Ericsson and Alcatel-Lucent Win the Verizon Wireless LTE Sweepstakes; Clearwire Talks Trash

The battle for the fourth generation wireless networks is officially on.

At the Mobile World Congress trade show in Bareclona today, Verizon Wireless announced that it has selected Ericsson and Alcatel-Lucent to provide the bulk of the telecom equipment for its new fourth-generation wireless network. Verizon also tapped Starent Networks to provide some gear as well. This win can translate into billions of dollars in business over the next few years.

The stocks of all three companies jumped 1.5% today, while the major indexes were flat or down slightly.

There were a few losers as well. The decision is a blow to other equipment suppliers that participated in trials with Verizon and Vodafone but weren’t selected to build the network: Nortel Networks Corp., Motorola Corp., Huawei Technologies Co., and Nokia Siemens Networks, the joint venture between Nokia Corp. and Siemens AG.

Nokia Siemens wasn’t a total loser, though. It got picked to be a supplier for one of the network’s subsystems that will run multimedia applications.

Known as Long-Term Evolution, or LTE, the new technology will give wireless consumers a true broadband experience on their cell phones and handheld devices so they can watch high-quality video and listen to music without delay or interruption.

Verizon plans to offer the so-called LTE network starting in 2010. Field trials of the network in Minneapolis, Columbus, Ohio, Northern New Jersey and Europe have demonstrated download rates of 50 to 60 Mbps.

Verizon’s announcement also spooked investors in Clearwire, which is offering a service on a competing technology called WiMax. Verizon Wireless’ 4G LTE deployment uses the company’s recently acquired 700 MHz spectrum. WiMax, which is backed by Sprint, Clearwire and tech industry heavyweights such as Intel and Google.

Clearwire’s stock fell more than 2% on the news, as well as the announcement by Comcast that it took a $600 million write-down on its $1 billion investment in Clearwire.

Clearwire even put out a release in response to the Verizon news, trying to spin a negative into a positive. In the statement, Clearwire made the bold claim that “today, Clearwire customers experience better speeds and bandwidth than what is being described as next year’s LTE networks.”

Let the trash talking begin!

Advertisement

Wireless: The Outlook Gets Murkier for Clearwire

BusinessWeek just published my story on what many folks consider broadband’s best hope for injecting more competition in the market for high-speed Internet access.

It’s about Clearwire, the WiMax startup founded by wireless pioneer Craig McCaw. The company has a very bold (and expensive) vision for rolling out fast Internet access through the ether but it’s getting caught up in the credit crunch right now.

Here’s the top of the story:

Last May some of the biggest names in the technology and media business, including Intel (INTC), Google (GOOG), Sprint (S), and Comcast (CMCSA), teamed up to invest $3.2 billion in the startup Clearwire (CLWR). The Kirkland (Wash.) company founded by entrepreneur Craig McCaw had high hopes of shaking up the wireless industry. The idea was that Clearwire would offer an alternative to the two big incumbent U.S. operators, AT&T (T) and Verizon Wireless, by rolling out a technology called WiMAX that could provide superfast Internet service for cell phones, laptops, and other devices.

Today, Clearwire is just trying to keep its head above water. Although sales are on track to rise 50% this year, to $230 million, analysts expect the company will lose $715 million. Billions more in losses are projected for the coming years as Clearwire invests heavily to roll out its network. Clearwire needs to raise billions in additional capital in the midst of the worst economic downturn in decades or it will be forced to slow the pace of its rollout and give AT&T and Verizon a chance to gain ground in the race to build next-generation wireless networks.

Clearwire’s stock has plummeted 90% since its peak in mid-2007. The sharp fall has prompted backers to announce write-offs on their investments, including a $950 million charge by Intel, a $355 million charge by Google, and a $350 million charge by Time Warner Cable (TWC). Comcast is expected to follow suit.

Click here to read the rest of the story.

Qwest: We Don’t Block Internet Traffic

At the Democratic National Convention on Tuesday, I had the opportunity to meet Steve Davis, Qwest’s senior vice president of public policy. I asked Steve about the company’s policy with respect to the management of Internet traffic.

The issue has been in the news recently as Comcast, the nation’s largest cable operator, has come under fire from the Federal Communications Commission for secretly blocking the peer-to-peer file trading service BitTorrent.

