Centrino: Cometa. Rosedale: Clearwire. And so on: May I be forgiven for invoking the late and largely unlamented Cometa as Intel Capital stuffs $600m (of a $900m total investment) into Craig McCaw's already bulging pockets? Absolutely, I hear you cry.
In July 2002, we first heard about "Project Rainbow," which was launched as Cometa that December; the company said they'd build 20,000 hotspots over two years, though the number was later revised down. The initiative was lauded as a combination of Intel, IBM, AT&T, and two venture capital firms. In reality, as I have tried to remind people ever since, it was Intel Capital (funding), IBM's service division (installation), and AT&T's broadband division (service). None of the companies had anything on the line when Cometa failed.
Intel hopped on Wi-Fi after the train had left the station. By the time they launched Centrino and spent tens of millions on a Centro-verified hotspot branding program, 802.11b was already clearly on the way out. Centrino systems wouldn't get 802.11g for another year, and Wi-Fi Protected Access (WPA) security lagged longer with upgrades from Intel that conflicted with manufacturers' Windows XP editions.
Centrino was a huge success from a branding perspective, and Centrino laptops had substantially better battery life while not offering great performance.
Cometa ultimately went belly up in May 2004 after securing just a few hundred hotspots, with a focus in Seattle, and losing the McDonald's bid to Wayport. The Barnes & Noble contract that they had signed just before shutting down was taken up by SBC--now called AT&T. Poetic justice of a sort.
The company suffered from setting unmeetable goals. Their founder, Larry Brilliant, now the head of Google.org, made statements that went far beyond what was achievable in a maturing market, and then left to focus on his hot-zone--as in infectious disease--specialty, leaving the company holding that that bag. Intel had also lost interest in Wi-Fi. It had become an also-ran to WiMax. Wi-Fi had no strategic advantage to the firm given that it was a de rigeur part of every modern laptop.
And that's why Clearwire, my dear friends, is no Cometa.
First, Intel has staked the future of its telecommunications effort on WiMax. They've pushed money into dozens of companies. They've headed standards bodies, built chips, and subsidized a lot of early network development. They've pissed off cellular operators by creating buzz around technology that clearly competes and complements cell networks, revealing some of the paucity of user-oriented thinking in the cell industry. Intel has burned bridges and sown salts in other fields. If they can't make WiMax bloom, heads will roll from the top down.
Second, Intel "owns" WiMax in a way that they didn't with Wi-Fi. Intel didn't make its own Wi-Fi chips and wasn't a leader in the market, which was already four years into development when Centrino shipped. While there are dozens of companies, including some enormous ones who compete with Intel on many fronts involved in with WiMax, Intel has consistently taken a position far ahead of the market and somewhat ahead of the industry. They're not leaving this standard to other people.
Third, Clearwire has a spectrum portfolio. No one can own Wi-Fi, but you can buy pieces of WiMax by having exclusive spectrum rights for regions of the country. Clearwire surely needs more licenses, and I'm sure has a strategy about that, but they can reach 90m people now, they said in their now-withdrawn IPO filing a few weeks ago.
Fourth, the technology isn't unproven or oversold by Intel or Clearwire. There is a lot of hype around WiMax, but I can't find statements in which Intel or Clearwire oversells how the technology will deliver. They're leaving that to other firms. If anything, the two companies are underselling WiMax before they can deliver the goods.
Fifth, Intel Capital has invested something like $1b in WiMax if you include this $600m in Clearwire investment. That's something like at least 50 times more than their Cometa investment.
Sixth, there's a clear market out there for fixed and mobile wireless broadband, which is why there are hundreds of wireless ISPs and billions spent on cell data. It's also why the metro-scale wireless market is so hot, and why Wi-Fi--despite it being not the ideal technology for the purpose--will be blanketing hundreds of cities by the end of 2007.
Cometa had nothing unique over other hotspot operators except a staff split among at least three different headquarters that was much too large and a lack of signed contracts by the time they shut down. Hotspots were on the way to becoming a standard commodity that could be built and resold by a host of firms even as Cometa launched.
Clearwire has a particular set of advantages. They have Intel's attention. They have a chunk of spectrum licenses. They have a technology that works. And they have an audience that wants truly large-area mobile service from anyone but the incumbents--even if that's just for competitive sake to drive prices down.
Clearwire will execute, there's no doubt, and the question will be whether they can acquire enough customers at the right price to turn a profit. Cometa once talked about creating hotspots to such a large extent that they would cover every area in which a business traveler might find themselves. Clearwire has the potential to meet that target and avoid Cometa's fate.