All Things Digital

Those on-again, off-again talks between Sprint (S) and Clearwire (CLWR)? They’re on again. In fact, they’re so on that they’re already over. This morning the two companies announced a $14.5 billion multi-player joint venture backed by cable operators Comcast and Time Warner as well as Intel and Google.

The alliance will see the four cable and tech companies investing $3.2 billion in the nationwide wireless network that Sprint and Clearwire have been struggling–with profound unsuccess–to roll out. Comcast (CMCSA) will contribute $1.05 billion, Time Warner Cable (TWX) $500 million. Intel (INTC) will invest $1 billion, Google (GOOG) about $500 million. The new venture will be majority owned by Sprint, but it will take the Clearwire name and be run largely by Clearwire execs, among them cellular industry pioneer Craig McCaw.

For the cablecos, which have yet to settle on a clear wireless strategy, the deal is a quick and dirty way to establish the high-speed wireless network they need to compete with telcos like AT&T (T) and Verizon (VZ). For Sprint and Clearwire, it’s a chance to make their non-starter of a WiMax network viable and something happy to talk about when conversation turns to Sprint’s stock price, which has fallen nearly 60% over the past 12 months.

That said, the deal is not without its problems–top among them WiMax itself. As Craig Moffett, an analyst with Bernstein Research, explained in a note to clients earlier this year, the 2.5 GHz spectrum upon which Sprint and Clearwire are building their network isn’t nearly as good as the spectrum Verizon and AT&T just purchased in the FCC’s 700 MHz auction. “Serious questions remain about penetration through walls and windows,” Moffett explained. “Elsewhere in the world, operators have also raised questions about WiMax’s real-world bandwidth, latency and non-line-of-site coverage. How competitive the offering would be versus Verizon’s or AT&T’s planned LTE broadband service therefore remains to be seen.”

That it does–though there have been some indications that it may not be quite up to par. Speaking at an international WiMax conference in Bangkok in March, Garth Freeman, CEO of Buzz Broadband, Australia’s first WiMax operator, described the technology variously as a “disaster,” “miserable failure,” and a standard “mired in opportunistic hype.”

So will that prove true for Clearwire as well? We won’t know for some time. Building out a massive network like this will take some doing. “We’ll likely to see early trials in 2010, but a full-fledged build-out will take longer,” Clearwire CEO Benjamin Wolff said during a conference call this morning. “Building faster is a matter of logistics. The build plan we’ve laid out will be one of the largest and fastest build-outs ever done. We have the capability to do it, but it’s a massive undertaking.”

As the anniversary of the iPhone’s market debut approaches, the Mac faithful are quickly succumbing to Apple (AAPL) Rumor Seasonal Affective Disorder, an ailment most often associated with the lead-up to Macworld.

Fueling that trend today is a memo, purportedly leaked from inside AT&T (T), instructing employees not to schedule any vacation between June 15 and July 12 to ensure sufficient staffing for “an exciting Summer Promotional Launch.” This, of course, is being taken as proof positive that the 3G iPhone will arrive at market sometime during that timeframe. And for good reason, AT&T issued a similar mandate last year prior to the iPhone’s official debut.

Meanwhile, Vodafone (VOD) and Telecom Italia (TI-A) said today that they’d both won contracts to bring the iPhone to Italy this year, the first time Apple has allowed two mobile carriers to distribute the device in a single country.

An interesting bit of news and one that lends some validity to recent reports that Apple is stepping back from the exclusive iPhone distribution arrangements it’s been inking to spur iPhone growth abroad. “Apple’s either turned a corner that they’ve had to turn, or that they’ve chosen to,” Technology Business Research’s Ezra Gottheil said of the Vodafone and Telecom Italia deals. “I don’t know if they prefer the exclusivity, and the revenue sharing that goes along with it, or just prefer to sell iPhones and grow their share of the [handset] market.”

