Wal-Mart and WiMax

WiMax, due out in 2005, is the baby brother of WiFi, and promises to deliver wireless 70 megabit-per-second data service over a distance up to 30 miles. For the uninitiated, home DSL and cable modems generally top out at about 1.5 Mbps. Robert Cringely thinks that Wal-Mart might be just the company to implement WiMax nationwide:

If you do the geometry and then do the subsequent conversion required because the rest of the world is metric (but for some reason we in the U.S. aren’t), you’ll see that a prototypical WiMax network can cover up to about 1,000 square miles or the equivalent of 10,000 WiFi hotspots. The area of the continental United States is approximately three million square miles, which suggests that 3,000 WiMax networks could cover the entire country. And it just so happens that between its discount stores, supercenters, Sam’s Clubs, and distribution centers, Wal-Mart has 3,756 U.S. locations, all of which are presently served by a hearty network.

Wal-Mart is an ideal WiMax operator not just because it already has a national footprint of adequate size. With $256 billion in sales, Wal-Mart also has the financial resources to go toe-to-toe with any possible competitor. The company has an insatiable appetite for new profit centers that won’t raise the ire of Federal regulators. It likes to leverage its existing assets. And best of all for we consumers, Wal-Mart likes to compete on price.

If Wal-Mart decided to get in the WiMax business, nothing could stop it from becoming almost overnight the equal any of the big telcos. Buy the licenses, install the equipment, light a few more fibers, start a marketing campaign on TV, in stores, and by direct mail, and before anyone would know it, $50 billion or so in shareholder equity would be drained from BellSouth, SBC, Verizon et al, and transferred straight to Wal-Mart intergalactic HQ in Bentonville, Arkansas.

Nothing could stop this behemoth. WiMax phones? Wal-Mart sells more phones than anyone.

But say the boys and girls in Bentonville aren’t as smart as I think they are. That’s no reason for the phone companies to relax because any national enterprise with 3,000 or more locations and money in the bank could take Wal-Mart’s place. Look at the about-to-be-merged Sears and K-Mart, with a combined 3,450 locations. Adding that WiMax $50 billion to Sears Holdings’ $20 billion market cap could be one of the greatest real estate plays of all time.

And if Sears doesn’t bite, there is always America’s largest single owner of real estate, MacDonalds, with 15,000 locations. While most McDonald’s restaurants are owned by franchisees, the national organization owns all the land under the stores and imposing a WiMax business (and even making the local owner-operators pay to install and market it) is well within Ronald’s power.

Update: I knew I’d read this idea before. Dan Sherman originally published this idea last summer.

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