Clearwire: Clearing the Decks for LTE?
They say it, and we believe it: Right now, for the foreseeable future, Clearwire Corp. (Nasdaq: CLWR) is a WiMAX company, selling a WiMAX-based 4G service that by all accounts is doing quite well. But the company’s potential to add Long Term Evolution (LTE) services to its portfolio increased in probability Wednesday, with the revelation of the reversal of a legal deal with Intel that had previously prohibited Clearwire from offering anything except WiMAX until late in 2011.
Since LTE equipment still isn’t even available in commercial volumes, it’s still early days to talk about any Clearwire-to-LTE move. But the noise over such a strategy may raise in volume following Wednesday’s quarterly earnings conference call, when Clearwire CEO Bill Morrow said that the company’s previous deal with major investor Intel — which effectively would have kept Clearwire from launching any services other than WiMAX until about 2012 — had been renegotiated, and has been replaced with a structure that is much more flexible, and will allow Clearwire to move more quickly to LTE should LTE-based services and devices (like say, an LTE iPhone) take off.
While it’s going to ride the WiMAX train as long as it can, Clearwire and its partners aren’t ignoring the obvious market momentum behind the still-developing LTE standard. In fact, Clearwire CEO Bill Morrow has publicly floated the idea of harmonizing the technologies in the future, under a hybrid 4G standard that could provide for economies of scale on all fronts. Given the remote possibility of that happening, the Intel re-negotiation is a sign that Clearwire is also already taking steps to ensure it can move to LTE just as fast as any other provider, maybe even faster than some others.
What makes Clearwire and LTE such an interesting discussion is the probable ease with which the company could add LTE services to its portfolio. (Unlike Stacey H at GigaOM, I don’t think this is necessarily an either-or-game.) Given its huge spectrum position, Clearwire has enough assets to build an LTE network side-by-side with its WiMAX network — unlike AT&T and Verizon, who are already talking about repurposing spectrum from 2G and 3G to make room for 4G.
In terms of network infrastructure, both WiMAX and LTE are IP-based, so it’s a guess that much of Clearwire’s core network equipment could handle both types of traffic. Responding to questions about LTE costs on the call, Clearwire was coy but did note that of a typical site build, the portion associated with radio-specific equipment represents between 10 and 15 percent of costs — so in theory Clearwire could build itself an LTE network for a fraction of the cost of a greenfield provider starting from scratch.
There are of course many details and questions to work through — such as the fact that Clearwire’s spectrum at 2.5 GHz is much different from the 700 MHz spectrum Verizon and AT&T will be using for their planned LTE deployments. But with big LTE backers Samsung, Huawei and Cisco in Clearwire’s corner, it’s safe to assume smart people are already looking into such challenges. Another note from the call today: Clearwire announced “vendor financing deals” with two of its infrastructure partners — perhaps a sweetener now to move to LTE later?