How to Pay for the WiMax Network

By Roy Mark  |  Posted 2008-10-08 Print this article Print


Still, there was a sense of downplaying expectations for the new network that Sprint plans to extend to Washington and Chicago by the end of 2008, particularly when it comes to voice service. Hesse said the WiMax network is not designed to compete with cellular voice service, although, like any IP network, it can carry VOIP traffic.

"This is a mobile data network and VOIP is just one application on that network," Hesse said. "If you want guaranteed throughput, you're going to have to be higher up the stack."

As for the big question-how to pay for it-Hesse said the nation's struggling No. 3 wireless carrier is cautious but not discouraged by the financial chaos roiling the markets.

"We've seen some economic impact, but it has not been dramatic impact so far," Hesse said. "Mostly, you have fewer subscribers in businesses for wireless services, but for consumers, wireless has become a staple. We feel relatively fortunate that we're more insulated than other industries. At the most, we think more people will be looking for cheaper voice and data plans and phones without as many bells and whistles."

Hesse said ultimately $3 billion to $5 billion will be needed to build out the network. Sprint Nextel has struck a deal with broadband provider Clearwire to absorb Sprint's WiMax assets. Awaiting government approval, Sprint and Clearwire will form a new company solely focused on WiMax. Google, Time Warner, Comcast and longtime WiMax proponent Intel have made significant investments in the new company, which will also be called Clearwire.

Intel will invest about $1 billion in Clearwire, while Comcast plans to contribute a little more than $1 billion. Time Warner is putting up $550 million and Google $500 million. Upon completion of the proposed deal, Sprint will own the largest stake in the new company, with about 51 percent equity ownership. Existing Clearwire shareholders will own about 27 percent of the venture. The new strategic investors, as a group, will be acquiring about 22 percent of the new Clearwire.

"We are optimistic that Clearwire will be approved this year, and our partners bring more than capital into it-though capital is a good thing to have right now," Hesse said. "We can't predict the future, but we are not seeing dramatic impact, though there has been subscriber impact on the business side with the banking industry."

Wire-line carriers, he said, have a lot more to worry about than wireless carriers.

"The big concern is that more users are likely to cut the cord and keep the wireless service," Hesse said.


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