Today Clearwire said it had completed the transactions that will allow it to build the first nationwide WiMAX network, to be known as Clear. CEO Ben Wolff took a few minutes to answer some questions about what the upcoming service will look like, how Clearwire might handle network congestion and how the recession might affect the speed with which Clearwire builds its network. Below is an edited transcript of our interview:

GigaOM: How much will it cost to build the nationwide network and will the economy slow the buildout?

Ben Wolff: Coupled with what we’ve spent, the $3.2 billion from our investors, and based on the same build schedule we released in May, we need to raise $2 billion to $2.3 billion in additional capital and will look at doing so in the next couple of years. We’ve got the ability to modulate the build plan to the point where we could reduce that funding gap by slowing down the build. That’s one of the first things the new board is going to address in the January meeting — make decisions about how quickly we build.

GigaOM: How will the white spaces broadband spectrum compete with WiMAX?

Wolff: We don’t see the whites spaces spectrum as being competitive with our network, much as we didn’t view the Muni wireless networks as competitive. We see it very much as being complementary with the Clear service. The white spaces spectrum will be unlicensed, and any time you have unlicensed spectrum as the primary means of connecting to the Internet you have the potential for interference and quality-of-service issues. We like the idea of relying on white spaces in some of the more rural areas and dense urban areas.

GigaOM: Will Clearwire or its partners use femotocells to build out the wireless networks?

Wolff: I think that femtocells are promising for any kind of wireless network. Having a femtocell indoors will provide better in-building coverage, and an opportunity for our [cable] partners to look at ways to utilize the backhaul they have going into the house. I think all wireless networks going forward could use them, but there are still questions about the business model — who pays for it and getting the cost of femtos down to a point where they can be cost-effective for a home.

GigaOM: Will WiMAX be as fast as LTE and can it act as a fat enough pipe to deliver Internet service to the home?

Wolff: I don’t think there is going to be much in the way of performance differences in LTE and WiMAX. The limiting factor is unlikely to be the technology; it’s likely to be how much spectrum the operator has available for 4G services. We have 100 MHz of spectrum and are in great shape to ultimately deliver a robust broadband experience.

GigaOM: What kind of services can Clear deliver using WiMAX?

Wolff: The suite of services people will eventually be able to buy are residential broadband, mobile broadband for each individual in the house, residential voice, and ultimately, mobile voice.

GigaOM: Since this is all IP network, will you charge for this as individual services or will this be one service that consumers can buy and add things like VoIP to?

Wolff: There will be some customers that will use a bring-your-own-VoIP service and we’ll offer our own managed mobile voice services that will offer higher quality of service.

GigaOM: What about network management such as blocking some traffic or slowing it down when the network is congested?

Wolff: We will have to experiment with how were dealing with network management issues. We won’t ID specific bandwidth-hogging apps and try to restrict or limit those. What we’re going to do is manage the network on a sector-by-sector basis, so if there’s no congestion we do nothing. If it turns out we do have congestion, we’ll manage bandwidth for all users in that segment rather than by applications.

GigaOM: Can a WiMAX network really provide the amount of bandwidth necessary to offer services such as streaming video that can really clog wireless networks today?

Wolff: One of the benefits over 3G is we have much more capacity, and we designed it to have a large number of customers using a large amount of data — including consistent streaming capacity.

Poor Beaumont. The tiny Texas town gained fame in the technology world when Time Warner Cable said in January that it would use it as a testbed for its tiered broadband trial. Then Hurricane Ike hit in September. And right before Thanksgiving, AT&T told the local paper it would start trialing its own brand of tiered broadband service there. When I ask AT&T why it would pick on Beaumont, a spokesman told me via email that, “While we are aware of Time Warner’s local trial in Beaumont, our decision was based on Beaumont’s good representation of many of our other markets.”

