A Boost for Clearwire, But Not in Creativity
Clearwire Corp., the wirless internet service provider, got a big cash infusion yesterday: $1.5 billion, largely from majority owner Sprint, but also a fair amount from Comcast Cable and Eagle River Holdings, the holding company for the assets of Clearwire's billionaire founder Craig McCaw.
It's a lot of money, and yet Clearwire is still a money-losing concern. At the same time it confirmed the investment, it released its quarterly results. Third-quarter loss was $82.4 million, an improvement from $137.6 million in the year-ago quarter, but a slight gain from the year-ago quarter's $72.7 pro forma loss, meaning there were some one-time charges or expenses skewing last year's numbers).
What's the future for Clearwire and its WiMax technology? Most of us here in the Puget Sound region are aware of Clearwire, if not for its local provenience than for the massive amounts of junk mail we receive encouraging us to sign up for a reduced-rate trial period. Of course, the mailers make no mention of the monthly fees, but then no one else's do either.
But with Clearwire still in the red, and still limited in its availability across the U.S., what will the money go toward, do you think: more investment in infrastructure (the company says it will expand 4G service in 11 markets in the fourth quarter, including Seattle/Tacoma)? Or more mailers trying to convince us to sign up?
I'm not sure a cost-benefit analysis would show that the money spent on the mailers is yielding much of a return. It currently claims 173,000 subscribers, and its new push will cover an area with 120 million potential customers. That's about a 1.5 percent penetration rate.
But how else can the company reach the marketplace and create brand awareness? When I consider switching my internet service from my old DSL line, my first thoughts go to Comcast, the people who already have a pipe into my house for cable TV. Certainly the "I'm a Mac" TV ads have boosted Apple's brand over the years (which Microsoft is slowly waking up to) — but Clearwire's TV ads aren't penetrating the hive mind like Apple's. Plus, TV's more expensive, and I can't imagine that Clearwire's ideal customer base—tech-savvy early adopters—is as responsive to dead-tree marketing as it would be to other forms of advertising. Clearwire instead seems to be taking a page out of the AOL playbook: flood the marketplace and cover the costs with the 1 percent (or whatever) that takes the bait.
That's the economics of spam. I think Clearwire needs to get more creative.
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