public owns only 10 percent of Clearwire, while Intel (11 percent) and Comcast (nine percent) are the largest holders after Sprint. Time Warner owns five percent, Google three percent, Brighthouse one percent, Eagle River four percent.

Perhaps the bigger issue is the different business models. Clearwire is mostly a wholesale provider, though it has some retail operations. Sprint really is a retailer with some wholesale operations. It isn't clear how much more Sprint benefits from increasing its 57-percent stake.

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Sprint May Throttle Heavy Roaming Users

Sprint Nextel Corp. says laptop customers using an excessive amount of mobile data while roaming could have their accounts temporarily suspended, though the carrier still doesn't plan to limit the wireless connection for its high-volume smartphone customers, the Wall Street Journal reports.

The key issue here is heavy roaming use, off the core Sprint network, and the primary reason appears to be that Sprint obviously incurs direct incremental costs when users are on partner networks.

Sprint is changing its policies for data service for laptops users with mobile broadband cards or USB modems will not apply to smartphones.

Sprint already has a cap of 5 gigabytes of data usage within the network, and 300 megabytes of roaming data. Starting July 11, excessive data roaming by mobile laptop users could lead to Sprint suspending the off-network service until the customer's next billing cycle, unless the customer opts into a plan with extra charges for off-network usage.

Sprint says it will notify broadband customers by text message or email when they hit 75 percent and 90 percent of the roaming data limit. The plans include 5 cents per megabyte on the Sprint network and 25 cents when roaming.

The threat of suspension doesn't apply to usage on Sprint's 3G network or the 4G network run by partner Clearwire Corp., says Sprint spokesman Mark Elliott. "Sprint does not, nor plan to limit speeds, nor change a customer's ability to use any particular application or Internet site."

Analysts are expecting an industry-wide shift to control the amount of data traffic consumed by users, so the Sprint move is not unexpected, though Clearwire continues to say it will not cap data usage.

The issue is whether the new move will complicate Sprint's "simplicity" and "simply everything" marketing message.

T Mobile USA already has in place policies to throttle users who exceed the 5 gigabyte monthly cap. AT&T has adopted new caps of 200 megabytes and 2 gigabytes.

Verizon Wireless has not yet made any specific announcements about changes.

Is Clearwire's Future as a Wholesaler?

Clearwire today is partly a retailer of services under its own name, and a major retailer of spectrum services to cable companies and Sprint. But one wonders, given its continuing capital needs, and the existence of at least one major mobile provider that desperately needs new fourth-generation spectrum (T-Mobile USA) whether Clearwire will not ultimately find it is primarily or exclusively a wholesale provider of 4G spectrum.

Comcast, Intel, Time Warner Cable, Google and Bright House Networks are minority investors while Sprint is the majority owner.

A research note from Credit Suisse evaluates the value of mobile satellite spectrum of the sort Harbinger Capital has been touting as the basis for a brand-new U.S. Long Term Evolution network, as being worth something on the order of $0.50 per MHzPOP. That evaluation apparently is derived from prices paid in 2006 for AWS spectrum that mobile providers now are using.

If those prices are sustainable in today's marketplace, then Clearwire might well be sitting on spectrum worth about $20 billion, Business Week has suggested. Some think it might be worth more.

read the Business Week story here

For Clearwire, much is riding on whether its strategy of buying up some 85 percent of the U.S. 2.5-GHz spectrum band will pay off.

The $5 billion Clearwire will pay its license holders for its spectrum over the next three decades is a bargain compared to what its rivals are paying. AT&T and Verizon bought their spectrum that can be used for 4G at government auction in 2008, paying a combined $16 billion, though many would argue those allocations, at much-lower frequencies, have propagation characteristics so much better that the premium is worth paying.

An unfunded business plan also remains an issue. At its current rate of spending, Clearwire will burn through its cash in 2011, according to Steve Clement, an analyst at Pacific Crest Securities. Clearwire may need $3.8 billion more to reach its goal of building a network that covers 270 million people, Clement says.

Clearwire now has about one million subscribers, double what it had in 2009. It added 283,000 net new subscribers in the first quarter, compared with 133,000 new customers in the previous quarter.

But even that rate of growth is unlikely to get Clearwire close to players such as Verizon Wireless, which had 93 million customers or so in the first quarter, out of 286 million total subscribers. Verizon has 31 percent of the market; AT&T has 25 percent; Sprint and T-Mobile USA both have 12 percent of the market.