“We are for everything that prohibits blocking of Internet traffic,” said Davis. “But we don’t support regulation of transport.”

I asked Davis if Qwest blocks or constricts any Internet applications as Comcast has done in the past. His response: “We don’t engage in the type of constriction that Comcast does.” (Since Comcast announced on Thursday that it will impose a monthly cap of 250 gigabytes on their customers, I didn’t have a chance to ask Davis about this new policy.)

Rather than blocking or constricting Web traffic, Davis said Qwest’s approach is to offer consumers several different flavors of bandwidth. Qwest, which serves about 13 million customers in 14 Western states, offers four different speeds at the moment, said Davis, including options for 1.5 megabytes (Qwest Connect Silver)), 7MB (Qwest Connect Platinum) , 12MB (Qwest Connect Titanium) and 20MB (Qwest Connect Quantum). Prices start at $46.99 per month.

The Denver-based phone company is able to offer beefier bandwidth because it recently began rolling out fiber optic cables in certain parts of its territory. Qwest is pursuing a strategy called “fiber-to-the-node,” which means it is laying cable from its central offices to nodes in various neighborhoods. That contrasts with Verizon’s more aggressive and expensive strategy of installing fiber optic cables directly into people’s homes.

Even so, Davis noted that offering consumers pay-what-you-drink options “doesn’t necessarily solve all problems” when it comes to U.S. broadband policy. “You could have back-haul problems too,” said Davis.

And it won’t help Americans living in rural areas who have no access to the Internet. To help solve that problem, Davis said Qwest is in favor of providing government subsidies for areas with no service to one low-cost provider that could wire the locale. “You wouldn’t subsidize competition,” said Davis.

My own take: Generally speaking, it’s better to have a solution come from the marketplace rather than government regulators. And while Om Malik and others have criticized the idea of tiered broadband, I believe some version of tiered pricing is the best solution to the bandwidth shortage.

Om makes a good point when he notes that cheap broadband has been a key factor in fueling the growth of the Internet. The broadband revolution has helped give birth to YouTube, MySpace and a host of other innovations that have energized the Web, creating new demand for Internet services.

And since Internet service has become a critical utility of our age, I agree that Internet providers should offer basic level service for a reasonable price. But let’s face it: Some people use more broadband than others and they should probably pay for it. I think it’s a very American idea: pay for what you use. And it’s economic 101.

That’s why competition should be a hallmark of our broadband policy–not government regulation of pricing. Competition will spur communications providers to offer higher and higher speeds at lower and lower prices. The battle between cable companies and phone companies has helped lower Internet service prices and raise entry-level speeds. But we need to find more ways to promote competition in future mediums, such as wireless broadband–especially since our appetite for bandwidth continues to grow with the rise of high definition video content.

What do you think?

Can Jerry Seinfeld Save Microsoft Vista?

In this week’s Digital Dish, the BW tech crew examines Hewlett Packard’s earnings, Comcast’s reaction to the Federal Communications Commission’s request for a new Internet traffic management system, and whether Microsoft’s new ads starring Jerry Seinfeld will solve Vista’s perception problems. (Hint: not a chance.)

Check out the video by clicking here.

FCC Slaps Comcast; So Long, Scrabulous?

In this week’s Digital Dish, BW’s tech crew discusses Apple’s cash hoard, the FCC’s order smackdown of Comcast, the fate of Scrabulous and the social networking-inspired phenom Twilight.

Check out the video by clicking here.

Are Cable Companies Taking Broadband Share from Telecom?

This morning, Comcast reported earnings, announcing an 8% increase in second quarter profits and an 11% rise in revenue. The stock is up more than 5% today.

While the nation’s largest cable operator lost basic video subscribers in the quarter, the losses were in line or better than what analysts had expected. Notably, Comcast, also the country’s second largest Internet service provider, showed that it was taking broadband market share from rival phone companies, which reported much weaker broadband gains.

Sanford Bernstein cable bull Craig Moffett estimated in a research note that “Comcast’s 278,000 broadband net additions alone represent 75% of the broadband market reported thus far…. Cable’s huge physical plant advantage–higher capacity and lower cost–is winning the day.”

By contrast, Verizon reported on Monday that it lost 133,000 DSL subscribers, while gaining 187,000 new customers for its fiber optic FiOS Internet service–yielding a net gain of 54,000 customers.

Check out Bernstein’s research note here.