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.”

We are now delivering the promise of WiMAX–high-speed, cost-effective wireless broadband access–to businesses and consumers in cities and suburbs around the world.”

– Scott Richardson, general manager of Intel’s Wireless Broadband division, gets a little ahead of himself in November 2005.

Sprint (S) appears to be rethinking its decision to pull the plug on its WiMax joint venture with Clearwire (CLWR) last fall. Word on the street has it that the two companies are finalizing a partnership to build a nationwide mobile broadband network based on the technology. A joint venture between the two could be announced in a matter of days. And if it is, it may involve a $2 billion cash investment from Intel (INTC).

As it well should. It was Intel, after all, that called WiMax “the most important thing since the Internet itself.” Course, it might as well have said the same thing about time travel, because neither are exactly widely available today.

Given Google’s well-documented efforts to set up a free Wi-Fi network in San Francisco, we believe the upcoming spectrum auctions could represent a rare opportunity for the company to acquire something resembling an exclusive (licensed) nationwide WiMax footprint, and largely eliminate any access dependency on third parties. As such, we believe Google’s potential involvement bears watching, especially in light of the fact the company has shown little hesitation in delving into the other aspects of networking. Google’s selection of equipment vendors, such as Force10 and Infinera, indicate to us a willingness to embrace leading-edge technologies, and we believe WiMax fits that description.”

–Joe Chiasson, Susquehanna Financial Group, February 2006

This morning Google announced an alliance with Sprint Nextel that will see the two companies working together to bring Google’s search, digital mapping technologies and GTalk chat service to Sprint’s WiMax network, which, once it’s completed, will theoretically allow wireless Web access at speeds and prices similar to cable connections.

The deal follows the announcement of Sprint’s plans to collaborate with Clearwire to build out a nationwide WiMax network by the end of 2008. It also follows Google’s conditional pledge to drop at least $4.6 billion on the Federal Communications Commission’s auction of the 700-megahertz spectrum, which has long been said to be the future of WiMax (with fewer line-of-sight issues and wider coverage and better building penetration).

Coincidence? Or part of a master plan in which Google wins the 700-megahertz spectrum, uses it to help complete the Sprint/Clearwire nationwide WiMax network effort and then announces the long-rumored Google Phone–upending the telco-cable duopoly in the process?