News Corp and Clearwire ready to tie the knot?

In a recent interview with film industry newspaper Hollywood Reporter, News Corp CEO Rupert Murdoch said: "If we can pull something off...there is no reason why that shouldn't link in with everything. I would expect to have wireless broadband advanced in at least two or three cities before the end of this year, and then it might take two or three years to build it out across the entire country."

The WiMAX venture would be executed by DirecTV CEO Chase Carey, who has already said he aims to keep the project from using more than $1bn of his $4bn cash mountain.

"There are a lot of moving parts, and when we have the right deal on the table, we'll do it. But in the short term, we will continue to provide our broadband services through the telcos," Carey said recently.

Like the Sprint Cableco venture - and unlike many of the telco plans - there will be real vision behind Murdoch's and Carey's plans, whichever network they end up using.

News Corp's recent purchase of the youth social networking phenomenon MySpace was a clear indicator that the company understands the nature of next generation communication, content and behaviour, and that innovative devices and applications, especially those used outside the home, will be the key to growth. As Murdoch has done in the past, he will harness new technologies and habits - notably increased user control of content - rather than fighting against it.

As well as putting News Corp in a position to shape and exploit these new behaviours and spending patterns, a wireless network would allow it to maximise its multibillion investment in its 34 per cent stake in DirecTV and increase its share of the overall broadband-convergence market.

For this reason, a deal with Clearwire (or another partner) is likely to be led by News Corp rather than just by its satellite arm, giving it the flexibility to use the wireless system for other purposes too (and we should remember that Clearwire is also acquiring spectrum and building networks in Europe and has its eyes on Latin America and China).

It is unclear whether DirecTV is still pursuing an option it discussed earlier this year, of collaborating with the other US satellite TV operator, EchoStar, to build a wireless network or partner with an existing one.

This would provide a combined satellite-based alternative to the other main quad play (voice, data, video/TV and mobility) blocs in the US - the fiber/wireless oriented plans of Verizon and AT&T, and the Sprint/cableco venture.

Given the consolidation of the non-satellite interests, even an eventual merger of DirecTV and EchoStar might be considered, as it would not have been a few years ago from a regulatory point of view.

Copyright © 2006, Faultline

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