Well, if this rumor proves true, Canada really will have to declare a national day of mourning for the BlackBerry (RIMM). When Apple (AAPL) CEO Steve Jobs uncrates the 3G iPhone a few months from now, presumably at the company’s WWDC conference in June, the device’s price may draw more oohs and ahs than its feature set.

Fortune claims AT&T (T) plans to knock $200 off the cost of a new iPhone for customers who sign two-year contracts. If that is indeed AT&T’s intention, the 8-gigabyte version of the device would likely price out at $199, the 16-gigabyte model at $399. Which is a pretty compelling value proposition given that the device will soon support Microsoft (MSFT) Exchange and run Spore, Salesforce (CRM), AIM from AOL (TWX) and a host of other third-party apps.

No wonder Apple execs seemed so comfortable reiterating the company’s goal of selling 10 million iPhones in 2008. At $199, they might be able to hit that number without the Asian markets.

Canada’s long national nightmare has ended. The iPhone’s coming to the Great White North. Apple (AAPL) and Canadian wireless provider Rogers Communications (RCI) have finalized a deal that will soon bring the iPhone to the RIM BlackBerry’s backyard.

“We’re thrilled to announce that we have a deal with Apple to bring the iPhone to Canada later this year,” Rogers chief executive Ted Rogers said in a statement just full of details. “We can’t tell you any more about it right now, but stay tuned.”

Good news for Rogers, which had suggested prior to the iPhone’s launch it would offer the phone in Canada, but was later forced to admit it hadn’t yet inked a deal with Apple.

Good news, too, for Canadian cellphone users. Particularly if Apple was able to wring a substantial reduction in wireless plan charges from Rogers–which, like all Canadian carriers, is notorious for its exorbitantly priced data rates. In the U.S., AT&T’s (T) combined iPhone service and data plans start at $59.99 for 450 anytime minutes, 5,000 additional night and weekend minutes, and unlimited data. A comparable plan from Rogers Wireless runs about $295 per month. And while the company recently began offering an “Unlimited On-Device Mobile Browsing Plan,” it doesn’t apply to BlackBerries, Windows Mobile devices or other smart-phones.

Sen. Ted Stevens was right: The Internet is not a big truck. It’s “a series of tubes”–tubes that can be filled to capacity by “enormous amounts of material.” And, according to AT&T, that’s going to happen about two years from now.

In remarks at the Westminster eForum on Web 2.0 this week in London, Jim Cicconi, vice president of legislative affairs for AT&T (T), said the Internet will hit its capacity in 2010. “The surge in online content is at the center of the most dramatic changes affecting the Internet today,” Cicconi said. “In three years’ time, 20 typical households will generate more traffic than the entire Internet today. We are going to be butting up against the physical capacity of the Internet by 2010.”

Clearly, some bigger tubes are in order here–$55 billion worth of them, according to Cicconi, who was quick to note that it will be companies like AT&T footing the bill for them. “There is nothing magic or ethereal about the Internet–it is no more ethereal than the highway system,” he said. “It is not created by an act of God, but upgraded and maintained by private investors.”

Ah yes, private investors. Like the ones who promised in the mid-1990s to provide fiber-optic connections to millions of households across the country in exchange for some $200 billion in tax cuts? The ones who never delivered on that promise, content to pocket direct tax credits of, on average, $2,000 per subscriber, without fulfilling their end of the bargain? Those investors?

AT&T (T) is “shifting headcount to areas where the customers are”–literally. This morning, the telecom sacked about 4,650 employees, trimming its work force by about 1.5%.

The cuts were made across the company and, according to AT&T spokesman Walt Sharp, are not an indication of weakness in the business. Said Sharp: “This is part of our ongoing evaluations to streamline the business. It’s about having the right people in the right job. … We’re shifting headcount to areas where the customers are.“

If Digg founder Kevin Rose is right, Apple’s next generation iPhone will include not one, but two cameras–the second a front-mounted video camera designed for iChat AV.

During a recent episode of his weekly Diggnation vidcast (see above), Rose claimed that the new iPhone reportedly being prepped by Apple (AAPL) for a summer release will enable video conferencing over AT&T’s (T) high-speed 3G wireless network.