Even at five million subscribers, Clearwire would still have only about 1.5 percent to two percent of the U.S. market, by the time it reaches that level, in two years, perhaps, assuming the overall market grows over the next two years about as much as it has been this year, and if Clearwire's growth accelerates.

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Clearwire Says It Has 3 Customer Segments

Clearwire says three customer segments already have emerged for the firm's fourth-generation wireless network. "A Clear customer is often a cord-cutter," says Clearwire CEO Bill Morrow. "This customer has a mobile phone, but no fixed line phone in the house." That customer fits the profile of an on-the-go user that wants broadband available outside the house.

"They also probably don't have cable TV service," he says, and tend to substitute Hulu, YouTube or other video sites for TV. It probably goes without saying that this sort of customer is single and younger, without children.

The "cable customer," on the other hand, "can't cut his Internet connection at home," says Morrow. That is because this second sort of customer has a family sharing a single at-home video entertainment connection, as well as a broadband Internet access connection.

In this segment, the 4G wireless service is part of a triple play package.

The third segment consists of mobile customers served by Sprint that wants to add a broadband access service for PCs and other devices, and for whom the convenience of having both mobile phone and broadband access services on the same bill, provided by one carrier, is valuable.

"When you go into the market you see all these different customer segments and it's easy to see that you can get more subscribers in total by marketing to different groups instead of just having one brand," says Morrow.

Clear customers do use much more bandwidth than the typical 3G user, though. "We're finding that customers are using on average 7 GBytes of data per month on our service," says Morrow. "The average amount of data a 3G subscriber uses a month is about 1 GByte to 2.5 GBytes a month.

It is not certain why this is the case. It could be that heavy users are attracted to the unlimited access, with no monthly caps. It could be that knowing there is no cap motivates usage, as broadband leads users to consumer more data than they do when on a dial-up service.

Clearwire Emerging as a Wholesaler

Perhaps Clearwire did not initially think its business model would be anchored by wholesale wireless, but that seems to be shaping up as key to its future. Of the 283,000 net new subscribers added in the first quarter of 2010, 111,000 of them, or 39 percent, were gained by wholesale partners.

Most of the other major national wireless providers also have some wholesale operations, but none likely approach Clearwire's percentage. Clearwire’s network is behind Sprint’s 4G services as well as Comcast and Time Warner Cable wireless services. Then there is T-Mobile USA, which seems to need wholesale 4G capacity as well.

It might not be unreasonable to speculate that one reason Clearwire is preparing for a transition to Long Term Evolution, instead of sticking with its WiMAX air interface, is that T-Mobile USA might well require LTE capability in order to sign up.

"There was an agreement before that was really a commercial deal between Intel and Clearwire that would restrict us from using anything other than WiMAX up to, I think it’s February of 2012," said Bill Morrow, Clearwire CEO. "That deal is no longer in effect."

Now, either Intel or Clearwire can give 30 days notice and the deal is over. "So it does give us the flexibility that if we wanted to do a commercial launch of LTE or some other technology, that Intel would not be holding us back," said Morrow.

With less than a million total subscribers, it is too early to say how the retail versus wholesale customer mix holds up over time. Should Clearwire pick up T-Mobile USA as a wholesale partner, and as Comcast and Time Warner Cable gear up their wireless operations, it is not hard to envision wholesale growing to be a majority of customers.

Clearwire Removes Obstacle to LTE Shift

Clearwire says it changed the terms of an agreement with Intel, one of its largest investors, that could eventually lead the way for Clearwire to switch to Long Term Evolution as its radio interface, ending its use of WiMAX. Clearwire and Sprint executives have said in the past they believe the two standards now are so similar it would not be difficult to adopt a unified air interface.

The new terms allow either Intel or Clearwire to exit the WiMAX agreement, which had until now forced Clearwire to use WiMAX through Nov. 28, 2011, with just 30 days notice. Those of you who believe Clearwire ultimately will switch to LTE can take that as a sign Clearwire might make the move before late 2011.

 CFO Erik E. Prusch reiterated the company's view that the overall ecosystem for 4G wireless was converging and as such, the market won’t have the technology wars in the future that it has seen in the past.

