Clear's Services In Portland - Neither Revolutionary Nor "4G"

Summary

The services offered by Clear in Portland include competition to DSL and cable modems for home users, and to EV-DO and HSPA for mobile data customers. In both cases the Clear services suffer from some significant disadvantages. While their optimum performance may be superior to the alternatives in some locations they are unlikely to present any consistent offsetting competitive benefits across the range of usage environments typically encountered that might stimulate many current broadband customers to switch, or many first time broadband users to choose them in preference to established broadband services.

Analysis

Clear’s Home Services (such as $30 and $40/month for speeds up to 3Mbps/384 kbps and 6Mbps/512 kbps downlink/uplink respectively) hardly seem likely to change the competitive game against well-established DSL and cable modem services. While WiMax may indeed be competitive in countries or areas with inadequate fixed access networks (e.g. South Africa, Malaysia, India etc.), experiences with fixed wireless competition in developed economies with modern fixed access facilities have generally been disappointing. It should also be noted that being a cellular wireless technology WiMax inevitably involves sharing of capacity at the radio access network level so the possibility of performance degradation for users as their numbers increase within a cell, or the risk of congestion, is a significant consideration. Fortunately compared to most if not all WiMax networks elsewhere Clear’s network can exploit the unusually large amounts of spectrum held by Clear to increase the capacity it can provide in a cell. So the good news is that with a small number of customers on the Clear network they may all be able to enjoy the maximum nominal speeds advertised when they wish. However, potential home users would be well advised to check the quality of indoor coverage in their homes, given the 2.5 GHz frequency, before signing up. The other bad news may be that if Clear is successful in attracting large numbers of customers, then the speeds they experience may fall significantly. Interesting related questions for Clear are: (a) How many simultaneous users can it support per unit area, given the way in which its WiMax network has been deployed; (b) How much can it grow this number by deploying more base stations and/or using more spectrum; and (c) How does the revenue/cost equation look as the number of customers grow (or how many customers/unit area are required to achieve profitability)? In contrast to its home services, Clear’s Mobile Internet Services should be compared with the mobile broadband data services that have been available for some time from AT&T (HSPA) and Verizon Wireless (EV-DO Rev.A). It is likely that in some locations users may experience higher download speeds with Clear than they find with HSPA or EV-DO, but variability of WiMax speeds (e.g. as a function of distance of the user from the base station) is likely to be greater, and uplink speeds may be slower. Both coverage and consistency of performance of the established alternatives to WiMax are superior and are likely to remain so, however aggressively Clear is able to expand its network coverage. Furthermore, the maximum speed advantage that Clear may offer is hardly decisive compared to the typical downlink speeds reported for these much more widely deployed and already more heavily used networks, i.e. HSPA (0.7-1.7 Mbps) and EV-DO Rev.A (0.8-0.9 Mbps), while significant speed increases are expected to become available with HSPA upgrades in the near future. On the negative side the disadvantages of Clear’s mobile services include their very limited coverage – which may also play a role as noted in its home services for a different reason (inadequate indoor penetration) in limiting the number of potential customers – and lack of voice capability, whereas AT&T and Verizon customers can subscribe to both voice and data communications . Yet gaps in coverage are among the most serious causes of mobile customers’ complaints and considerations in their choice of service. Pricing of Clear’s mobile services at around $40-50 per month is competitive and somewhat but not dramatically  lower than current HSPA and EV-DO services, which as noted offer much greater coverage. Clear’s mobile services are aimed at laptop and netbook users, and are offered with a very aggressively priced (from $49.99) USB WiMax modem. Laptops with embedded WiMax wireless modules will also become available in the near future. Of course terminals with embedded HSPA or EV-DO and even multimode HSPA/EV-DO (based on Qualcomm’s Gobi chipset) broadband wireless modems are also available (and several have been available for some time), so there is nothing new or unique about Clear’s approach.  Indeed overall so far there is nothing “4G” and no decisively differentiating component in terms of performance or business model about Clear’s offerings. One interesting comparison to keep in mind for assessing the relative success and success factors of mobile broadband data services can be found in the takeup of Apple's iPhone. While full details of the iPhone’s success with AT&T in the U.S. are not publicly available, AT&T did report that it sold 2.4 million 3G iPhones in the 3^rd. quarter of 2008, of which 40% were new customers for AT&T. This number contrasts with 1 million 2G iPhones that were sold in the 3^rd. quarter of 2007. So a second set of questions for Clear is when and at what price EV-DO coverage via Sprint will be available with its WiMax-based services (e.g. using the WiMax/EV-DO card announced by Sprint) to augment the coverage its customers can enjoy, and when or will voice service be included in its mobile offerings so that they are not restricted to data-only revenues. It would after all be an unprecedented and revolutionary first if Clear were able to achieve profitability on the basis of data-only services in the mobile market. Sometimes disasters (such as plane crashes) are the result of an unusual and hence very difficult to anticipate combination and sequence of individual faults or circumstances arising from unrelated causes, and they would in retrospect have been avoided if any single one of the contributing factors had been absent even if all the others were present. In the same vein, but the opposite context, the prospects for the success of Clear – ability to build a profitable customer and revenue base - depend on its overcoming every one of a set of multiple diverse and daunting obstacles while its competitors commit an extended series of self-destructive mistakes in their moves with regard to pricing, marketing, network evolution and upgrades, and the introduction of new terminals and services. Not an impossible outcome, but a highly improbable one.