Intel, Google, others save Sprint’s Xohm WiMax service

Posted by Wolfgang Gruener

Kirkland (WA) – A group of IT and communications industry heavy weights have agreed to invest billions of dollars into Sprint’s wireless broadband service, whose future recently appeared to be more and more uncertain and the days went by. While Sprint will hold the majority of the new venture, it will be called Clearwire and Comcast, Intel, Time Warner Cable, Google and Brighthouse will get a combined 22% share of the business – marking the first time that IT companies will have substantial influence in how a wireless technology will be marketed and provided to consumers.

The possibility of an investment into Xohm was reported previously by the Wall Street Journal at the end of March and it seems the information provided at the time was as accurate as it can be in a report based on “industry sources”. The new company will essentially merge the existing Xohm and Clearwire assets, taking advantage of Xohm’s entire 2.5 GHz spectrum and Clearwire’s existing customer base with about 400,000 accounts.  Called Clearwire, the company will apply for the Nasdaq ticker symbol CLWR and will be run management team will be Benjamin Wolff, currently CEO of Clearwire, as the new company’s CEO and Barry West, currently Sprint’s Chief Technology Officer and XOHM business unit leader, as president of the new Clearwire.

Sprint will hold 51% of the new Clearwire, representing a $7.4 billion stake. Clearwire’s participation is valued at $3.9 billion and a 28% stake. The remaining 22% will go to Comcast, which will invest $1.05 billion, Intel ($1.0 billion), Time Warner Cable ($550 million), Google ($500 million) and Brighthouse ($100 million). The complete company is valued at $14.5 billion at founding. Next to Sprint and Clearwire, Intel will be the largest stakeholder due to its previous investment in Clearwire, which gave the chip manufacturer a share of more than 20% in the communications company.

While Sprint and Clearwire control the direction of the business, each of the other investors will seek their own specific advantages from participating in Clearwire.

Google said it will develop Internet services, advertising services and applications for mobile WiMax and become the search provider and a preferred provider of other applications for the new Clearwire’s retail product. Google will also work with Clearwire on an open Internet business protocol for mobile broadband devices. The new Clearwire will support Google’s Android operating system software.
 
Sprint and Google have also entered into an agreement related to Sprint's mobile services, whereby Google will become the default provider of web and local search services, both of which will be enabled with location information, for Sprint. Sprint will also preload several Google services - including Google Maps for mobile, Gmail and YouTube - on select mobile phones and provide easier access to other Google services. Google and Intel have options to enter into 3G and 4G wholesale agreements with Clearwire and Sprint respectively and have no current plans to do so.

Sprint, Comcast, Time Warner Cable, and Bright House Networks will enter into wholesale agreements with the new Clearwire, becoming 4G providers of new Clearwire’s mobile WiMax service.

Intel’s position is unique, not just because its substantial share in the new company, but the fact that it is the dominant WiMax hardware company worldwide. Not surprisingly, Intel said it will work with manufacturers to “embed WiMax chips into Intel Centrino 2 processor technology-based laptops and other Intel-based mobile Internet devices, and will market the new company’s service in association with Intel’s performance notebook PC brand.”

Intel vice president Sriram Viswanathan, who runs Intel’ WiMax business, told TG Daily that Intel considers the availability and success of WiMax as a “critical” component of its product and business strategy. “Broadband wireless is an integral part of mobile devices today,” he said. “There will be no alternative to WiMax within the next three years.”

The upside of the participation of the IT industry in Clearwire is a sign that we could see a greater innovation drive in this and other communications companies than we have experienced in the past. Viswanathan agreed with that assessment and said that innovation drive “is an absolute goal” for Intel in this venture. While the company’s influence will be limited, the executive said that Intel will work on an open WiMax platform that will allow any WiMax device to access to network.

However, Intel’s big stake may raise concerns at other WiMax companies and bring up the question whether Intel’s investment will hand the company an unfair advantage over its competition.  Viswanathan said that “nothing prevents other manufacturers to work with Clearwire”, but noted that the investment of course will result in a “fair advantage” for Intel.

The remaining question for consumer will be: How much will WiMax devices and the service cost? Intel previously stated that it is aiming for a 30/30 model - $30 cost for the hardware and $30 per month for the service. Viswanathan declined to comment on the per-month pricing, but stated that Intel will be trying to get the cost of embedding WiMax devices low enough to stimulate a “high activation rate”.