Cable Technology Feature Article
Sprint, Cable Weigh Clearwire Options
By Gary Kim, Contributing Editor
Sprint (News - Alert) has been wrestling with its Clearwire relationship for years, it seems. Most recently, Sprint went so far as to sign agreements giving Sprint long-term access to the LightSquared network, a move that illustrates Sprint's dilemma. It already owns 54 percent Clearwire (News - Alert), but has had major strategy disagreements with Clearwire, and by design, does not exercise management control of Clearwire.
Now talk has surfaced of a potential effort by Sprint to buy the rest of Clearwire it does not already own, in some collaboration with several U.S. cable companies. Comcast is itself already an investor in Clearwire along with Time Warner Cable and Bright House Networks.
At least in part, the issue is that Clearwire needs to raise more funding to finish its national network. And it is fair to say that prospect has been the cause of internal debate within Sprint, as well as within the cable companies, who have not recently been too eager to pour more money into Clearwire.
While a full buyout of Clearwire by Sprint seems the most-likely end game, some observers think a consortium of cable companies might want to acquire Clearwire outright, giving them greater control.
Ownership of spectrum by cable operators is a bit rare, and would represent a bit of a departure from past practice, even though Cox Communications has bought its own spectrum, and more than a decade ago firms such as Time Warner and Tele-Communications Inc. (now owned by Comcast) likewise invested in mobile spectrum alongside Sprint.
Though cable operators have seen the value of mobile spectrum, they haven't had notable success building big new businesses in the mobile space, and Cox Communications, which recently had decided to build its own mobile network, now has backed away from that strategy.
As early as 1994, Sprint, Tele-Communications Inc., Comcast Corp and Cox Cable formed a joint venture in which the companies planned to build a nationwide network to provide wireless, local and long distance phone service and cable TV to consumers, part of which involved investing in new spectrum. The companies won “Personal Communications Service” licenses and built a network.
It is a historical footnote now, but back in the early 1990s observers predicted PCS would be a separate business from mobile service. The thinking was that PCS would be a service used by pedestrians, distinct from fixed telephony and fully-mobile cellular service. PCS, it was thought, would not support high-speed call hand off, for example, but only lower-speed hand off when people were moving at walking speeds.
Instead, that business never seemed to get traction and PCS simply became became the spectrum foundation for third generation mobile services. However, in 1998 Sprint assumed control of the business and bought the cable companies’ interest in the company.
In 2005 Comcast, Cox, Time Warner and Advance/Newhouse again formed a joint venture with Sprint Nextel to provide a quad-play cable TV, high-speed data, landline and wireless service to their customers. But the Pivot venture never grew beyond the initial 33 markets Sprint launched in November 2007. Sprint said that Pivot was being hindered by provisioning issues. Time Warner later said that demand for Pivot services was “tepid.” Pivot users eventually were given the option of switching to Sprint’s regular service.
In 2008 Sprint and Clearwire announced that they would combine their WiMAX businesses and create a new company that would include a $3.2 billion investment from Intel (News - Alert), Google, Comcast, Time Warner Cable, Bright House Networks and Trilogy Equity Partners. The Clearwire had Comcast, Time Warner, and Sprint as wholesale customers.
The point is that major U.S. cable operators have a history of working with Sprint but have been unsuccessful at creating a mobile success story to match their efforts in consumer voice and broadband, small business voice and data or enterprise capacity services.
Whether for lack of internal support or some other combination of reasons, wireless has been troublesome for cable operators.
In the latest rumored discussions, Sprint has been looking for some way to raise investment capital from cable operators to finance a complete buyout of Clearwire. Whether that would involve a direct cable investment in Sprint or in Clearwire is not clear. Based on history, almost any investment would carry a bit of risk.
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Gary Kim (News - Alert) is a contributing editor for TMCnet. To read more of Gary’s articles, please visit his columnist page.
Edited by Jennifer Russell