Despite doubts about Clearwire’s ability to compete against the coming rival 4G network of Verizon (s vz) and AT&T (s t), its users are apparently pleased with the service. Mike Sievert, chief commercial officer at Clearwire (s clwr), said the company’s mobile users (those on laptops and dongles outside the home) consume more than an average of 7GB per month of data. That’s a shocking amount of mobile data consumption, especially when all we’re hearing is how scarce spectrum is and how operators can’t keep up with the mobile demand.
But slaking that thirst for mobile data, and doing it cheaply, underlies Clearwire’s overall strategy. For now, that’s why it’s bet on WiMAX, but WiMAX plays only a small role in Clearwire’s cost benefits, which means that it’s not beholden to the technology after 2011, when an agreement with Intel (s clwr) that kept Clearwire and WiMAX together will expire. Sievert was coy when asked directly about the Long Term Evolution standard that the two largest U.S. carriers are experimenting with, but rather than obsess about the radio access technology, let’s look closer at the real disruption Clearwire offers.
Sievert said it cost Clearwire “somewhere in the mid-$20 range” per person to build out its WiMAX network, an estimate that relies on several things, from the cost of the spectrum to the number of the towers Clearwire needs to deploy. In contrast, analyst Chris King at investment bank Stifel Nicholas, has put the per-person cost near $20 for Verizon’s rival LTE network build.
But it’s once the network gets humming when Sievert believes Clearwire starts looking good, both because it will be cheaper to send bits across and enable the company to provide more capacity to data-hungry users, something that may play a larger role as rivals introduce tiered pricing plans, as both Verizon and AT&T have talked about doing.
Sievert credits the all-IP architecture of the Clearwire network for its ability to deliver bits cheaply, pointing out that Verizon and AT&T both will have more expensive legacy networks to run that include equipment for dealing with circuit-switched voice. In the short term this is an advantage for the LTE crew, because they can offer data across their 4G networks and keep voice on 3G — ensuring a consistent level of quality.
But long term, Sievert thinks the advantage is Clearwire’s, especially after it introduces handsets in 2011 that will use Sprint’s (s S) 3G network for voice (see video) and will then transition to VoIP. Sievert did not give a time frame for the all-4G phone. Eventually, however the LTE providers will also move to VoIP but aren’t likely to abandon their older networks for decades.
But the biggest advantage is Clearwire’s deep spectrum resources. If nothing else, the last few months has focused the tech world’s attention on the scarcity of available mobile spectrum. Well, Clearwire has a lot of it — about 150 MHz in many markets, while the other major carriers claim just two-thirds or less of that amount.
It also has 30 MHz chunks of spectrum that it can use for WiMAX, while Verizon, for example, has 20 MHz for LTE. Spectrum can be used to increase both speed and capacity, so while Clearwire’s current speeds of 3-6 Mbps down aren’t going to compare to Verizon’s 5-12 Mbps for LTE, Sievert says Clearwire could allocate another 10 MHz to match speeds and still have another 10 to spare to boost capacity.
So Sievert is content that he can profitably meet the needs of mobile broadband customers with his existing resources without having to resort to pricing gimmicks that may anger customers. And since, as I’ve argued, the average consumer isn’t too worried if their mobile wireless is LTE or WiMAX, Clearwire does have a chance. Add to that a relationship with the cable providers and Sprint, and Sievert claims he has access to 100 million customer relationships through his partners. In other words, if consumers decide they want unlimited wireless broadband from their existing cable provider, rather than a constrained offering from their wireless provider, Clearwire may succeed.
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