The combined $900 million investment in Clearwire Corp. from Intel Capital and Motorola Ventures establishes that 802.16e technology will be a force in mobile wireless broadband service.
Under the investment deal announced last week, Intel plans to invest $600 million into Craig McCaw’s Clearwire operations, which already provides wireless broadband service in 27 metro areas in 12 states. The investment, which Intel said is its largest investment ever, should help to promote the deployment of WiMAX technology-as well as the sale of Intel’s WiMAX chips. Indeed, Clearwire previously announced plans to use Intel’s WiMAX equipment eventually. Today, Clearwire uses a proprietary pre-WiMAX technology provided by subsidiary NextNet Wireless Inc.
Intel’s deal with Clearwire likely ensures that the 802.16e flavor of mobile WiMAX takes off. Clearwire has previously voiced its intent to migrate its network to the WiMAX standard.
Indeed, Clearwire now has an extra $900 million to build out its network, which eliminates the company’s need for an initial public offering. Clearwire filed for a $400 million IPO in May.
Having carried the torch for 802.16e’s ratification, Intel now seems well-positioned to reap chip profits from the deployment of the technology.
During an interview with RCR Wireless News, Scott Richardson, vice president and general manager of Intel’s Service Provider business group, pointed out that Intel’s WiMAX strategy is similar to its successful Wi-Fi strategy of investing in Wi-Fi players, which resulted in “making Wi-Fi synonymous with Centrino.” Centrino is Intel’s Wi-Fi product.
“We put money into players in the ecosystem that help facilitate our technology position,” Richardson said.
Richardson noted that he expects to see significant WiMAX adoption in 2007 in both emerging and mature markets.
He added fixed WiMAX will likely be adopted in emerging markets like China and India, while mobile WiMAX likely will take off in mature markets throughout Western Europe as well as in large Asian cities.
“Mobile WiMAX as a standard is moving along very quickly, but it can take multiple years to build out the infrastructure for a new technology. This announcement signifies that two big companies, Intel and Motorola, are committed to WiMAX,” Richardson said.
However, it’s not clear which types of wireless products will house Intel’s mobile WiMAX chips. Intel’s chips likely will dominate WiMAX-enabled laptops, but handsets are quite another story. Consider the recent wranglings between Intel and Qualcomm Inc., the owner of Flarion Technologies and its Orthogonal Frequency Division Multiplexing technology, which it claims is the underlying technology behind WiMAX. Qualcomm has not been shy about announcing royalty-bearing licensing agreements for WiMAX products. Further, Qualcomm has said it intends to collect royalties from a variety of WiMAX equipment vendors, which could include Intel.
It’s also interesting to note the timing and dollar amount of Intel’s sale of its smart-phone chips business unit to Marvell Technology Group Ltd. The sale was announced in late June and totals exactly the same amount as Intel agreed to pay for its interest in Clearwire-$600 million.
And then there’s Motorola. The company is essentially paying around $300 million to buy Clearwire’s NextNet business.
Clearwire purchased NextNet, which makes non-line-of-sight equipment based on OFDM technology, to control the development of its network infrastructure. Going forward, Clearwire said it plans to use Motorola equipment to build out its broadband wireless network.
During a conversation that took place one day before the Clearwire announcement, Motorola’s Paul Sergeant, the company’s senior marketing manager, told RCR Wireless News that he didn’t feel that Motorola had any gaps in what he called its “end-to-end WiMAX portfolio.” So why then would Motorola buy NextNet? Is there a behind-the-scenes deal involving handsets and other mobile devices as Clearwire rolls out WiMAX services?
In their joint press release, Clearwire, Intel and Motorola said the transaction will ultimately accelerate deployment of 802.16e-2005-based mobile WiMAX networks and technology. There was no mention of handsets.
Skylight Research summed up Motorola’s interest in NextNet as being spectrum-sensitive and infrastructure-minded.
“With NextNet on board, Motorola combines a strong portfolio for unlicensed bands and a growing global presence with a growing equipment supplier for licensed bands. The deal is mutually beneficial as it gives Motorola an immediate foot in the door with licensed equipment and a customer who has the potential to change the competitive landscape of North American operators.”
In addition, Skylight Research speculated that Motorola may be attempting to crank up the pressure on Sprint Nextel to get off the fence and commit to Motorola’s WiMAX offering for its 2.5 GHz spectrum.
“It’s no coincidence that prior to this transaction, Motorola was already a leading, maybe the leading, WiMAX contender in Sprint’s evaluation of technologies for the 2.5 GHz band,” stated Skylight. “If Sprint chooses Motorola’s .16e equipment, Clearwire benefits from roaming privileges without interoperability issues (which might be a reason for Sprint to make that selection as well). There are two questions on everyone’s minds. Is this an Intel strategy to provide an insurance policy for WiMAX because Sprint is favoring another mobile technology? Or is this a clever tactic to influence Sprint’s decision toward WiMAX in the interest of nationwide roaming? After all, interoperability, even in the earliest stages of equipment, will not be an issue if one vendor is supplying two large operators owning 2.5 GHz spectrum.”
Sprint Nextel is also considering wireless broadband technology from Samsung Electronics Co. Ltd., Flarion and IPWireless Inc. RCR