Perhaps, but it’s also a classic example of why we need competition in the broadband arena. Beaumont is a small market and as such, doesn’t offer a lot of choice when it comes to broadband providers — making it easy for the dominant players to implement anti-consumer initiatives such as overage fees and tiered plans. AT&T will charge its Beaumont customers $1 for every gigabyte over 150 GB per month, while Time Warner Cable has a set of plans that allow users to download between 5 GB and 40 GB per month before facing overage charges. The FCC is attempting to bridge the broadband gap by encouraging new wireless technology, but I’m not sure those networks will be robust enough for the home, which will require fast speeds and the ability to stream video content. That means the digital divide will continue to exist even as companies and the government attempt to eliminate it.

Clearwire said today that it has closed several transactions that will allow it to build out a nationwide WiMAX network, including gaining control of Sprint’s Xohm network and a $3.2 billion investment from several large companies. These deals were announced in May, and despite the downturn that has pummeled stocks since then, the terms of the deal have not changed. The new nationwide WiMAX service will be branded Clear.

Clearwire received the $3.2 billion investment from Comcast, Intel, Time Warner Cable, Google and Bright House Networks. The cable providers will also resell the WiMAX service, even hinting that they will integrate wireless into some of their other broadband and entertainment offerings, much like AT&T and Nokia each hope to do. Sprint will also resell access to its current 3G network to the newly created Clear, paving the way for dual-mode 3G and 4G devices that will ensure that WiMAX devices work even where there’s no WiMAX network. This will be important in signing up mobile users. Below are other important bits from the call:

• Baltimore, Md., and Portland, Ore., will be the first cities to go online, with no mention of Chicago and Dallas which were to go live under Sprint’s Xohm brand soon.
• Clearwire CEO Ben Wolff says most of the $3.2 billion investment will go toward building out the nationwide network. Many of the pre-WiMAX markets that currently have Clearwire service will get Clear service in 2009.
• Wolff also said that Clearwire is building the Clear network with equipment that can also be used for LTE deployments, meaning if LTE becomes necessary, Clearwire can upgrade its network more easily.
• Barry West, the former CTO of Sprint Nextel and head of the Xohm efforts, will become president and chief architect of Clearwire.
• Atish Gude, formerly senior vice president of Sprint’s XOHM mobile broadband operations, is now senior vice president and chief marketing officer of Clearwire.
• First products on the market are embedded WiMax chips in laptops and USB modems, but by mid-2009 consumers will see more mobile Internet devices, MP3 players and other consumer electronics that can run on the Clear WiMAX network.
• The Clear network should provide customers with average download speeds initially of 2-4 megabits per second and peak rates that are considerably faster.
• Clearwire now has 100 MHz or more of 4G spectrum in most markets across the U.S.

The Federal Communications Commission is expected to address the issue of creating a nationwide, filtered broadband network at its Dec. 18 meeting according to the Wall Street Journal. That gives that meeting the potential to be as controversial as the one held last month on election day. The November meeting approved two mergers and created the potential for free wireless spectrum over the protests of broadcasters. This upcoming meeting could create free, licensed wireless spectrum in the AWS-3 band, ticking off T-Mobile, which paid $4 billion to lease the adjacent AWS-1 spectrum.

The FCC had issued a rule making on the topic back in June with a proposal that would create two tiers of wireless Internet service in the 2155-2175 MHz spectrum band. The lowest tier would provide free wireless broadband for the 100 million Americans who don’t have access to broadband right now, and a carrier would sell access to the faster tier for all comers. The rule making was similar to a proposal created by the Kleiner-backed startup M2Z Networks, which had asked the FCC to give it the spectrum for free.

Originally, the FCC had talked about filtering that free wireless network to rid it of objectionable content for everyone, but in October, when the FCC issued a report saying that such a network wouldn’t interfere with T-Mobile’s network, a spokesman for the regulatory agency said the filtering provisions would only be aimed at children. That could stop some consumer advocates from protesting the FCC actions, but it won’t stop T-Mobile, which shows no signs of backing down, even though its efforts to stop the proposal on the grounds that it will interfere with the T-Mobile network have failed.