The technologies underlying LTE and WiMAX aren’t so far off as to make a transition from one to the other all that expensive in terms of the network costs, but devices that are currently running on the WiMAX network might need to be replaced if Clearwire implements a wholesale technology change on its radio network.

link to webcast

Wireless Carriers Need More Spectrum, But Can They Handle the Borrowing?

Though acquisition of more mobile spectrum is a key strategic imperative for leading U.S. mobile operators,  it is not clear how much capacity and flexibility Verizon Communications and AT&T have within their credit ratings to absorb future spectrum purchases, say analysts at Fitch Ratings.

That is a significant opinion. Despite the apparent belief in some quarters that the largest U.S. telecom providers are so well positioned they can handle any shock to their financial models, Fitch Ratings does not believe that is the case.

In fact, a number of factors, including the cost of acquiring new spectrum, ability to monetize broadband services more effectively and competition from application-based wireless services all pose "longer-term threats to telecom operators' balance sheets and cash flows," Fitch Ratings say.

Fitch believes Verizon Wireless and AT&T Wireless, because of their scale, market power, and financial strength, will be in a better position to cope with these challenges than many lower-margin contestants, should the market environment shift. But increased reliance on wireless communications is an issue for many other contestants as well.

A key issue for cable companies is whether their wholesale arrangement with Clearwire can bundle competitive offerings that can successfully offset the significant threat from next generation broadband wireless networks as the telecom industry transitions more and more traffic longer-term to wireless, Fitch analysts say.

The Federal Communication Commission's "National Broadband Plan" aims to release 70 megaHertz of spectrum available for auction in the 2011 time frame.

Depending on the timing of the auction, the final amount of spectrum available, and the aggressiveness of the bidding, it’s not clear how much capacity and flexibility Verizon Communications Inc. and AT&T Inc. have within their credit ratings to absorb future spectrum purchases.

The good news is that, by the end of 2010, leverage is expected to decline for Verizon and AT&T due to strong free cash generation and management commitment to debt reduction. Both companies’ leverage has been at the high end of Fitch’s expectations due to past acquisitions and spectrum purchases.

Other well-capitalized, smaller operators or new entrants with strong balance sheets and good
free cash flow prospects should be in a favorable position to acquire additional spectrum.

New entrants or smaller companies without good operational cash flow characteristics or
strong balance sheets would likely have a difficult time funding any commitments for
spectrum purchases or buildout requirements.

That suggests the coming spectrum auctions will reshape the competitive environment in significant ways, favoring the well-capitalized contestants and weakening the financially weaker firms.

The transition to 4G networks also would seem to provide an opportunity for operators to
implement a new pricing model for data services. But it is not clear the opportunity is all "upside."

Clearwire, for example, already offers unlimited mobile data usage for $40 per month. Clearwire does not currently cap subscribers’ data usage, where most cellular operators limit monthly data
usage at 5 gigabytes. Since AT&T and Verizon offer capped plans costing $60 a month, Clearwire is using its 4G spectrum to disrupt current levels of pricing.

The company’s management has indicated that Clearwire’s mobile WiMAX subscribers already average approximately 7 GBytes of data usage per month.

Given the current indication by operators that Internet video will be a key driver of traffic on 4G networks, operators will need to create larger “data bucket” plans with tiered pricing, as the current 5 GB 3G plans currently offered for aircards and netbooks would not be sufficiently large enough to handle subscriber demands from streaming video.

Is Another National LTE Network Needed?

Do businesses and consumers in the United States need one more fourth-generation nationwide wireless network, aside from the existing Clearwire, soon-to-be-built Verizon and AT&T networks, as well as regional networks being created by regional mobile providers and cable companies, not to mention high-speed 3G networks running at top speeds of 22 Mbps?

Though no firm answer can be given to that question, we might find out relatively soon whether investors think there is a need for another facilities-based 4G network of national coverage.

Harbinger Capital, which recently merged with SkyTerra, proposes to build a fully integrated satellite-terrestrial network to serve North American mobile users, with a national 4G terrestrial network covering 260 million people by the end of 2013.

The planned network would launch before the third quarter of 2011 and cover nine million people, with trials set initially for Denver and Phoenix. The next milestone is that 100 million people have to be covered by the end of 2012, 145 million by the end of 2013 and at least 260 million people in the United States by the end of 2015. Harbinger told the FCC that all major markets will be installed by the end of the second quarter of 2013.

