Ex-telephone lineman expects Clearwire to climb higher

It's a good thing Clearwire's new chief executive, Bill Morrow, knows how to guide a boat through choppy seas.

Morrow was a Navy coxswain, piloting a captain's boat, before entered the telecommunications business — as a Pacific Bell lineman who worked his way up to engineering and eventually leadership of wireless companies in Asia and Europe.

Six months ago, Morrow took the helm of wireless mogul Craig McCaw's launch. Kirkland-based Clearwire is trying to leapfrog past the nation's two biggest telecom companies with its speedy fourth-generation wireless broadband service.

Clearwire may be the world's best-funded tech startup, with $3.2 billion from investors Intel, Comcast, Time Warner, Google and Bright House Networks.

But there's concern among financial and industry analysts that Clearwire is less a superyacht then an experimental hydroplane, one that could run out of fuel and get overtaken by carriers such as Verizon. That giant recently announced progress on its 4G network using LTE, a different technology emerging as the standard in Europe.

Fears about Clearwire crested after it reported second-quarter earnings Aug. 11. It lost $241 million on sales of $64 million, while spending heavily to reach its goal of serving 80 cities and 120 million potential customers by the end of 2010.

Of particular concern was uptake — Clearwire added 12,000 customers in the quarter, bringing the total to 511,000 — and the fact that Clearwire needs more than the $2.5 billion on hand to reach its 2010 goal.

The stock fell 10 percent the next day and several analysts downgraded the stock. The drubbing continued last week when British research firm Analysys Mason said WiMax, the technology Clearwire is based upon, is losing its early mover advantage and may lose out to LTE in developed countries.

But Morrow remains upbeat about the company's situation and outlook.

He said perceptions will change in coming quarters as Clearwire reports its progress in additional markets and continues winding down the early "pre-WiMax" service it's been offering since 2004.

"Because we're still in the early phases, this is one of the things that's going to keep us a little bit volatile," he said. "I think it's less about the performance of the firm right now because we're in this transition. ... With the few markets we were in second quarter, it doesn't look like the growth was really there. But with the coming quarters, people will see that and I think it will change that issue."

Maybe confusion was inevitable, given all the changes happening at Clearwire. Before launching its first 4G service in Portland in January, the company absorbed Sprint's WiMax business and consummated the big financing round.

Then it shuffled executives and lured Morrow from his native San Francisco, where he was CEO of Pacific Gas & Electric.

Morrow, 50, took a break from building the network — and buying a house and boat — to answer a few questions last week.

For one thing, he said Clearwire will finally offer its "Clear" brand 4G service in the Seattle market in December. Pricing hasn't been disclosed yet, but in Portland it costs $45 per month for unlimited usage of mobile broadband with download speeds up to 4 megabits per second. The service works with Clearwire modems, USB antennas and laptops and handheld devices with WiMax radios.

Here are edited excerpts of the interview. I have a longer, fuller version in my blog.

Q: A big question is whether Clearwire will have financing to build what you said you'd build.

A: We do — $2.5 billion — which gets us to the 75 million [potential customers] level, but we're planning for 120 by the end of next year. But as I've told many of the analysts, I'm confident we're going to get the funds. It will be there. ...

Q: Some analysts are pretty concerned about that.

A: If you consider just for a moment the opportunity to grow in this marketplace, where almost everybody confirms the real growth is going to be in a broader-band wireless mobile play, we're in the sweet spot.

Sprint is relying on us to do that for them, the cable companies don't have their own access for this and there's really no other carrier with the spectrum to be able to launch into this area, other than AT&T and Verizon, and this is a brand-new space. ...

Q: What about Verizon moving ahead with its LTE mobile broadband network?

A: It doesn't bother me because I think it's an affirmation that the future is in this space and there's an enormous, pent-up demand among consumers.

Q: I'm waiting for a company like Sony to announce an electronic book, game player or other device that uses 4G broadband, to get ahead of Amazon and its 3G Kindle, and that uses your network to differentiate their reader or device.

A: There are several consumer-electronic companies that are interested in doing that very thing.

Q: Would you have a relationship with them similar to what Sprint has with the Kindle, where the service cost is included in the initial cost of the device, so there aren't monthly fees?

A: Pretty much, yes. When I managed Vodafone UK, the European operations, a lot of the European carriers started what's called a service-provider model. What we're seeing is interest among consumer-electronics companies — I think much like what Amazon did with the Kindle — saying I've already got a distribution channel set up, I've already got a brand name that I want to support, I have products that access the Internet and networked. All I really need is a 4G, high-capacity, high-speed, high-video-capability network and I'll take care of the rest. We're seeing people interested in this.

Q: Looking a few years out, do you see the majority of your customers using your service through devices like that or direct subscriptions?

A: I think it will be a combination thereof. I would say in the next three years it's not likely to hit the majority.

It will be more direct, either through the Clear brand or through Sprint or Time Warner or Comcast sorts of wholesale channels.

But there will be a complement, a growing complement, that will be this service provider model of consumer electronics. Three years is pretty soon, but not too long thereafter.

Q: How is Google going to leverage its investment in Clearwire — will they offer a mobile YouTube player, a 4G Android Web tablet?

A: Google is who you ought to talk to. I think the best thing we can do for Google is grow the ecosystem.

Brier Dudley's column appears Mondays. Reach him at 206-515-5687 or bdudley@seattletimes.com.