Like most such predictions, Rose’s should be taken with a grain or two of salt. His last iPhone premonition, which had the device featuring slide-out keyboards, dual batteries and CDMA and GSM support, was laughably inaccurate. That said, he did accurately predict the debut of iPod nano ahead of its 2005 debut. So there may be something to his latest claim. Certainly, it sounds plausible.

After nine days of nail-biting excitement, the Federal Communications Commission’s auction of the 700 MHz spectrum is beginning to wind down.”

I wrote that over a month ago, and boy was I wrong. Though the FCC is clearly keen to end it, the auction continues to drag on with cellphone companies fighting it out over niggling little bits of 12-megahertz B-Block spectrum in Albany, Ga., Yuba City and Imperial, Calif., Ashtabula, Ohio and Hunterdon, N.J. Apparently, pushing the clocks ahead an hour this past weekend didn’t do much good.

With bidding appearing to have entered the final stretch, the auction has raised nearly $20 billion, double the sum for which the FCC had hoped. Stifel Nicolaus analysts Blair Levin and Rebecca Arbogast predict it will end this week with Verizon (VZ) and AT&T (T) coming out as the auction’s biggest winners, and Google (GOOG) as a “willing loser.”

What do you do when you’ve just posted a $29.5 billion loss and you expect to lose 1.2 million customers this quarter, as many as you lost in all of 2007? Well, if you’re Sprint (S), you announce a $99.99 unlimited calling and data services plan.

This morning the nation’s third-largest wireless carrier recorded a massive fourth-quarter loss, suspended its dividend program for the ”foreseeable future,” borrowed $2.5 billion to improve its “financial flexibility” and announced a shiny, new discount service plan presumably intended to make everyone forget about its deteriorating business. Sprint’s ”Simply Everything” plan offers unlimited “voice, data, text, email, Web surfing, Sprint TV, Sprint Music, GPS navigation, Direct Connect and Group Connect” for $99.99 a month.

Not bad for a package of services for which customers have typically paid a premium. Trouble is, it’s relatively close to the $99 price point plans introduced by Verizon, AT&T and T-Mobile earlier this year. Granted, Sprint’s plan is the only one that includes data right now, but it likely won’t be for long. Certainly, Sprint CEO Dan Hesse doesn’t see it as a cure-all for Sprint’s problems. “I want to make it clear that it’s not a silver bullet,” he said during a conference call with analysts. “But it’s a very important piece. Our business is not performing well right now. We are working aggressively to turn this around, but our financial performance will not improve overnight.”

The only difference between Yahoo CEO Jerry Yang’s letter to shareholders and his all-hands memos to employees is the capital letters. Besides that, it’s really just another restatement of the same “we have a lot to be excited about” arguments Yang’s restated thrice already to employees (see “Yahoo CEO to Employees: Thank You for Not Quitting,” “May the Head Winds Be Always at Your Back, Yahoo” and “Yang to Employees: Nothing to See Here. Please Disperse.“)

In short, Microsoft (MSFT) bid BAD, Yahoo’s continued independence GOOD. Also, Yahoo’s (YHOO) board is “continuously evaluating all of Yahoo!’s strategic options.” Yeah, all two of them–”Yes, we’ll accept your bid” and “No, we’d prefer a nasty proxy fight.”

Anyway, here’s the letter in all its redundant glory …

Dear Stockholders,

On Feb. 1, 2008, Microsoft made an unsolicited proposal to acquire your company. As much has been reported in the press recently, I wanted to reach out to you personally to let you know why your Board of Directors, after a careful review by Yahoo!’s management along with our financial and legal advisers, believes that Microsoft’s proposal substantially undervalues Yahoo! and is not in the best interests of our stockholders.

Most importantly, I want you to know that your Board is continuously evaluating all of Yahoo!’s strategic options in the context of the rapidly evolving industry environment, and we remain committed to pursuing initiatives that maximize value for all our stockholders.

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