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The New Clearwire

Susan Crawford

The new Clearwire could be game-changing, but the rules of the game may not be quite as Clearwire presents them. I have been wondering since last July whether something significant would happen in the Google/Sprint world. The deal announcement earlier this weekseems to be that key development. (Here's the press release [PDF] and here are slides [PDF] describing the transaction.)

In a nutshell, Sprint will contribute its substantial spectrum licenses in the 2.5 GHz range and its WiMAX-related assets and intellectual property. Google, Intel, Comcast, Time Warner Cable, and Bright House Networks will invest a total of $3.2 billion. The idea is that this combination of investment and spectrum will allow the resulting "new Clearwire" to get a jump on AT&T and VZ in introducing highspeed mobile internet access — perhaps a two-years' lead. Part of this time-to-market advantage will come through Sprint's agreement to allow the new Clearwire to use its towers, fiber network, and IT support. Plus the new Clearwire is saying that it's using a standard — WiMAX — that was developed in 1995. (More about that below.) Verizon's preferred standard, LTE, or "Long Term Evolution," isn't as longstanding.

It's clearly exciting to have a potential competing provider of highspeed mobile internet access out there that could cover 140 million Points of Presence (units of coverage — a POP is an access point from one place to the rest of the internet that has its own unique IP address) by the end of 2010. But there are… issues.

Money. Not to sniff at the $3.2 billion investment of the cable/Google team, but there is already a prediction that the new joint adventure won't have enough money to carry out its plans. To get to the 140 million POPs, the venture knows it will need an additional $2-2.5 billion. Okay, maybe that's easy, but it's a hole. And some people are even saying that the venture is radically under-estimating the amount of money it needs — they're asserting that even after the additional $2.5 billion comes in, the new Clearwire will need another $5.5 billion to roll out "a mobile WiMax network with supporting backhaul in 50 markets in the U.S." ("Backhaul" means the part of the wireless network, owned or borrowed, that allows the communication to travel from a cell tower to a central site — either a switch or a node on an internet backbone. There's apparently a backhaul bottleneck that doesn't get talked about enough.) So it's unclear whether there's enough actual or potential money in the system to make it work.

On the other hand, all of this buzz and interest in WiMAX, as well as Intel's involvement, make it a possible trigger for gadgets and devices etc. for WiMAX — whose presence could in turn make the venture into an attractive investment opportunity in the years to come.

Technology. There seems to be a good deal of concern about WiMAX itself. Will it work? It's supposed to cover long distances, but will those high frequencies travel through walls? Won't it be awfully expensive to get towers (and their antennas) close enough to users to make coverage adequate? Clearwire talks a lot about its test of WiMAX going on in Portland, but that is still a beta installation and no one seems to have definitive results. Techies seems to think that you need lots of wires to make wireless work — wires to provide adequate backhaul and reach rural users — and that using the investors' cable systems for backhaul won't work because of all the slow upload problems we know about. Although maybe this will prompt the cable guys to upgrade. At any rate, lots of dubitante out there about WiMAX itself.

Openness. It's hard to tell exactly what's going on from the limited information we have on this transaction, but the press release [PDF] does say that "Google will be THE search provider and a preferred provider of other applications for the new Clearwire's retail product." And"Google will become the default provider of web and local search services, both of which will be enabled with location information, for Sprint."

How does this fit with Google's earnest (we thought) efforts in connection with the 700 MHz auction to ensure that VZ and AT&T open their devices and networks to foreign applications? It is true that Google's own blog posting about the transaction says that the resulting highspeed wireless internet access will "allow consumers to utilize any lawful applications, content and devices without blocking, degrading or impairing Internet traffic," but how does that square with the assertion of Google-exclusiveness (ex-gloogleness?) for the Clearwire "product" — whatever a "product" is in this context?

So we're cautiously optimistic, here at the Susan Crawford blog. We hope the thing will fly; we hope we'll be flying down freeways uploading wildly some day (from the passenger seat), and it's certainly good to see some disruptive investment in the wireless highspeed access area. But we wish Google hadn't asked for that excloogle placement as part of the deal.

By Susan Crawford, Professor, Cardozo Law School in New York City
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