Speculation appears to be growing that WiMax operator Clearwire may take a moment out of its aggressive 4G rollout strategy to consider selling off some of its wireless spectrum holdings. It certainly has to be enticing: Estimates put the value of those holdings at some $20 billion, well above Clearwire’s approximate $1.6 billion market cap.
Analyst Tim Farrar of TMF Associates blogged about the possibility, and GigaOm furthered the idea, noting that:
Right now, the logic behind valuing spectrum tends to be fairly simplistic, with folks asserting that because it’s relatively scarce and demand for mobile broadband services over it is on the rise, the value of each megahertz covering a member of the population will always rise, too. However, the physics constraining the use of spectrum and the rules set forth by the FCC dramatically influence the actual value.
Connected Planet’s take,
Kevin Fitchard:
Selling spectrum might appear attractive to Clearwire, which will need to fund the cost of building a nationwide network beyond the 120 million pops targeted by year’s end, but by doing so Clearwire might be giving up its ace in the hole. The deck is stacked against Clearwire in many ways: It’s supporting a technology most of the mobile industry has given up on; it will find it harder and harder to compete with LTE operators for cheap and compelling devices as LTE becomes the world’s dominant 4G technology; and once VZW completes its large-scale LTE rollout this fall, Clearwire will see its time-to-market advantage evaporate. What Clearwire does have to its advantage — as it consistently points out at trade shows and analyst conferences — is boatloads of spectrum.
Its 2.5 MHz bands may not have the wall-penetrating propagation characteristics of VZW and AT&T’s 700 MHz spectrum, but what it lacks in might it makes up for in abundance — more than 100 MHz in most markets. As AT&T and Verizon use up their available 700 MHz and advanced wireless service spectrum (AWS), Clearwire will still have plenty of frequencies to play with, allowing it to offer more overall capacity sooner than its competitors. AT&T and Verizon will get more spectrum, either from new bands identified by the FCC or by clearing some of their 2G and 3G licenses for LTE, but Clearwire’s mostly contiguous spectrum at the same band will eventually give it tremendous advantage.
WiMax and LTE share orthogonal frequency division multiplexing access as their underlying technology, which allows for the creation of extremely wide channels. Why is this important? Well, as 4G radio techniques improve, Clearwire will be able to move beyond 10 MHz carriers to 20 MHz, 30 MHz even 100 MHz carriers with ease, allowing it to offer many times more the capacity on the same infrastructure. Meanwhile, by dividing LTE all over the electromagnetic spectrum, AT&T and Verizon will have to build what amounts to separate 4G networks at each band. Software-configurable base stations will help minimize some of those costs by allowing them to share baseband resources, but there’s no getting around the fact that they’ll need separate radios for 700 MHz, AWS and, eventually, PCS and cellular frequencies. And in less dense areas the different frequencies will require different cell site concentrations to account for their propagations.
To sum up what probably seems like a bunch of technical jargon, Clearwire will be able to deploy the same capacity in a single network that its competitors can match with two or three. Clearwire’s spectrum position is the only long-term advantage it has left. If it’s serious about being a competitive player down the road, then it probably shouldn’t squander that advantage.
That’s our take on this. Let us know what you think in the comments section below:
It is questionable that LTE devices will be noticeably cheaper than WiMax ones even a few years down the road. Let’s not forget the IPR tariff that QCOM and others will be imposing on LTE devices. In contrast, WiMax’s IPR cost is an order of magnitude less.
Another point—Ma Bell and Big Red may be able to get addtional frequency bands, but those won’t be as cheap as what Clearwire paid. Ultimately, this higher cost will be passed to the consumer.