Sprint sues Clearwire
Puget Sound Business Journal (Seattle) - August 4, 2006
by Charlie Anderson
<http://www.bizjournals.com/search/bin/search?t=seattle&am=seattle&q=%22Charlie%20Anderson%22&f=byline&am=120_days&r=20>
Kansas City Business Journal
http://seattle.bizjournals.com/seattle/stories/2006/08/07/story2.html?t=printable
Sprint Nextel Corp.
<http://www.bizjournals.com/search/bin/search?q=%22Sprint%20Nextel%20Corp%22&t=seattle>
-- the nation's largest holder of valuable spectrum for a new generation
of wireless high-speed Internet service -- has sued the second-largest
holder for an alleged double cross.
In a suit filed July 11 in Johnson County, Kansas, District Court,
Sprint Nextel alleges tortious interference and conspiracy by
Kirkland-based Clearwire Corp.
<http://www.bizjournals.com/search/bin/search?q=%22Clearwire%20Corp%22&t=seattle>
Clearwire is the brainchild of Craig McCaw, the billionaire wireless
entrepreneur. Clearwire canceled an initial public offering last month
after raising $900 million from Intel Corp.
<http://www.bizjournals.com/search/bin/search?q=%22Intel%20Corp%22&t=seattle>
and Motorola Inc.
<http://www.bizjournals.com/search/bin/search?q=%22Motorola%20Inc%22&t=seattle>
In the lawsuit, Sprint Nextel accuses Clearwire of going behind its back
and buying rights to wireless spectrum in the Seattle market from an
Ohio woman. Sprint Nextel claims it had a contract to lease the woman's
rights and had a right of first refusal if she decided to sell her
spectrum holdings.
The lawsuit was filed by Sprint Nextel subsidiary American Telecasting
of Seattle Inc.
<http://www.bizjournals.com/search/bin/search?q=%22American%20Telecasting%20of%20Seattle%20Inc%22&t=seattle>
Sprint Nextel spokesman David Gunasegaram declined comment on the lawsuit.
In an e-mail, Clearwire spokeswoman Teresa Fausti-Blatt said, "Clearwire
conducts appropriate and ethical business practices."
"We believe the claims made by American Telecasting of Seattle and the
pending litigation are unfounded," she said.
The spectrum at issue differs from spectrum used to connect wireless
phone calls and let users browse the Internet on their phones. The
higher-capacity "broadband radio service" spectrum can be used to
deliver Internet access at speeds comparable to land-line alternatives.
Sprint Nextel owns or leases spectrum to deliver this high-speed
wireless Internet access to about 80 percent of the country. Clearwire
owns the rest.
But while Clearwire has launched its service in markets such as
Jacksonville, Fla., and Reno, Nev., Sprint Nextel has been conducting
trials on five different technologies. It is expected to announce which
technology it will base its service on this summer.
When they merged last year, Sprint and Nextel promised to roll out the
service to 15 million Americans by 2009, and 30 million people by 2011.
Phillip Marshall, an analyst at Boston-based researcher The Yankee
Group, said it would make sense for Sprint Nextel to strike a
partnership with Clearwire and share the risk of building a national
network, which he estimates could cost $3 billion.
In the Johnson County lawsuit, Sprint Nextel acknowledges a 2003
confidentiality agreement between Sprint Corp. and Clearwire officials
to hold talks. No other details were given on the nature of those talks.
But the lawsuit indicates there was a working relationship between the
two companies until the alleged double cross.
Included as an exhibit in the suit is an Oct. 5, 2005, letter from
Clearwire co-CEO Ben Wolff to Sprint Nextel executive Todd Rowley. The
letter regards an agreement by Sprint Nextel to turn off usage of its
spectrum in Seattle so as not to interfere with Clearwire service. In
exchange, according to the letter, Clearwire agreed to let Sprint Nextel
access a comparable amount of its spectrum holdings.
In keeping with that arrangement, Sprint Nextel attempted to contact the
owner of a block of spectrum in Seattle with whom it had a long-term lease.
After numerous attempts to contact spectrum owner and Ohio resident Lois
Hubbard, Sprint Nextel said it was informed in February by Hubbard's
lawyer that the lease deal was nonbinding.
In May, when Clearwire filed papers for its IPO, Sprint Nextel
discovered that Clearwire had struck a deal on Oct. 10 to buy a stake in
a limited liability corporation set up by Hubbard, according to the
lawsuit.
Documents filed with Federal Communications Commission state that
Clearwire owns 49 percent of Lois Hubbard Communications LLC
<http://www.bizjournals.com/search/bin/search?q=%22Lois%20Hubbard%20Communications%20LLC%22&t=seattle>
and has an option buy the other 51 percent from Hubbard "in certain
circumstances."
"Through its undisclosed negotiations, Clearwire maliciously breached
its duty toward American to contract in good faith," the suit said.
Sprint Nextel also named Hubbard in the suit, alleging breach of contract.
Attempts to reach Hubbard and her Cleveland-based lawyer, Timothy
Sterkel, were unsuccessful.
"She's hard to get a hold of; she's an elderly lady," said Dale Kipp, a
Mesa, Ariz., man who submits FCC filings for spectrum-holders, including
Hubbard.
John Mansell, an analyst at Monterey, Calif.-based Kagan Research who
has closely tracked Clearwire, said the business of acquiring wireless
spectrum can be messy.
"It could be as innocuous as the right hand of (Clearwire) didn't know
what the left hand was doing," he said.
On the other hand, Clearwire and Sprint Nextel are engaged in numerous
competitive bids, which could create friction.
"They've been competing with each other all over the country," Mansell
said.
--
Regards,
Peter
RAD-INFO, Inc. - NSP Strategist
We Help ISPs Connect & Communicate
813.963.5884
http://4isps.com/newsletter.htm
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