Why Clearwire needs LA (or NY) by 2011

After closing the merger that pooled its WiMax assets with those of Sprint Nextel, Clearwire Corp. found itself the owner of a big, big swath of spectrum in the 2.5 GHz range, holdings that dwarf even those of the big providers AT&T and Verizon. But to keep that asset intact, Clearwire will most likely need to launch wireless services in either Los Angeles or New York — or both — to satisfy some build-out requirements that are a regulatory hangover from the Sprint/Nextel merger of 2005.

The buildout conditions, which were part of the FCC’s approval of the Sprint/Nextel deal, require the owner of the Sprint 2.5 GHz assets (now Clearwire) to offer service “to a population of no less than 15 million Americans by August 7, 2009,” and to basically double that number by August 7, 2011. While Clearwire says its existing pre-WiMax offerings as well as its services in Baltimore, Md., and Portland, Ore., should fulfill the first requirement, satisfying the second step is going to require Clearwire to add some big population areas quickly — hence the attraction of New York and LA, the nation’s two most populous regions.

What could happen if Clearwire doesn’t meet the conditions? The FCC would have “a full range of enforcement sanctions available to it,” including fines or forced divestiture of the spectrum assets, according to several sources with legal knowledge of the situation. But before it gets to that, it appears that Clearwire is moving forward with plans to offer services in markets it hasn’t talked about yet, including the Big Apple and a big patch of sunny SoCal.

If you poke around the careers section on the Clearwire site (like our pal Dan Jones recently did), you will see the company advertising for lots of technical and operational positions in New York and the greater L.A. area, which may be a bit puzzling since the company hasn’t formally declared any interest in those markets. But since Clearwire CEO Ben Wolff said recently that it takes the company about two years to launch a market once it decides to, it makes sense to be looking for deployment teams in NY and LA now, so that Clearwire can get either one or the other online in time to keep the FCC or any nosy competitors at bay.

(If you are interested in a more-thorough breakdown of the market requirements, FCC conditions and where Clearwire might launch services next to comply, subscribe to our WiMax Focus research service, where such analysis is part of this month’s report on Clearwire and its plans for 2009.)

Without getting too deep into the details here — according to the conditions the company actually needs to cover something like 45 million people in at least 10 different markets, with at least one-third coverage in each market, to get to the 15 million nut — some quick back-of-the-envelope math shows that if you total up the population covered by the markets Clearwire has publicly targeted, a list that includes Chicago, Boston, Philadelphia, Washington, D.C., Dallas/Fort Worth, Atlanta, Las Vegas, Providence, R.I. and Grand Rapids, Mich., you only get to around 36 million total people covered.

That means Clearwire probably needs to add enough services in New York and Long Island (population 19.6 million) or the greater Los Angeles basin (16.4 million) to get past the 45 million total/15 million covered threshold necessary to meet the August 2011 deadline. Of course the company is also advertising for help in other big markets, like San Francisco, Phoenix, Detroit and Denver, among others, so maybe NYC or LA can wait if the company decides to go with more smaller urban areas instead. But if the company is already struggling to build out quickly, it seems to make more sense to strike in one big area where backhaul and marketing costs can deliver more bang for the buck than to spread it around in multiple locales.

Clearwire, which recently held its long-awaited new board meeting, is expected to announce new-market plans within the next few weeks. According to SEC filings for 2007, Clearwire’s pre-WiMax services covered 13.6 million people across 46 markets; no numbers are available yet for 2008, but with Portland (where Clearwire says it reaches 1.7 million potential customers) and Baltimore the company says it isn’t worried about meeting the 2009 requirements.

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About Paul Kapustka

Paul Kapustka is a longtime journalist who has spent more than two decades covering the information technology business, Paul most recently has been focusing on mobility and how it has changed the computing and collaborative landscape. His newest project outside Mobile Enterprise 360 is a research and analysis operation called WiFi Journal. He is also editor in chief of Mobile Sports Report, which covers the intersection of mobile technology and sports business. Paul is also the founder of Sidecut Reports, a research firm that covered the emergence of 4G technology in the cellular marketplace.

Comments

  1. Phil Lacey says

    Launching a ground up wireless network is no piece of cake, I helped launch the Network Operations side of the house for PCS GSM 1900 stuff in the LA/NV markets for what used to be PBMS or Pac Bell Wireless in 1995 to 1999(pre Cingular daze) it took about 3 years to build and launch those 2 markets. You have more savy landlords and government entities now and they slow the process. the NMBYers, the handset and the equipment vendors, the sub-contractors, the LECS/CLECs you have to go through, the sales and marketing, the zoning and leasing, etc. No small feat! and now add a bad economy grinded to a halt and going in reverse and not at the bottom yet. Clearwire/Sprint has got its wish full of money and it’s hands full of running out of time. The WIMAX technology of 4G or whatever that ends up being is a must move forward. At least they are trying to improve on the lackluster 3G data crap out there, dial up speed is about what it is now. lotsof places in Europe, Asia and even Africa are all deploying WIMAX right now. The US is always behind the rest of the world for wireless due to the FCC sticking its fingers in. yeah it may evolve over to LTE but the differance betwen LTE & WIMAX is small. getting the country out of 3g and over to 4G is great! and it IS gonna be hard going. The merger was just approved about a month ago and eveyone expects results and a network yesterday. Get reality in place and sticker shock for the new vehcile, it’s gonna take 3 or more years, more money till you see the resembalance of a decent nationwide 4G market. Verizon and AT&T are going to want to get every dime out of the old stuff they got so they wont do anything till they are forced to. They will also have to take that time to retrofit to an IP Core based world and deploy yet an almost undeveloped LTE technology, 2 years till you see anything from them to sell to the customer and that is going to cost them money too. Clearwire is going to be forcing them to do it. In the end the stuff will work the bugs out and will work good. All we ever heard back in 1994 was that CDMA would not work, well guess what folks, it just about took over. The Clear 4G markets will come but its going to take time, So everyone has to be real. lets throw a “vegas wild card” in here…the unknown is always another new latest and greatest technology that will blow everyone out like your laptop is outdated as soon as you buy it so technology moves quick, Cleawire become both the tortoise and the hare with this. a hard spot but ya got to like the underdog that is already up and training for the fight early! Clearwire…the Rocky Balboa of Wireless. We will see.