The original thinking has been that wireless services within a number of vertical markets that are highly dependent upon the ubiquitous coverage and redundancy to be provided by its satellite network would be the core of the business strategy. But Harbinger might think there is a market broader than that as well.

Harbinger actually is required by the Federal Communications Commission to provide wholesale access to third parties, and also to restrict total Verizon Wireless and AT&T traffic to no more than 25 percent of total, to provide more competition in the market.

The big issue is whether there is substantial need for additional spectrum at this point. One might argue that industry requests, as well as FCC proposals, for allocation of an additional 500 megaHertz of spectrum for mobile broadband are clear evidence of need.

But there are other issues of market structure and competition. Assuming hundreds of new megaHertz of spectrum can eventually be relocated, most observers think the buyers of such spectrum would be the largest mobile providers such as AT&T and Verizon.

The Harbinger network, by definition, would largely be a platform for other providers, as it would operate as a wholesale provider.

The key business issue is whether there actually is sufficient business demand for another national 4G terrestrial network, though. Sprint and Clearwire both have relatively lavish amounts of spectrum already, and both have shown a willingness to sell wholesale capacity.

One might argue the key differentiator would be the satellite roaming features that would be available on handsets that normally default to the terrestrial network. But the bigger test will be of investor sentiment, as Harbinger will have to raise billions to build the new terrestrial network.

The 36,000 base stations that Harbinger plans to use, along with the tower sites, backhaul and other gear associated with a terrestrial network will require billions of dollars worth of investment.

Analyst Chris King at Stifel Nicolaus estimates that Verizon’s LTE network will cost about $5 billion to deploy. Clearwire has also spent billions on its network, with analyst estimates ranging from $3 billion to about $6 billion. There is no particular reason to think the ubiquitous terrestrial network Harbinger expects to build would cost less.

Investors will have to be found first, before there is a chance to test the thesis that another facilities-based 4G network is needed.

Sprint and Clearwire Might Go LTE for 4G

Sprint Nextel and Clearwire executives have said for some time that WiMAX and Long Term Evolution are similar enough that Clearwire could switch to LTE at some point. But that is more likely to happen when another technology migration to "fifth-generation" technology happens, not in the fourth generation.

In one respect, battles over air interface are simply part of the mobility business. Just as AT&T and T-Mobile opted for the GSM air interface while Sprint and Verizon opted for the rival CDMA air interface, and similar battles were fought over 2G standards, carriers will have to migrate their platforms over time, just as they always have.

The evolution from GSM (3G) to LTE (4G) will still require a new network, with a new air interface, operating on discrete spectrum and requiring new handsets and software. For that reason, each technology generation requires a fork lift upgrade and a refresh of consumer terminals as well. That's just part of the business.

So though Clearwire and Sprint chose WiMAX for 4G, their options for 5G remain open, and both Dan Hesse, Sprint CEO, and Bill Morrow, Clearwire CEO, say they could opt for an LTE derivative for 5G.

Hesse says the choice of WiMAX was based on the fact that Sprint could not wait for LTE standards to jell. It had a business need to move, so it did. "WiMax was tried-and-true tested technology at the time we made the choice," he says. "We couldn't wait."

related article

Trouble at Clearwire?

Clearwire generated $45.4 million in service revenues in its most recent quarter, a 91 percent growth rate year over year. Not bad. But it is the guidance for 2008 that is troublesome.IT expects a 29 percent to 35 percent subscriber growth to end 2008 with 510,000 to 530,000 subscribers.

Growth businesses aren't supposed to slow that much, so early into their growth trajectory. Average revenue per user doesn't seem to be headed in the right direction, either. ARPU in the fourth quarter was just over $36.00, slightly below the year-ago quarter.

More Funding for U.S. WiMAX?

Sprint Nextel and Clearwire are close to announcing the formation of a WiMax joint venture funded in part by a $2 billion injection from Intel Capital, the Street.com reports. As currently rumored, the deal would create a new company that pools Sprint and Clearwire licenses in the 2.5-gigahertz wireless spectrum. Additional financing also is expected from other firms.

An earlier partnership between Sprint and Clearwire died last November, when the two parties could not reach agreement on terms of the partnership.

