Sprint Nextel and Clearwire will form a joint venture worth $14.5 billion to deploy the first nationwide mobile WiMAX network, they said Wednesday.
As expected, the new company will be focused primarily on deploying a nationwide WiMAX network that will provide 4G coverage in both rural and urban markets. The new company, which will be known as Clearwire, will also concentrate on delivering wireless broadband to consumers, businesses and even government public safety services, Sprint says.
In addition to forming their new joint WiMAX venture, the two companies also announced that they had secured $3.2 billion in total investments from several major tech and communications companies, including Google, Intel, Comcast, Time-Warner Cable and Bright House Networks. Under the strategic investment agreement signed by the companies, Sprint will own the largest stake in the new company at 51%, Clearwire will own about 27% of the company, and the group of five major investors will own 22%. (Read Craig Mathias' analysis of the deal.)
After the deal is finalized, Comcast, Time Warner and Bright House will enter into wholesale agreements to become official vendors of Clearwire's 4G WiMAX services. Additionally, the three television companies will become bundled providers of Sprint's 3G wireless voice services, which Sprint hopes will expand the reach of its network to millions of new customers.
Google, meanwhile, has agreed to develop new Internet services, advertising services and applications for all Clearwire WiMAX devices. In return, Clearwire will support Google's open source Android operating system on all of its WiMAX devices. And finally, Intel has agreed to work with manufacturers to install WiMAX chipsets into Intel-based laptops and mobile devices, and also to market Clearwire's WiMAX service in congruence with Intel's performance notebook PC brand. While both Intel and Google have options to enter into 3G and 4G wholesale agreements with Clearwire, Sprint says that both companies have chosen not to do so at this time.
Sprint and Clearwire had previously signed a letter of intent to jointly build out a nationwide WiMAX network last summer, but then called off their plans months later, as the companies said they "could not resolve complexities" involved in the original plan. Former interim CEO Paul Saleh told an investor's conference last year that the original plans with Clearwire fell apart because having a WiMAX network split between the two companies had simply become too complicated, and the companies were worried that it might confuse customers.
Since then, both Sprint and Clearwire have been rumored to be negotiating a new deal to build out a nationwide WiMAX network with help from outside investors. Intel and Clearwire have a history of working together on WiMAX-related projects, and Intel announced earlier this year that it would integrate WiMAX into its new Montevina mobile platform.
The major investment by Time Warner, Bright House and Comcast in WiMAX wireless Internet technology further raises the stakes in the cable companies' rivalry with telecom carriers Verizon and AT&T, which have each been aggressively promoting their FiOS and U-Verse services as alternatives to traditional cable television and Internet. A report issued earlier this year by researchers Information Gatekeepers projects that telcos will be able to match the total number of high-speed accesses offered by cable companies by 2011.
Too little, too late?
For the past year, WiMAX has been a technology under siege. It has faced criticism as unreliable and untested, and not only from promoters of the rival High-Speed Packet Access (HSPA) and Long-Term Evolution (LTE) technologies. Earlier this year, Garth Freeman, the CEO of Australian WiMAX operator Buzz Broadband, described his experience with the technology as a "disaster" and cited problems such as latency, jitter and poor indoor service. WiMAX equipment vendor Airspan, however, says Buzz Broadband cut corners in its deployment, and that is failure should not reflect on WiMAX.
Even so, the persistent criticism of WiMAX led Sprint's Xohm CTO Barry West to hit back at WiMAX skeptics at a Wireless Communications Association conference last month. Noting that it would be at least two years before LTE services and devices hit the wireless market, West accused LTE-adopting companies of "not having anything to offer" and of "trashing the system that's out there working."
But despite these vigorous defenses of WiMAX, and despite the new Clearwire nationwide WiMAX network plans, some analysts remain skeptical about WiMAX's long-term potential. Gartner analyst Phil Redman says because WiMAX is a data-only technology that can only transmit voice services over IP, it will have limited market appeal for users who want all-in-one 4G devices.
"It's going to be a challenge," he says. "Can you name any successful data-only networks that are around today? People who want cell phone and voice technology are going to have to carry a second device unless they make it a combination device that uses both WiMAX and cellular technology."
But Jeff Thompson, the CEO enterprise wireless broadband ISP Towerstream, says the high quality of the investors in the new WiMAX company shows that many within the telecom, tech and cable industries view WiMAX as an important technology that will bring 4G wireless broadband services to Americans at least two years before LTE products come to market.
"Clearwire has got a huge amount of titans that are validating this technology," says Thompson, whose company has already deployed fixed WiMAX technology and is currently testing the mobile WiMAX standard. "It's going to bring a lot of awareness for new products like this and it will lower the costs of devices. These are good things for the WiMAX base."