At the meeting, the Commission is also expected to take up the issue of a la carte cable, as well as cable providers’ tactic of switching some formerly basic channels to a higher service tier — in effect raising the price for service for some subscribers, angering consumers and content providers. Much like the outgoing Bush administration is striving to issue its own rules before the changing of the guard, FCC Chairman Kevin Martin is attempting to make his mark on the nation’s communications before his exit.

Updated: The sales of Cable modem termination systems (CMTS) declined 32 percent in the third quarter of 2008 to $246 million, according to research firm Infonetics Research. In comparison, $360 million worth of CMTS’ were sold in the second quarter of 2008. One way to interpret this is as yet another data set pointing to a severe slowdown in demand for broadband across the board. We had earlier pointed out that the economic problems were impacting U.S. communications companies, especially those with exposure to hot housing markets. No wonder UBS analyst Nikos Theodosopoulos is projecting global service provider spending will go down by as much as 10 percent in 2009.

Any slowdown could be bad news for gear makers like Arris, which provides broadband gear to companies like Comcast. At a recent UBS telecom conference Robert Stanzione, Chairman and CEO of Arris, said his “key growth opportunities going into 2009 will be largely centered around DOCSIS 3.0 deployments,” along with sales in the international markets. The company felt that the cable capex could be flat or down net year, but Stanzione said Arris will do well anyway, because it thinks DOCSIS 3.0 will be key priority for cable companies and they will spend on it.

Not so fast. Infonetics analyst Jeff Heynen thinks that with consumers holding onto their purses tightly, the cable companies might slow the rollout of DOCSIS 3.0 wideband services, as “it remains to be seen whether consumers will want to upgrade their broadband connections when budgets are already strained.”

As you all very well know, I have little patience for Comcast and its anti-innovation policy of metered broadband. If you are like me and are looking for an option, in San Francisco you can get 18 Mbps ADSL2+ connection from Sonic.net, a small ISP which has puts its own gear in nine central offices in the city. The service called Fusion Broadband isn’t exactly cheap but at least you aren’t going to be metered. CEO Dane Jasper emailed to let us know that his service is also available in Berkeley, Albany, Santa Rose and bunch of other cities.

Updated with Cisco Confirmation: If you want to know how bad it is going to get for all of us in Silicon Valley, just look at Cisco Systems. For first time in its history the company is going to shut down for four days at the end of the year, according to a report by UBS Research. Remember when such shutdowns were associated with industrial era companies? Well, this is the new past as they say. I heard that a major internal annual event has been put on hold as well.

Cisco’s four-day shutdown is part of an effort by the company to save $1 billion. It might be more than just cost savings because Cisco (and many of us) doesn’t have visibility into 2009. Cisco, as a company has just seen Wall Street, a major customer shrink in size. At the same time it is facing low-cost competition from Dell, HP and Huawei. The New York Times is correct in identifying HP’s ProCurve businesses as slowly becoming a major competitor to Cisco. “HP is a much more formidable challenger to Cisco, and it has sent an obvious message,” Nikos Theodosopoulos, an analyst at UBS Securities told The Times.

Cisco has confirmed the shutdown and other cuts in a blog posting pointing out that it had started talking about these initiatives following its Q1 2009 earnings release

We will be target reductions in travel and discretionary-related expenses, including offsites, outside services, equipment, events, trade shows, marketing and other activities.  As part of this effort, we will also implement a year-end shutdown of the US-Canada theater from December 29, 2008, through January 2, 2009 (note that January 1 is already a holiday).  There will be some exceptions for targeted business-critical teams including technical assistance services and channel partner and customer product ordering services.  

While this is not our first year-end shutdown as we followed this longstanding Silicon Valley practice in our early years as a company, it is our first in over a decade.  Given the difficult macroeconomic conditions, we believe our cost control focus at this time is appropriate while still providing our partners and customers with critical services over the holiday period.

In an order released yesterday, the Federal Communications Commission declared certain parts of the New York City cable market competitive, thanks to Verizon offering its FiOS TV in the area. This means the FCC also revokes the ability of the municipal authorities of New York to regulate how Time Warner Cable sets its basic cable rates. So far, it looks like parts of Brooklyn and Manhattan are competitive, if one can envision a duopoly (in areas where Cablevision doesn’t provide service) as real competition. Although I may be too cynical, as I bet that TWC will find it hard to implement tiered bandwidth when going head-to-head for broadband and cable subscribers with Verizon, which has shown no inclination to cap or meter customers. Maybe I should hightail it back to Brooklyn.