Through a joint venture with Clearwire and a big investment from Intel, Sprint can move the expenses off its books and yet still continue to build a fourth generation network. Intel's interest in WiMAX is creating a new market for chipsets supporting WiMAX devices, including mobile PCs and handsets.

The unusually large investment by Intel Capital, which hasn't invested so much in any single company before, seems to be a signal that Intel worries about the U.S. WiMAX market. Though at one point it might have been conceivable that large incumbent wireless carriers might move to WiMAX on a wider scale, at&t Wireless and Verizon Communications now say they will back Long Term Evolution as the basis for their fourth-generation networks.

The issue is that WiMAX and LTE are different ways of creating capabilities seen as integral for 4G networks, so if Verizon and at&t aren't going to be creating WiMAX networks, Intel has to look elsewhere. T-Mobile USA, the fourth-largest U.S. mobile provider, is a logical candidate to go with LTE as well, as most of the GSM-based network providers seem to prefer that approach.

Aside from that strategic consideration, Clearwire 's part, the deal would provide cash it needs to continue operating and building its network.
Clearwire had about $1 billion in cash and investments at the end of the September quarter, but burned through about $400 million in cash to fund operations in that quarter, according to the company's most recent quarterly filing.

What's Good for Suppliers Also Good for You?

If you casually stroll past displays of PCs on the shelves of any electronics retailer, you'll see at least a few notebooks preconfigured for one brand of wireless data card access. Now, in one sense this is the same strategy used when software comes preloaded on your brand-new machine. Dial-up Internet access services, anti-virus, firewall and security, media players, browsers, games and so forth provide examples.

In the same vein, there has been an argument that the notebook screen represents real estate that a provider's icon must occupy to get more usage or attention. Up to a point there's a clear logic to such thinking.

But there's some point at which the strategy breaks down. Lots of machines sport RJ-11 connections for dial-up Internet access. I don't know how many of you think that's a "feature" instead of a "bug" anymore, but it's clearly not an important feature for many.

The point is that USB and Ethernet ports, like RJ-11 ports, are general purpose computing capabilities. They don't lock anybody into a continuing commercial relationship with any single provider. The user has choice.

Providing that a new notebook has sufficient hard disk capacity, most users probably just ignore all that preloaded software and most of the offers. Norton might disagree, of course, and that might be one of the salient exceptions. Others of us have to spend some time removing all the unwanted software from the machine or at least disabling their ability to start up automatically.

Suppliers might think otherwise, but the incremental cost of preconfiguring a PC for one flavor of 3G data card access probably outweighs everything but the revenue the manufacturer gets from the service provider for preloading the software.

Most people don't seem to have any problem buying a card when they want to use wireless broadband services. To be sure, there might be some instances where a particular buyer of a particular model actually wants to buy wireless broadband from the precise supplier whose access software is preloaded on that machine. But not very often.

Perhaps an argument can be made that the revenue gotten by the PC manufacturer from such deals helps in some small way to control the overall cost of the device. In that sense, there is a consumer benefit. So maybe this is the PC equivalent of advertising. Users might not "like" it, or "want it," but it might help lower the cost of acquiring and using something else (their PC).

Still, it's hard to imagine that preloading broadband wireless for a single provider can be done on a wide-enough scale to produce incrementally-significant customer additions.

The way this could work, though, is to do the reverse: sell a cheap device that actually is configured to use one broadband access provider. Consumers can do the math. If the value of getting a general-purpose computing device is low enough, and the price is lock in to one broadband access supplier, some buyers will do so.

Vodafone Data Plan Prices Slashed

In what appears to be a major bid to ignite the mobile broadband market, Vodafone NL has reduced data plan bundle prices as much as 50 percent for domestic usage and up to 85 percent for international use in 42 countries. That sort of thing might ultimately have direct implications for U.S. high-speed mobile services as well. And the reason is that if it appears WiMAX or any other mobile broadband alternative is getting traction, incumbent mobile service providers have a potent weapon: pricing.

While no carrier would be thrilled about slashing its prices in the manner Vodafone has done, the fact remains that incumbent mobile providers have and texting revenues to prop up their revenue streams. Upstart mobile broadband providers will have less margin to drop their prices. Which leads one to wonder what will happen when Clearwire and Sprint fire up their new WiMAX network on a continental basis (assuming Sprint perseveres).

