Clearwire's LTE plan faces high hurdles
In addition to funding woes, Clearwire faces technical and market challenges
WiMax carrier Clearwire's so-far-unfunded plan to adopt LTE faces several obstacles, but the company effectively doesn't have a choice, according to industry analysts.
Last week, Clearwire announced it would deploy LTE (Long-Term Evolution) in addition to its WiMax network, starting in dense urban areas with the highest demand for mobile data. But the company acknowledged it needs about $600 million of new funding to roll out the new infrastructure, even as it seeks funding separately for other purposes.
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Clearwire launched the first 4G (fourth-generation) mobile network in the U.S. beginning in 2008 using WiMax, before LTE was even available. But since then, the newer standard has been adopted by the majority of mobile operators planning 4G networks and WiMax has been marginalized in the mobile world. (It may continue to thrive as a rural fixed-wireless system in some regions, analysts say.)
Broad adoption of a technology feeds the development of phones, data cards and base stations, so in the future LTE is likely to be a better choice for offering a variety of devices and services, analysts said. In addition, the next generation of WiMax, called WirelessMAN-Advanced, has drawn few commitments from service providers.
"Clearwire as a technology island has only a limited lease on life," said analyst Roger Entner of Recon Analytics.
In fact, the company has long publicized the fact that it was conducting trials of LTE, which concluded in the second quarter. On a conference call last week about its second-quarter results and the LTE plan, Chief Technology Officer John Saw boasted that with the amount of spectrum Clearwire plans to use, its LTE gear showed average speeds between 50Mbps (bits per second) and 90 bps. Burst speeds exceeded 120Mbps.
The issues
However, despite reaching 7.65 million total subscribers under its own brand and those of wholesale partners, with a net gain of 1.5 million in the quarter, Clearwire remains a struggling company. It has enough liquidity to continue operating for at least the next 12 months but is still seeking outside investments. The LTE plan will require its own funding, for which the company did not identify a source. Clearwire has $9.1 billion in assets, the largest being $4.3 billion worth of spectrum licenses, but also has $4 billion in debts.
Even if it can raise the money to build the network, Clearwire is not likely to start rolling out LTE in the next six months, and it would take about a year to build the system, Interim CEO John Stanton confirmed on the conference call.
