Clearwire Finds Common Ground With Satellite Broadcast Players

Carl Weinschenk

Way back when, in a long-ago time before the explosion of the Internet, direct broadcast satellite services changed the face of video entertainment by grabbing significant market share from the cable industry. The cable operators, in turn, had reigned supreme since methodically superseding broadcast television over the previous three decades.


The period right before the broadband era was the DBS industry's high-water mark, however. The need for a DBS signal to make a round trip of about 46,000 miles -- up to a satellite and back -- creates problems for interactive services. This shortcoming became ever more glaring as cable and telephone companies supercharged their networks and began rolling out converged triple- and quadruple-play mixes of wired and wireless voice, video and data services.


Last week, the two major DBS players -- DirecTv and EchoStar -- and Clearwire announced deals. The deals allow the DBS players to sell Clearwire high-speed data service alone or with their video products. Clearwire, in turn, can sell the DBS players' video fare.


This seems like a major step forward for all three parties, though, of course, some folks aren't too impressed. The folks at Gigaom, for instance, say the spate of positive press the announcement generated is only making up ground that Clearwire previously lost. This Tech Trader Daily blog posting provides analyst reaction, which seems generally positive.


If it pans out, the battle for residential and small business customers will expand, especially in exurban and rural areas. Clearwire, which has more than 250,000 subscribers in about 40 markets, uses a proprietary wireless technology. The company is working with Intel and Motorola on mobile WiMax, and expects to migrate to the new platform as it becomes available.


We think the deal will benefit the three companies, but the Clearwire-DBS partnership will not pose a significant threat to cable operators and telcos. The fierce battle between the two groups is leading them to increase through-puts and add features beyond what the partners can offer, at least until mobile WiMax matures. However, this entity certainly could dominate carefully selected secondary and tertiary markets, where the cable and telephone companies aren't as aggressive and competition from other sources, such as broadband over powerline, isn't as imposing.


This is an interesting time for Clearwire. In addition to the two DBS deals, The Wall Street Journal last week speculated that Sprint Nextel may be considering spinning off its WiMax unit. Sprint's goal, according to this InformationWeek piece, may be to hedge its bet on WiMax by partnering with Clearwire.

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