Wireless operator Sprint Nextel (S) is planning an ambitious rollout of new broadband services over the next few years with a technology called WiMax backed by chip giant Intel (INTC), BusinessWeek has learned. Over the past couple of years, Sprint execs have been experimenting with various technology options that would allow users to access the Internet while on the move, including technology from Flarion, a company now owned by Qualcomm (QCOM). But it was WiMax that ultimately won out.
The Sprint initiative, which could be announced as early as Aug. 8, is expected to usher in a new era of competition in the telecom industry. In most markets, consumers only have two choices for broadband service, one cable and one phone company. Some critics argue that limited choice has kept prices for service relatively high and connection speeds relatively low (see BusinessWeek.com, 7/31/06, "The Phone Companies Still Don't Get It"). Many experts argue that an aggressive third competitor would help spark more competition.
Sprint execs certainly plan to bring more competition—and more innovation—to the market. The company's WiMax network will take years to build, so nationwide coverage won't be available until at least 2008. But when it is, they expect to offer speedy broadband service to people not just in their homes, but also on the road. Sprint is working with Intel to develop a version of WiMax that will allow people to connect to the Internet as they're moving in a car or walking down the street. "Our vision is about creating an Internet everywhere experience," Atish Gude, Sprint's senior vice-president of strategy said in an interview. "It will be a life-changing event for the customer to have control and connectivity."
Gude says Sprint's extensive consumer research has revealed considerable demand among consumers to connect existing devices to the Net, particularly those who now only connect when they are stationary. Apple's iPod, for example, downloads music and videos from the Net via a cable link to a PC. But the "ability to enable the iPod to connect anywhere, anytime is a very powerful concept," Gude says.
The same goes for portable DVD players, which could use WiMax to download digital movies while fans are in the back of a taxi cab or to send user-made videos to friends from a music concert. How about the ability to connect a camera or camcorder to the Internet on the fly? Suddenly, Net-based activities like blogging would rise to a whole new level. "We're not creating new trends but we're enabling them in a different way," Gude says.
Timing is crucial. A host of new competitors have similar ideas in mind. Craig McCaw's Clearwire has already decided to roll out WiMax in the U.S. (see BusinessWeek.com, 6/24/06, "A Wake Up Call From Craig McCaw"). Satellite companies such as DirecTV and Echostar's Dish Network are also considering adopting WiMax.
Currently, rivals are jockeying with other media companies and telecoms to buy spectrum in a month-long government auction of licenses to launch services that would compete with Sprint's (see BusinessWeek.com, 5/15/06, "The New Wireless Wars"). That's one important reason why Sprint has decided not to waste any more time getting its technology off the ground. "They talked several times about time to market, which suggests they don't want to sit on their hands and wait," says one Wall Street analyst.
Sprint risks falling behind in any case. The company is battling fiercely with wireless rivals, particularly Cingular Wireless, a joint venture between AT&T (T) and BellSouth (BLS), and Verizon Wireless, a venture between Verizon Communications (VZ) and Vodafone (VOD). And in recent months, it's lost ground in the competition for traditional mobile phone customers (see BusinessWeek.com, 8/4/06, "Sprint Nextel: Way Off the Hook"). Verizon Wireless, which already has a strong reputation for quality service, is quickly rolling out its own mobile wireless Internet service.
Sprint's choice of WiMax represents a major coup for Intel. The major supplier of WiMax chips, Intel has seen more success overseas with the technology. A Sprint deal raises the possibility that Clearwire and Sprint could partner, or sign roaming agreements, to have a nationwide wireless broadband network up and running in just a few years.
COLD SHOULDER FOR QUALCOMM.
The deal leaves Qualcomm out in the cold for now. Qualcomm owns the main WiMax competitor, a technology it gained through the recent purchase of Flarion. Qualcomm had lobbied Sprint heavily to use Flarion technology, which Sprint in fact used in its extensive North Carolina trial a couple of years ago. But executives at Intel and Motorola (MOT), which builds WiMax infrastructure, argue that WiMax offers better bandwidth for delivering massive amounts of data. Motorola execs, in fact, are confident that WiMax will win the bulk of the market.
Indeed, it will be at least a couple of years before Sprint's technology, or any other form of mobile broadband, finds its way into consumers' hands. "One of the real problems is that most of these technologies aren't ready yet," says Matt Desch a telecom veteran and former member of Flarion's board of directors. "WiMax has lot of potential, but it's years away from market readiness," he says.
Sprint has ambitious plans for a nationwide network. But it may take until well into 2008 before the network is ready. "This is not something that we are going to launch in two months," Gude says. "We still have work to do to get tech deployed. It is very important to have the right ecosystem in place."