As people in the U.S continue to line up for mobile phone launches, the rest of the handset market is looking pretty grim. Optimistic news about the BlackBerry Storm is akin to Restylane in an aging actress — a plastic filler that hides signs of decay underneath. Today Samsung said that the handset market won’t achieve the 9 percent growth it anticipated for 2008 back in June, and pointed to a lackluster 2009. James Chung, a spokesman for Samsung, told Reuters the electronics giant was looking at single-digit or (the mathematically impossible) “negative growth” for next year.

This follows Nokia’s grim update earlier this month in which the world’s No. 1 handset maker predicted a sales slowdown. As we’ve already noted, lowered handset sales hurt chipmakers and handset makers, and may eventually hurt carriers, which use new handsets to encourage consumers to buy new, or more inclusive, data plans.

Wireless data plans are still enjoying a steady takeup rate as people purchase sub-$200 smartphones. But even though people may still buy those smartphones as Christmas gifts, my bet is that data subscriptions will also hit bumps if the economy continues to pummel consumers. I fired off a quick email to Chetan Sharma to find out how he thought the lowered handset forecast might affect carriers and their efforts to push data plans; he said we won’t know for sure until next year.

“Now, we don’t know if these trends will counter each other to balance things out or will the replacement cycles slow down quicker to bring down the services market. Q3 data didn’t have any indication of that and I doubt if Q4 data will have any conclusive evidence of the trend. I think the first indication of things are shaping up will be in Q109 results as by then consumers and the markets will have a better understanding of the new economic policies.”

March is a long time to wait, but I’m curious how the economic slowdown will affect your data subscriptions. Will you pare back?

The growth of the Internet is both true and greatly exaggerated depending on which web you look at, according to a rundown of data offered last night by Prof. Andrew M. Odlyzko of the University of Minnesota School of Mathematics. Growth of the wireless web is far outpacing the rise in use of the wired web, and providers charge more for wireless traffic. Odlyzko compiles an annual report on the growth of Internet traffic that generally looks at growth not as an incoming exaflood of information designed to take out networks or sell more routers, but to actually forecast the growth of networks.

In his rundown of recent, available data, the wired web has been growing by about 65 percent worldwide from the third quarter of this year over last year judging by stats from PAIX, an Internet exchange. Otherwise, growth appears to be slowing in North America and Europe, although Odlyzko is looking at only a few data points for this update. However, he concludes that wireless web growth is up 400 percent based on a report issued last week by Opera, which makes the Opera Mini mobile browser. As wireless growth explodes, look for carriers, in a bid to both control access and boost revenue, to implement tight controls on what users can and cannot do on their data plans. And even though wired web growth is slowing, don’t expect carriers to suddenly abandon their efforts to squeeze more out of subscribers with tales of video clogging the network.

The Wall Street Journal this morning had a short article pointing out the somewhat obvious reasons why location-based services on cell phones are still not mainstream. It also helpfully pointed out that carriers were working on it. To recap, LBS services need three main things: a way to get location (which we have thanks to GPS chips and even the ability to triangulate using Wi-Fi networks), software that can make sense of geographic information and do something with it (which are out), and cooperation between handset makers and carriers to enable developers to access such services easily.

It’s the cooperation piece that fails, but the article points to several companies such as Nokia, uLocate’s Where application and SkyHook Wireless that are attempting to bridge that gap by offering a platform that will sit between carriers and smaller developers. For example, uLocate has signed a deal with Sprint to act as the LBS platform for its WiMAX network. Smaller developers can sign on through Where and get access to WiMAX subscribers without worrying about working with Sprint or getting the location information form a provider. I suppose since we’ve waited this long for LBS, most of us can wait a little longer.

image courtesy of Where

I’d better hightail it to Washington, because a reshuffling of Congressional Committee members is poised to herald more regulation for telecommunications firms on issues ranging from rural access to Net Neutrality. Yesterday Rep. Henry Waxman ascended to the head of the House Committee on Energy and Commerce — which you may remember for its investigation into how web firms use consumer data — and convened two hearings into online privacy.

