BALTIMORE-As Sprint representatives introduced one executive after another and invited them to share the stage Oct. 8 with Sprint Nextel CEO Dan Hesse and Barry West, CTO and president of Sprint’s Xohm WiMax unit, the bonhomie was worthy of Charm City.
Celebrating the official launch of the nation’s first commercial WiMax network on a sparkling morning in Baltimore’s historic waterfront district, West crowed, “The United States has now made a major step toward moving to a mobile broadband network. Xohm will extend the home and office Internet experience to anywhere you are.”
Joining the handshaking and backslapping were executives from Sprint’s partners in the ambitious project to launch a wireless, IP-based data network, including Sean Maloney, Intel’s executive vice president and chief sales and marketing officer.
Representatives from Lenovo and Acer, which are each rushing notebooks into the market that are equipped with Intel chip sets to take advantage of the new wireless broadband technology, climbed onto the stage for their kudos, as did makers of WiMax modems and dongles and other WiMax gear makers.
“Today is all about the embedded model and the WiMax chip,” West said, grabbing a pair of hedge clippers and clipping a strand of wire symbolizing traditional cable and DSL broadband lines. “This is a special one for Verizon.”
Then came the hard questions: Will the technology work across a nationwide network, does the business model make sense and how do you pay for it?
West said if WiMax can make it in Baltimore, then it can make it anywhere, noting that Baltimore’s brick buildings and abundance of water made covering the city with a wireless Internet connection fast enough to run Web 2.0 applications a unique challenge.
“The RF [radio frequency] propagation typically doesn’t behave itself with a lot of water around,” West said. “All of our engineers will tell you this city is challenging.”
Although the Baltimore rollout is only partially completed, with approximately 130 of a needed 300 towers lit, West said there have been “very, very few customers who have said it’s not working, but the take-up rate is extremely encouraging and more than we expected.” He added that the Xohm Web site had 30,000 hits in the first four days of the rollout.
How to Pay for the WiMax Network
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.