All discussion of technology advantages and attributes will become irrelevant if the pricing leadership changes in any significant way. Pricing also is key to creation of some potential new mobile Web business with different pricing and use cases than today's mobile devices provide.

In other words, will WiMAX develop as a cable replacement, 3G replacement or foundation for mobile devices other than phones? In the first or second cases, pricing policy is pretty simple: offer comparable service at lower prices. In the last case, the issue is whether a sustainable business can be built around non-voice devices: cameras, game platforms, music players, navigation, mobile Web. In that case, prices probably have to be quite aggressive.

So part of the equation and business model is whether a WiMAX network can be built cheaply enough, and operated efficiently enough, to offer such lower pricing. In any event, it appears at least some leading mobile providers aren't going to wait to find out.

And as this forecast from In-Stat suggests, most of the future WiMAX market is going to be mobile, not tethered.

Pre-paid Vodafone mobile users in the U.K. last summer also found themselves offered new lower pricing of £2 per Megabyte for mobile data rather than the original £7.30 per MB. While not a complete flat rate plan, it's a possible step in that right direction.

Will Google Bid?

The deadline for filing an application for the 700-MHz auction is Dec. 3. The actual auction starts Jan. 24; the names of the bidders will be disclosed on Jan. 14.

Prediction: Google will submit a bid of $4.6 billion. But maybe no more than that, and the winning bid will certainly be higher. Now that Verizon has agreed to open up its mobile network to any compliant device or software, and having already gotten working agreements with Sprint, T-Mobile and Clearwire, Google might not need to secure spectrum simply to ensure that its open approach to the mobile Web has a place to develop.

Clearwire Shares Drop 25% at Market Open

...as a result of the scuttling of its proposed agreement with Sprint to build a natinal WiMAX network reaching 100 million potential users. Investors reason that Clearwire now will need a new cash infusion, as it continues to lose money on its operations.

Sprint, Clearwire Deal Dead

In a surprise move, Sprint Nextel Corp. and Clearwire Corp. say they are scrapping their agreement to jointly build a nationwide high-speed wireless network based on WiMax technology, after failing to reach agreement on terms of the deal.

The move naturally will increase speculation about the fate of the Xohm WiMAX venture, given Sprint's desperate need to shore up its existing mobile phone business. Obviously, the asset is easier to sell or spin off if Clearwire isn't involved.

Is it not too early to predict that Google strategists now will be taking another look at spectrum options? At the same time, might not once more note that the complexity of running two separate networks, sets of devices and software are part of Sprint's problem?

Other carriers have dealt with such issues by collapsing all services and users onto a single technology platform. Clearly, most of the churn issues are caused by the Nextel base, heavy with small business users. The Nextel iDen network is a-now unusual platform that nobody anywhere else supports, besides.

At one point, the Nextel customer base was prized within the mobile industry for its significantly-higher voice average revenue per user. These days, as revenue growth is coming from new data services, the gap has narrowed almost to insignificance, and surely will vanish.

At one time, Nextel's "push-to-talk" feature was unique, but other providers now are able to mimic that feature. It's popular in the construction business, but when was the last time you saw anybody use that feature who wasn't in a field service work scenario?

Operating two networks leaves Sprint with a troubled customer base, higher churn issues, an unusual technology platform and all the other issues--such as limited handset choice--that come from being a low-volume customer. There's more downside than upside. And be clear, most of the churn is from the Nextel side.

From Google's vantage point, it is clear that the Sprint WiMAX network will be built and operational years before any 700-MHz network will. Sprint's WiMAX network has been designed for mobile access, where Clearwire has been taking the fixed approach. Mobility works better for Android devices, obviously.

Sprint now says it will review its WiMax business plans. It also should be seriously considering what to do with the Nextel assets.

New Direction for Google, Sprint, Clearwire?

The only clear and unambiguous statement one can make about Google's mobile aspirations is that mobile advertising is key to Google's future growth. Everything else is open to discussion. And even as speculation remains about Google's possible interest in owning 700 MHz spectrum or even designing its own mobile devices, new possibilities continue to arise.

Under pressure for failing to protect the business it has got, Sprint executives are likely to consider some alternative future for the WiMAX network it has been touting as its fourth-generation network. Finding some way to monetize and offload the asset are among the obvious options. Merging the WiMAX assets with Clearwire is one option, though doing so without monetizing the restructured asset won't help Sprint very much, if the attempt is to lighten the capital spending and management attention burdens.