As the head of that committee, Waxman has considerable influence over its agenda. The Wall Street Journal speculates that Waxman will delegate many telecommunications issues to Rep. Ed Markey, of Massachusetts, who has already pushed for a Net Neutrality bill, and has a fondness for consumer issues.

In the Upper House, Sen. Jay Rockefeller from West Virginia will likely be named the head of the Senate  Committee on Commerce, Science and Technology, and as the representative from a heavily rural state, is likely to push for access to broadband. He would replace Sen. Dan Inouye of Hawaii, who will chair the Appropriations Committee. Inouye had supported Net Neutrality rules, as well as the entrance of new bidders into the 700 MHz auction.

Of course, if politicians are willing to float regulations on telecommunications, they’re also likely to float more regulations in general — some of which the pro-Net Neutrality crowd won’t enjoy. Rockefeller wants to introduce legislation to make the FCC regulate television violence, while Markey  has sent letters to the FCC expressing concern about the use of product placement in television shows.

I’ve spent the past few days pretty immersed in the SC 08 conference here in Austin, Texas, but I’m still embarrassed that I missed the formation of a new lobbying organization think tank called The Future of Privacy that’s being funded by AT&T. The group hopes to help policy makers and business leaders figure out how to manage online privacy.

A big source of irony from the group, other than its purported focus on online privacy to benefit consumers and the industry alike, is that Co-chair Christopher Wolf also headed up one of my favorite astroturfing efforts, Hands Off The Internet, the phone company think tank dedicated to Net Neutrality. Somehow, that connection isn’t mentioned in his FOP bio. Wolf is a litigation partner in the Washington, D.C. office of Proskauer Rose LLP, a firm that does work for AT&T. The other co-founder of FOP, Jules Polonetsky (here’s a great interview on his views on Internet privacy), was the former chief privacy officer at AOL. Prior to that he worked at DoubleClick, which was bought by Google.

The creation of the FOP is both a good thing and bad thing. It’s a sign that consumers worried about how their private information is collected and used on the Internet have been taken seriously. On the other hand, the backer and members of this particular organization are highly likely to influence legislators in a direction that will keep consumers’ data in their hands.

I hope that some of the more privacy focused representatives can cut through the corporate double-speak that I have seen firsthand from the telecommunications companies on other issues. Perhaps Google, which is not represented on the board, can start its own privacy think tank and we can watch the fight unfurl between caching private data for later use, and profiting from data as it travels through the ISPs’ pipes.

This issue of Internet privacy has gained more momentum in the last few months after ISPs contracted with a startup called NebuAd to monitor where a consumer surfs the web and serve ads against those visits. Other companies are trying this as well. Since then, Congress has held two hearings on online privacy, with one related to data collection and the other related to deep-packet inspection as employed by NebuAD and its ISP customers.

As the online experience becomes more interactive, the rules around of who’s watching us as we’re watching the web need to be defined. But in addition to worries about corporate spying, legislators and lobbying organizations should also take a close look at what governments can now access and use. For those of you following this space, the advisory board includes:

• Dorothy Attwood, Senior Vice President, Public Policy and Chief Privacy Officer, AT&T, who went before Congress to decry NebuAd’s tactics but noted that perhaps in exchange for lower rates a consumer might be willing to share more data with the ISP
• Chris Kelly, Chief Privacy Officer and Head of Global Public Policy, Facebook, the company that brought you the privacy nightmare known as Beacon
• Simon Davies, Director, Privacy International
• Peter Swire, a law professor at Ohio State University and Senior Fellow, Center for American Progress, who is advising President-elect Barack Obama on technology

I’m a geek groupie when it comes to technology. I can’t actually produce any of these life-changing products, but I can recognize something cool when I see it. And the 100-Gigabit data transfer demo that Ciena was showing off at SC 08 in Austin, Texas, today was very cool. Unlike previous demonstrations, Ciena’s was a 100-Gigabit data transfer over a single channel, rather than one aggregated over multiple channels.

