Sprint Nextel Corp. says its decision to merge its WiMax high-speed Internet unit with Clearwire Corp. will herald a new era in the wireless business — one in which consumers build their lifestyles around the mobile Internet.
So what is WiMax?
“WiFi on steroids,” said Julie Ask, vice president and research director at Jupiter Research.
WiMax works similarly to WiFi service but it’s faster and, with more bandwidth, can accommodate more users. It can also travel farther: A WiFi hot spot is generally in the range of about 100 feet; WiMax can stretch up to 30 miles, blanketing an entire city.
Indeed, that’s what Sprint and its partners intend to do across the country. By 2010, they expect WiMax service to be available to as many as 140 million people across the U.S.
Under the deal announced yesterday, Sprint is combining its Xohm subsidiary with Clearwire to form a new public company that will be called Clearwire but controlled with a 51 percent interest by Sprint. Intel Corp., Comcast Corp., Time Warner Cable Inc., Google Inc. and Bright House Networks have agreed to invest a total of $3.2 billion in the venture.
Analysts say the deal is a way for subscriber-losing Sprint to get the cash to move forward with its WiMax strategy while freeing up the Overland Park, Kan., company to focus on customer-service problems and other issues plaguing its wireless voice business.
Clearwire is a Kirkland, Wash., wireless broadband provider with about 400,000 U.S. customers. Its network, which uses pre-WiMax technology, would get needed funds to expand.
The nation’s largest and second-largest carriers, AT&T Inc. and Verizon Communications, are developing their own next-generation mobile broadband technology, known as LTE. But WiMax has a “substantial time-to-market advantage” of at least two years, Sprint Chief Executive Officer Dan Hesse yesterday stressed on a conference call.
Berge Ayvazian, chief strategy officer with the Yankee Group market research firm, said consumers will see “a big difference” on several fronts with the rollout of a WiMax network.
“Rather than seeing Clearwire as an alternative or competitor to cable companies, Clearwire will be an enhancement that allows cable companies to offer service anytime, anywhere, so it’s not just bundling cable and wireless, it’s taking your cable mobile,” Mr. Ayvazian said of Comcast and Time Warner’s decisions to invest in the new company.
“In addition, it will introduce a whole new concept of mobile service, in which the Internet is the product rather than viewing the Internet as a threat; it’s a means to transform the whole wireless business to go from being phone calls to being content, applications, transactions and building your lifestyle around the mobile Internet.”
Despite the promise of WiMax, consumer demand isn’t guaranteed, Ms. Ask noted.
“I think WiMax is something there’s still a lot of questions about. How much demand is there from consumers and the willingness to pay? It also involves teaching consumers new behaviors,” she said. “Ubiquitous wireless broadband is game-changing, but that doesn’t necessarily mean WiMax is somehow uniquely qualified to deliver that.”
WiMax is aimed at supporting advanced data services, as opposed to traditional voice calls. Sprint executives said they will offer dual-mode devices that support the company’s cellular network as well as WiMax.
The companies expect to close the deal, which requires approval by the Federal Communications Commission and the Justice Department, by the fourth quarter.
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