[IP] The New Wireless Wars
Begin forwarded message:
From: Dewayne Hendricks <dewayne@xxxxxxxxxxxxx>
Date: May 20, 2006 9:20:19 AM EDT
To: Dewayne-Net Technology List <dewayne-net@xxxxxxxxxxxxx>
Subject: [Dewayne-Net] The New Wireless Wars
Reply-To: dewayne@xxxxxxxxxxxxx
MAY 15, 2006
<http://www.businessweek.com/technology/content/may2006/
tc20060515_848569.htm>
The New Wireless Wars
By Olga Kharif
Uncle Sam's spectrum auction opens the door for small fry like Craig
McCaw's Clearwire, reversing a trend to consolidation
On May 11, 2006, a low-profile company called Clearwire Corp., headed
by wireless pioneer Craig O. McCaw, filed with the Securities &
Exchange Commission to go public. The initial public offering is
expected to raise $400 million, and, in its filing, the company says
it will use the proceeds to expand its network for offering wireless
broadband services.
In particular, Clearwire says it will use the money to acquire radio
spectrum, which suggests it could be one of the major bidders in a U.
S. government auction of wireless spectrum this summer. "We intend to
deploy our advanced wireless broadband network broadly both in terms
of geography and categories of subscribers," the company said in its
SEC filing. That's a big promise, but as Clearwire's SEC filing
notes, giant chipmaker Intel (INTC ) spent $20 million in 2004 for a
stake in the company.
McCaw's Clearwire and Intel are just a couple of the players
jockeying for position in the derby that's been labeled Auction 66.
Scheduled to kick off on June 29, it's shaping up to be much more
than just another sale of the airwaves by the Federal Communications
Commission. It involves the biggest chunk of wireless spectrum ever
to come up for auction in the U.S., worth an estimated $8 billion to
$15 billion.
Other possible participants include Microsoft (MSFT ), TimeWarner
(TWX ), and News Corp (NEWS ). "It's likely to be the most exciting
auction we've ever seen," says Richard Doherty, director of
consultancy the Envisioneering Group.
MORE TURMOIL. What's grabbing the attention of such big players is
that the spectrum is considered particularly valuable. Chris Hardy,
vice-president and general manager of the consulting firm Comsearch,
which is working with several of the bidders, says the winners could
build three or more new nationwide wireless networks, offering voice
service, broadband Internet access, or mobile TV services. "This
spectrum is wide open to applications," says Hardy. "Virtually any
wireless [technology] can be put in."
What this means is that the communications industry, after a five-
year shakeout, is headed for more turmoil. Just as the wireless
industry has consolidated down to three major players, the survivors
could face a new crop of competitors who could kick off pricing wars
and change the industry's dynamics like never before. Companies that
want to participate in the auction had to express their interest to
the FCC this month, but those names won't be made public until mid-
June. Bidding in Auction 66 is expected to run one to two months.
Within four to five years, this auction's winners could have these
wireless networks up and running, competing directly with entrenched
carriers like Cingular, Verizon Wireless, Sprint Nextel (S ) and T-
Mobile, also expected to participate in Auction 66 (see BW Online,
05/08/06 "At Sprint, Full Speed Ahead").
THE McCAW FACTOR. In effect, this auction could wipe out two years
of wireless industry consolidation, when Cingular swallowed AT&T
Wireless, and Sprint acquired Nextel, cutting the number of
nationwide cellular service providers from six to four. Thanks to
Auction 66, the number of national wireless networks in the U.S.
could potentially balloon from four to seven or more within a few
years, says Hardy.
New wireless players could come from a range of industries and
backgrounds. Clearwire, which wouldn't comment on the auction or its
network plans, is just one of the likely bidders. Its chairman and co-
CEO, McCaw, achieved fame for cobbling together cellular spectrum in
the 1980s to build McCaw Cellular, which he sold in 1994 to the old
AT&T for $11.5 billion. In the process, he became one of AT&T's
largest shareholders. Auction 66 could mark the hatching of a similar
spectrum plan, this time involving Clearwire.
Another potential bidder is small service provider Leap Wireless. On
May 9, Leap announced a $250 million sale of its common stock
specifically to finance participation in Auction 66. Other potential
bidders could include ventures backed by Microsoft Chairman Bill
Gates and Microsoft co-founder Paul Allen, says Doherty. "It's a
billionaires' high-stakes poker game," he says.
CABLE CALLING. While portals Yahoo (YHOO ) and Google (GOOG ), at
the top of analysts' list of potential bidders, won't participate in
the auction directly, they could play a role through partners. Both
portals tell BusinessWeek Online they have not applied to take part
in the auction. Still, Google is expected to participate in the
auction through EarthLink, an Internet Service Provider (ISP) with
which the search company has partnered to build out a wireless
network in San Francisco. EarthLink would not comment on whether it
has applied to take part in the auction.
[snip]
Weblog at: <http://weblog.warpspeed.com>
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