The product isn’t available for commercial use yet (and there’s no date set for when it will be), but when it is, customers will be able to upgrade their existing fiber equipment with the Ciena kit to 100G. Other players, from Infinera to Alcatel-Lucent, are also trying to deliver 100G networks. Those speeds will help the core network handle the anticipated growth of Internet traffic, and lower the per-bit cost of delivering that traffic. In the video below, Dimple Amin, vice president of R&D and special projects at Ciena, talks about the demonstration, what it does and how far such traffic can travel. He also says there’s no technical reason why these speeds couldn’t be delivered at the edge of  the network to consumers’ homes. That would be the day.

Meraki, the Google and Sequoia-backed startup that focuses on citywide Wi-Fi networks, hasn’t let the demise of municipal Wi-Fi halt its efforts to make money or make the wireless network technology available in more places. It has scaled back considerably on its visions of open source, low-cost Wi-Fi for municipalities, instead focusing on Wi-Fi for apartment buildings, city squares and environments where someone is willing to pay to provide the service. Instead of connecting the world, Meraki wants to connect with paying customers. And that’s a good thing.

Today the company announced a Wi-Fi access point that plugs into a wall, and on Dec. 4 will release a lighter solar-powered access point to go places where power doesn’t. In a briefing about the products, it’s clear that Meraki still holds onto its altruistic views, with CEO Sanjit Biswas trumpeting the growth of Wi-Fi networks in Africa and small Chilean fishing villages. However, he’s quick to point out that hotels and apartment buildings can use the new Meraki products to rapidly install Wi-Fi networks that will cover a complex all the way from the pool to inside bedrooms.

In the last year, the startup has changed its business model several times, from trumpeting cheap hardware and charging a fee to access a dashboard, to tripling the price of its hardware and pushing ads. Such shifting hasn’t sat well with some citywide Wi-Fi network proponents, but the bottom line for many cities and customers is that Meraki’s Wi-Fi networks are still cheaper than those from vendors such as Cisco or Juniper. As Wi-Fi becomes more important, Meraki’s capitalizing on its cheaper gear with new packages that offer to unwire a city street for $10,000, or today’s launch of a residential package designed for apartments and hotels that costs less than $5,000.

Wi-Fi is of growing interest for both consumers and ISPs. Earlier this year, Quentanna, a Wi-Fi chipmaker hoping to build a plug-in home access point to boost wireless signals, launched with a few ISP customers on board. A few weeks ago AT&T purchased hot-spot provider, Wayport for $275 million. If Meraki can figure out a way to spread Wi-Fi and make money, it could be in a good position as ubiquitous access to the Internet becomes more important for gadget-toting consumers. Wi-Fi is one of the most common gateways to the web, and even in a down economy Meraki thinks it can make money on the tools to build those gateways rather than by managing them. Meraki has realized that instead of saving the world, it needed to save its business.

A report prepared for The Broadband Forum by research firm Point Topic and released today says that there are now 400 million broadband subscribers worldwide. In 1998, there were only 57,200 subscribers — that’s growth of nearly 600,000 percent. I was there — chronicling the emergence of now-forgotten names such as Northpoint Communications and @Home Networks. There was a time when the U.S. led the broadband race. Today we merely follow.

DSL is still the most widely used technology, but fiber is rapidly catching on. In 2002, there were 18,000 fiber broadband subscribers — now there are 45 million. Whichever way you look at it, this is a massive achievement and the numbers show that broadband is the platform. Had it not been for broadband, we wouldn’t have seen the emergence of Skype, YouTube, and countless other such innovations. But it’s all coming under threat, thanks to the backward-looking policies of companies like Time Warner Cable, Comcast and AT&T, all of which want to put a meter on bandwidth — and with it, innovation.

We will worry about that another day. For now, remember: 400 million broadband subscribers.