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The Only Way Ahead For WiMax

While I had my head down cranking out a feature on Intel's ultra-mobile future last week, Sprint Nextel chairman and CEO Gary Forsee for the first time raised doubts about the future of Sprint's WiMax network project. According to the Wall Street Journal, it appears that a spin-off or a joint venture of some kind with Clearwire could be in the offing, which could well be the only way that WiMax will actually get off the ground in this country.

In the face of significant skepticism from Wall Street and from the tech press, the No. 3 U.S. carrier has repeatedly underlined its determination to spend $3 billion to build out a nationwide network based on the mobile version of the wireless broadband technology. Sprint executive Don Stroberg, a forceful and sharp guy, has reiterated the company's full-speed-ahead WiMax policy to me on several occasions. But when Forsee and Stroberg studied the numbers, an alliance with Clearwire surely became obvious as the only realistic tactic. Sprint's ambitious WiMax scheme, lauded by tech journalists including myself for its audacity and farsightedness, is a beast to pull off for several reasons:

1. Cost. $3 billion over the next three years is almost certainly an underestimate by 50% or more.
2. Marketing. Sprint, which already has major customer-retention issues, was faced with signing up large numbers of new subscribers for a technology that many nontechnical users have never heard of and that faces competition from other rapidly emerging broadband wireless services, including Sprint's own EV-DO network.
3. Technology. WiMax is a highly touted and, potentially, very powerful technology. It's also relatively untested in the field, and the majority of WiMax deployments to date have been for fixed wireless applications. Many vendors and operators see the early potential for WiMax service in rural or developing-country deployments, or as a backhaul solution for other types of wireless networks.

In short, staring at its announced early-deployment timeline, Sprint has realized that it's hooked a much bigger fish than it can reel in. I don't think Sprint has cooled to the eventual potential of WiMax; I just don't think the carrier can achieve a build-out of this magnitude and challenge while watching its cellular-voice business disintegrate by the day.

What's more, a hookup between Clearwire and Sprint would make perfect sense. Clearwire, which has nearly $1 billion in venture funding from Intel and Motorola as well as the proceeds from its lackluster March IPO, brings a startup's appetite for risk and agility; Sprint offers the market clout of a major carrier, additional funding, and ownership of the largest block of 2.5-GHz spectrum. Clearwire's share price, by the way, leapt by almost 20% on the WSJ report. (Broadband Wireless Internet Access News commenter Steve Stroh even suggests that a Sprint hook-up was Clearwire founder Craig McCaw's plan all along.) The alliance of the two isn't just a good fit; it's a necessity if a mobile WiMax network is to be built in the U.S. in the next few years.

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