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JULY 24, 2006
A Wake-Up Call From Craig McCaw Clearwire's plan to create a mobile broadband network could make waves Imagine a future like this: You're on the Acela high-speed train from Boston to Washington and you want to touch base with friends in Beijing and London. You pull out your laptop and moments later are catching up via video link -- even as the train thunders along at 150 miles an hour. Later, as you zip past the White House in a cab, you grab the same laptop to catch up on e-mail, then boot up your media player to watch a few minutes of the afternoon ball game of your hometown favorite, the Boston Red Sox. If Craig O. McCaw gets his way, you'll be able to do all that, and more, in as little as three years' time. McCaw's Clearwire Corp. has amassed enough licensed radio spectrum to create a nationwide, wireless broadband network based on an emerging technology called mobile WiMAX -- a powerful cousin of WiFi. Clearwire got a big boost on July 5, when Intel Corp. (INTC ) and Motorola Inc. (MOT ) pumped nearly $900 million into the company. The tech giants aim to turn WiMAX into a mainstream consumer technology and hope to make lots of money selling the chips, laptops, cell phones, and other gear that work with it. McCaw famously upended Ma Bell by building a cellular phone network in the 1980s, a business he later sold to AT&T (T ) for $11.5 billion. Now he could be poised to do much the same to today's cable, satellite, and telecom players by providing a cheaper alternative to the broadband services they currently offer. "Filling a need that others aren't addressing has always been a focus of the companies that I have been involved with," McCaw says. Not so long ago, McCaw's WiMAX gambit seemed less threatening to the entrenched players. There were no industrywide standards for mobile WiMAX, so the equipment was too expensive to roll out on a large scale. But last year the industry adopted the long-awaited standards, which helped bring Motorola and Intel into the game. Add McCaw's control of one of the biggest chunks of WiMAX spectrum, and he seems well positioned. The cable guys and telcos profess themselves unfazed by McCaw's WiMAX ambitions. But you can easily imagine people preferring to subscribe to a Clearwire service that allows them online access anywhere rather than one that restricts them to their home. What's more, because WiMAX infrastructure is so much cheaper to build than traditional networks, Clearwire can likely afford to offer a nationwide mobile service for as little as $25 a month. Suddenly, paying $60 for Verizon Wireless' (VZ ) Broadband-Access service looks a lot less attractive. This is not just a question of luring away rivals' subscribers, either. McCaw's WiMAX play also could put in jeopardy the billions of dollars the telcos and cable companies are investing to make their broadband networks faster and more reliable. For example, Verizon is spending $20 billion to $40 billion to roll out fiber-optic lines to homes over the next 10 or so years. Meanwhile, the cellular carriers have spent comparable amounts on so-called 3rd Generation networks that are supposed to let subscribers watch "real-time" TV on their phones, among other things. WiMAX won't necessarily make these investments redundant, but it could provide enough competition to make it hard for the carriers to recoup the billions spent. DEFENSIVE MOVES So is no one standing in McCaw's way? Well, some of the key players are already making moves that could fend him off. The cellular carriers are working with PC makers to extend their broadband business beyond phones. Business commuters already are snapping up new plug-in modem cards that allow them to get online anywhere. Verizon Wireless and its ilk also have been cutting prices on both the cards and monthly broadband subscriptions. And in November, Comcast (CMCSA ), Time Warner Cable (TWX ), Cox Communications, and Advance/Newhouse Communications cut a deal with Sprint Nextel Corp. (S ), the only other company with nationwide WiMAX spectrum. The partnership allows the cable guys to offer cellular phone service, key to competing with the telcos. But they also could resell Sprint Nextel's WiMAX service or even buy some of its spectrum. "The [Sprint] deal lets cable providers keep their options open as far as wireless goes," says Charles S. Golvin, an analyst for Forrester Research Inc. (FORR ) Then again, Clearwire is already forging strategic partnerships of its own. AOL, for example, resells the company's WiMax service. Meanwhile, satellite provider DirecTV Group Inc. (DTV ) has expressed interest in WiMAX as a way to compete with the cable companies and telcos. And despite Sprint-Nextel's deal with the cable guys, it would be premature to rule out a partnership between that company and Clearwire. Neither can offer complete national coverage, so they might be forced into some kind of a roaming WiMAX agreement. With his enviable track record, vast spectrum holdings, and now huge war chest, McCaw's Second Act is already well under way.  By Cliff Edwards Get BusinessWeek directly on your desktop with our RSS feeds.  Add BusinessWeek news to your Web site with our headline feed. Click to buy an e-print or reprint of a BusinessWeek or BusinessWeek Online story or video. To subscribe online to BusinessWeek magazine, please click here. Learn more, go to the BusinessWeekOnline home page  | | |
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