Sprint could do so if it spun off the WiMAX network in some way. And that's where Google has yet another option. The problem with owning 700 MHz spectrum is that service can't be provided until the network is built, requiring more cash and more time. Google might not want to wait.

The WiMAX network will be commercially viable long before any 700 MHz network will. So add more more wrinkle to the "what will Google do in mobile" speculation.

At this point it also seems safe enough to assume that some sort of reference design and operating system are under development, even if Google does not itself roll out its own phone. Separately, Google also is maneuvering to get prominent play for its mobile-optimized applications on existing devices and networks. And none of the tactics and strategies are mutually exclusive. Google might do some or parts of all of them.

Disruption? Maybe Not.

Lots of companies and lots of people have been at the "telecom disruption" game for quite some time, beginning way back with the Carterfone decision and MCI's assault on the long distance calling market. We have had Internet service providers, competitive local exchange carriers, hosted service providers, application providers, instant messaging providers, portals, VoIP providers, cable companies, satellite providers and others attacking one part or another of the global telecom value chain.

Through it all, global communications service revenue has kept climbing. In fact, you'd be hard pressed to find any year when that didn't happen. Perhaps the issue is not disruption at all, but rather transformation. There will be new spaces created, and a rearrangement of older spaces. But nothing has stopped global revenue from climbing, year after year.

Of course, all the analysts could be wrong. Some cataclysm could yet await. But it sure doesn't appear to be something you would build your company on.

Has Muni Wi-Fi Missed the Window?

Municipal Wi-Fi arguably had a market window within which it had to get traction or lose out to cable companies and especially telcos. With EarthLink now backing out of the remaining deals it originally negotiated, that window could slam shut. That isn't to say there might not be some niches it could fill, but they will be smaller niches.

The higher end part of the fully mobile market will be able to buy fourth generation mobile services, broadband based on 700 MHz spectrum, WiMAX and 3G broadband services. The tethered part of the market will simply find cable modem, Digital Subscriber Line and fiber to home services too attractive to ignore as well. The out of office portion of the market increasingly can use T-Mobile hotspots, hotel Wi-Fi and airport Wi-Fi.

Clearwire and satellite broadband are going to make more sense in most rural markets, though independent ISPs continue to offer basic tethered access using Wi-Fi technologies adapted for more focused line of sight deployment.

Wi-Fi had to get into place before WiMAX arrived, and it looks like it simply is too late to be a sizable mass market access opportunity. That isn't to say hotspots are not a business at all; simply that it is a niche.

That said, sizable niches do exist for providers of satellite broadband in some segments of the market. WildBlue, ViaSat, Gilat and HughesNet prove that the niche exists. And Spaceway might someday create additional niches in the smaller enterprise market as well. Wi-Fi, though perhaps not of the muni variety, might continue to provide such a niche.

What does WiMAX Displace?

To the extent that mobile phone penetration is nearing saturation, while broadband access to businesses and homes also is close to saturaturated, at least as a technology supporting personal computers, one has to ask what customer demand WiMAX will cannibalize. Well, I suppose some people might argue WiMAX creates a new market, but the issue still is to envision what that new market is.

So far, it appears most observers other than Intel Corp. think WiMAX will supplant some other form of access.

Intel clearly sees WiMAX as a technology that changes demand for lap-top PCs. As Internet access has changed requirements for desktop machines, so Intel believes WiMAX will create new demand for mobile machines that are always connected.

But most service providers seem to view WiMAX as a technology that extends or replaces some other existing end user value or network. Sprint sees WiMAX as a technology that changes the mobile phone market by extending beyond third generation platforms, first augmenting and then replacing earlier generations of technology.

T-Mobile might view WiMAX as a technology that potentially displaces Wi-Fi hotspots. Cable and telephone companies see it as a threat to cable modem, fiber-to-home and Digital Subscriber Line services.

I wouldn't be so sure WiMAX ultimately will have most impact as a PC-affecting technology.

It seems to me more likely it will have much more significance as a mobile phone and mobile handheld device platform. There are all sorts of reasons why users aren't going to take advantage of mobile WiMAX from their PCs, including ambient light and furniture. Everybody can reach for and use a mobile in a pocket or purse.