Never one to go slow when an emerging opportunity exists, Craig McCaw's wireless broadband venture Clearwire (NASDAQ:CLWR) pushed ahead yesterday in a new deal with DirecTV (NYSE:DTV) and EchoStar Communications (NASDAQ:DISH). The distribution agreement lets the two satellite providers offer Clearwire's broadband service in a package with their own satellite programming. In kind, Clearwire will be able to offer its customers satellite TV services from either provider.
With DirecTV reporting 16.2 million subscribers at the end of March and Echostar logging 13.4 million on its DISH Network, Clearwire has a good opportunity to accelerate customer growth and thereby ramp up revenue more quickly, to slow the continuous bleeding of cash.
Clearwire's network covers only a fraction of the U.S. -- some 10 million people -- at this point, but that will change as the months and years go by. The companies said the partnership will launch later this year, and Clearwire is quickly adding new markets for its wireless broadband service. Clearwire owns spectrum rights in U.S. regions that cover 223 million people.
While the deal makes obvious sense from the perspective of new distribution opportunities, it also offers some strategic advantages for each company. It is an important early step in making Clearwire's broadband services a viable alternative to offerings from large incumbents such as AT&T (NYSE:T) and Verizon (NYSE:VZ) and a competing broadband offering that Sprint Nextel (NYSE:S) is pursuing -- although there has been recent speculation that Sprint may partner with Clearwire for this venture.
And since Clearwire's broadband service is nomadic -- subscribers can get broadband reception in their home or anywhere else within network coverage -- the distinction from wired alternatives will help DISH and DirecTV differentiate its bundles from cable providers such as Time Warner (NYSE:TWC) and help offset slowing subscriber growth.
So while some may think Clearwire is putting the cart before the horse by signing distribution agreements before its network is largely built, it's actually a smart move. Developing pent-up demand will make it easier for Clearwire to borrow more money in the future -- something the company will certainly need if it wants to scale its business.
More broad-banded Foolishness:
- New Kid Struts Its Stuff on Wall Street
- Foolish Forecast: Clearwire's Hail Mary
- Echostar Dishes Out Slowing Growth
Fool contributor Dave Mock wonders whether chicken eggs came before horse carts. Or maybe horse eggs predate chicken carts. He owns no shares of companies mentioned here. Dave is the author of The Qualcomm Equation. The Fool's disclosure policy always comes first.
