Clearwire is on tack to accomplish what it promised earlier this year in terms of its CLEAR 4G WiMAX network expansion plans by the end of 2009. The operator’s first mobile WiMAX market was launched in Portland last January, followed by Silicon Valley in April. Later this past summer, it expanded to Las Vegas and Atlanta, adding more than 4.5 million people to CLEAR’s coverage footprint. In September the company announced the addition of 10 new markets, including Boise, ID, Bellingham, WA, and eight markets throughout Texas: Abilene, Amarillo, Corpus Christi, Lubbock, Midland/Odessa, Killeen/Temple, Waco, and Wichita Falls, covering over 10 million people. Earlier this month Clearwire rolled out its 4G network on Salem, Oregon and Milledgeville, Georgia; and in the forth quarter of 2009 the company is planning to roll out in additional cities including Charlotte, Greensboro and Raleigh, North Carolina; Austin, Dallas/Fort Worth and San Antonio, TX (November), and Chicago, Philadelphia, Seattle, Honolulu and Maui, Hawaii (December). By the end of 2009, Clearwire’s 4G network is expected to be available in more than 25 markets, covering over 30 million people.

Despite the many new market additions covered by CLEAR, subscriber additions have been slow this year. From Q4 2008 to Q2 2009, only 36,000 subscribers were added, mainly because Clearwire’s efforts have been focused on its 4G network build-out. However Clearwire expects to reach more subscribers in the third quarter of 2009 than it did in the second and first quarter. During the fourth quarter of 2009 the company aims to reach more subscribers than in the previous three quarters combined. Clearwire is at a point where the big markets are starting to hit, and as this happens, subscriber additions are expected to accelerate, starting in the fourth quarter and into 2010 as well.

One question on everyone’s mind is whether Clearwire will migrate all its pre-WiMAX subscribers to WiMAX at some point. The operator is converting various markets from pre-WiMAX to WiMAX, and its strategy is in fact to discontinue service in pre-WiMAX markets after a certain conversion period. However, there will be some pre-WiMAX markets that Clearwire will not actually convert; by the end of this year they will still have 10 million POPs covered with their pre-WiMAX network, and will have to decide what to do with these markets in 2010. So far, no announcements or decisions regarding this have been made, but perhaps they will eventually convert these to WiMAX or maybe even continue operating using pre-WiMAX.

From discussions with a number of operators worldwide, we know that certain of them segment their markets according to business vs. residential users. More recently, we have noticed that more operators are beginning to segment their markets based on applications used or bandwidth usage. Clearwire’s market segmentation strategy is different – at the highest level, Clearwire has a multi-brand approach as a network of networks. This means that its strategy is to provide services to other brands through its wholesale partners, while building the CLEAR brand service. This is a very interesting approach, as different brands appeal different people: the brand that appeals to a teenager is different than that which appeals to a business professional. A portfolio of brands allows Clearwire to penetrate a wider population. Clearwire’s wholesale partners Sprint, Time Warner and Comcast have 110 million customers in the US, which is more than AT&T or Verizon Wireless. Clearwire, along with its 3 partners, will deploy mobile WiMAX in 11 new markets in Q4 2009 each with their respective service brands: Clearwire’s 4G service is branded CLEAR, Comcast’s 4G service is branded Comcast High-Speed 2go, Sprint’s 4G service is branded Sprint 4G. Sprint’s 3G/4G dual mode products facilitate the combination of its 3G and 4G US networks.

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Within the CLEAR brand service the segmentation strategy is different. One of the fastest growing segments is of people under 30, who have only a wireless phone and may travel or change residences (often renters) and want to have a flexible subscription that follows them as they move. Another segment is SME and SOHO, which benefit from the ease of installation and rapid availability of service, meaning they can buy the service at any point of distribution, and plug and play for immediate broadband service, rather than waiting for a service appointment for installation. Even if they move, they will not need any technical assistance to install their equipment in a new location.

Clearwire is generating an ARPU of US$40 per month, and it is likely that in 2010 for it will be about the same. 2010 will be a year of rapid growth for Clearwire, in terms of new markets and brand new customers. Having said that, the first few months will present a challenge in terms of promotion, which is likely to affect ARPU and offset some natural gains from new products and services. Clearwire’s 4G business model is aimed at a US$65 monthly ARPU, which it plans to achieve by leveraging 5 services: home broadband, home VoIP, mobile broadband, mobile VoIP, and mobile entertainment, in order to offer new value and a new user experience. We can expect to see a gradual increase in Clearwire’s ARPU towards the end of 2010.

Clearwire has a relatively future-proof network design that allows it to transmit with a variety of different protocols. What helps Clearwire to serve its customers with more capacity is its spectrum position. In most markets the operator has over 100 MHz of spectrum, even without legacy 3G or voice business, so what is available for 4G is by far much higher than what its competitors have to work with, giving it a premium advantage.

At some point down the road, it is possible that Clearwire will consider deploying infrastructure that supports both WiMAX and LTE technologies, once LTE becomes commercially available. For the moment however, Clearwire is planning to move to establish market share with the technology that is available today – WiMAX. The company will leave its options open to consider adoption of LTE as the market and technology develops. Whether it is WiMAX or LTE is really less of a factor than Clearwire’s superior spectrum position, which allows it to serve its customers with increasingly higher speeds and capacity.

For more information you can contact the author at cintia@maravedis-bwa.com

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