Clearwire’s LTE Plan: Opportunities and Threats

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on August 10, 2011   |   1 comment

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WiMAX giant Clearwire announced a few days ago its intentions to deploy a 4G LTE network. This announcement, although unsurprising, leaves many open questions about Clearwire’s current situation, the opportunities it has and the many hurdles along the way to a profitable LTE network.

Clearwire’s LTE implementation comes after several months of technology testings in some of its markets. It was mostly motivated by the slow marginalization of WiMAX technology over the last year because of the adoption by the majority of the newer LTE standard. As of today, the broad adoption of the LTE technology feeds the development of LTE enabled-devices (smartphones, base stations, tablets, data cards, etc) and makes it a better choice for any operator who intends to offer a variety of devices to its customer base.
Clearwire was the last WiMAX-only operator before this announcement and the already crowded LTE environment in the U.S. represents the company’s biggest obstacle to success. Even Clearwire’s long time partner Sprint just closed an LTE deal with the company LightSquared. Verizon Wireless and AT&T are running their own separate LTE networks and the merger between T-Mobile and AT&T would also provide T-Mobile with an LTE option different from Clearwire.

Strong competitors are a common problem in multiple industries, but in this case, this also means that potential sources of funding are growing thinner. Most LTE providers in the U.S. have sufficient spectrum for a few years to come before they will need additional bandwidth, which Clearwire could easily provide. This may represent the second main problem for the fulfillment of Clearwire’s intentions: it acknowledged a need of $600 million in funding for its LTE plan only, alongside its other funding needs for separate purposes.

Finally, there are two sorts of LTE technologies currently being developed: FDD-LTE and TDD-LTE (for Frequency-Division Duplex and Time-Division Duplex). These two technologies have a different approach of how they upload/download data — either on two different bandwidths, or as a time-sharing system on a single bandwidth. Most carriers like Verizon and AT&T have decided to use FDD-LTE. But Clearwire chose to usi TDD-LTE — which has a less developed device ecosystem — and requires product manufacturers to create chipsets and devices that support both technologies (a $10 additional cost for the consumer is a reasonable forecast).

But Clearwire has the opportunity to play its cards right, as there are several elements favoring the company’s success in this otherwise difficult situation.

The carrier has one major advantage on all its competitors, it owns a huge spectrum (over 100MHz, with up to 40MHz of contiguous spectrum) in most of its markets, giving it a real advantage over its competitors to offer true 4G LTE speeds. Clearwire plans to start offering its LTE on 20MHz bands of spectrum, allowing it to deliver speed peaking at 120Mbps and averaging between 50 and 90 Mbps. It has the opportunity to adjoin an additional 20MHz spectrum for even better overall performance. Clearwire’s current network is also the best available solution for the soon-to-be 4G LTE-Advanced technology, the second generation of LTE which will require more spectrum to provide higher speeds.

Moreover, Clearwire already owns a 4G-capable infrastructure on which it is currently running its 4G WiMAX network. Implementing a dual technology on this infrastructure will bring about much lower costs than if it had to create an infrastructure from scratch. As such, the transition from WiMAX to LTE will be done in the least disruptive manner for the consumer over the next few years during which Clearwire will run both networks at the same time.

Clearwire’s success mostly depends on its ability to overcome the funding issue in the near future. Once its immediate survival is ensured, it can focus on developing a powerful LTE network with big chunks of available spectrum and capable of supporting LTE-Advanced. This ability will probably be very attractive to other carriers when they come to the end of their own network capabilities and will gladly purchase spectrum from Clearwire.

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