(page 2 of 2)
Quite a Payoff
In return for their investments, Google and the cable companies would gain access to an open wireless network that could allow them to reach customers almost anywhere they go. This is particularly crucial for the cable operators, which want to be able to offer mobile Internet services as they compete with new pay-TV offerings from AT&T (T) and Verizon Wireless.
Google, Intel, and the cable companies did not immediately return phone calls seeking comment. Senior executives were expected to fly to Las Vegas for an Apr. 1 news conference at a major wireless industry conference if the deal is completed over the weekend. New Sprint Chief Executive Dan Hesse is scheduled to deliver the opening keynote at that annual show, known as CTIA Wireless.
Hesse has been under pressure from Wall Street to drop WiMax and focus on network and customer service problems that have prompted an exodus of cellular subscribers since the company merged with Nextel in 2005. Officially, the company remains on track to launch the Xohm WiMax service in Chicago, Baltimore, and Washington as early as late April, with nationwide service expected by early 2009.
Intel already has announced plans to bake WiMax into wireless laptop cards by late this year, while Samsung and Nokia (NOK) are expected to demonstrate mobile devices using the technology at CTIA. WiMax aims to deliver Web browsing speeds at least twice as fast, and up to 10 times faster, than the two dominant, third-generation cellular technologies, EV-DO and HSDPA.
But by giving cable companies access to a wireless network, the deal could pose a risk to Sprint's long-term growth prospects. The cable providers are likely to add a wireless laptop option to their bundles of phone, home Internet service, and television services. Analysts also expect them to commission devices that let users tunnel back into the home to view content stored locally on digital video recorders and home computers while they're on the road. Such a move could, in effect, steal customers from Sprint's wireless-only services.
Head Start
On the plus side, Sprint is betting that its big-name backers will help quickly legitimize WiMax and create a giant market for high-speed mobile data services up to two years ahead of AT&T and Verizon. Those two companies are planning their own networks based on a competing standard called LTE, short for Long-Term Evolution. Such a head start could give Sprint a temporary edge over the two rivals that have been stealing its customers. "Sprint is realizing that if you want to be successful, you've got to make a big statement at launch, with lots of marketing that builds interest and excitement," says senior wireless analyst Daryl Schoolar at research firm In-Stat.
For Google, a $1 billion investment in WiMax would represent a pittance for a company with a war chest of $14.2 billion in cash and equivalents. And it would help keep up the pressure on Verizon to make good on its pledge to open its wireless network to outside devices. Google, which hopes to expand its dominance in desktop search to wireless devices, would like to see Verizon's network connecting with gadgets based on Android—a mobile software platform that Google launched late last year.
The proposed partnership may also provide a critical lifeline to Clearwire, which was founded by wireless entrepreneur Craig McCaw. Up till now the company has been aiming to steal business from cable and DSL home Internet providers, a strategy analysts say had little chance of succeeding over the long-term.
Whether WiMax succeeds ultimately will depend on whether there are enough innovative devices and services available by late next year. Samsung, Nokia, Apple (AAPL) and other consumer electronics makers have been eyeing the technology for its ability to deliver video and other data-intensive applications to customers wherever they roam.
Rather than charge consumers for additional data plans, some companies are looking to follow the approach taken by online retailer Amazon.com (AMZN) with its Kindle e-reader. While the device relies on Sprint's network to download content, the purchase price of $399 includes that service. Amazon makes additional money by taking a fee from subscriptions to magazines and newspapers that can be downloaded by Kindle.
No one knows just how much a reinvigorated U.S. WiMax effort would change the competitive landscape. Clearwire, for instance, has reseller partnerships with satellite providers DirecTV and Dish Network. But with new, deep-pocketed allies, the era of the high-speed mobile Internet is likely to come sooner rather than later.
Edwards is a correspondent in BusinessWeek's Silicon Valley bureau.
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