Sprint, Clearwire in WiMax Venture

MELISSA BLOCK, host:

Today, Sprint Nextel said it's joining forces with some of the world's most famous internet and cable giants to start a new kind of wireless company. Among the investors are Intel, Google, Comcast, and Time Warner Cable.

This new firm will be built around what's called WiMax technology. It allows cell phone users to connect to the Internet at much faster speeds that they can today.

But as NPR's Jim Zarroli reports, the cost of building that new network promises to be huge.

JIM ZARROLI: Jerry Bianchi(ph) can sit in a park in Manhattan on a beautiful spring afternoon and access the Internet just as though he were in his office. He uses a card made by Verizon that plugs into his laptop. Essentially he surfs the Net over the same network that carries his cell phone calls. Bianchi, who works as IT manager, says he likes the system but it isn't perfect. For one thing, it's slower than his home DSL line.

Mr. JERRY BIANCHI: There are spots where like a cell phone would be if you go through certain areas, like I said, I used it on the train, so you go through certain areas, you might hit a dead zone and it drops you off. It gets a little frustrating.

ZARROLI: To Sprint Nextel, Internet users like Bianchi represent a huge potential market for wireless services. The company said it was combining its broadband wireless unit with that of Clearwire, the startup company founded by cell phone pioneer Craig McCaw. The company will be called Clearwire, although Sprint Nextel will own a majority of its shares. Chief executive officer Ben Wolff told analysts the new venture would give consumers a level of wireless services they haven't seen.

Mr. BEN WOLFF (Sprint Nextel): Customers want both a true broadband experience and mobility when it comes to their communication services. Until now, they've had to settle for one or the other. We intend to change that by building one of the fastest and most capable wireless networks ever conceived.

ZARROLI: The company plans to build that network using the new technology called WiMax. So far WiMax technology has been tried in just a few places, but analyst Michael Nielsen of Stanford Group says it appears to have a lot of potential.

Mr. MICHAEL NIELSEN (Analyst, Stanford Group): The promise of WiMax is to have really the Internet any time, any place, on the go, completely mobile with an open platform, so that virtually any type of consumer electronic device or appliance with a WiMax-embedded chip set can access the Internet.

ZARROLI: But Nielsen and other analysts say there are also big questions about whether the venture can succeed. For one thing, Sprint Nextel's competitors, Verizon and AT&T, are developing their own new wireless technology called LTE, that can be built over their existing network. Clearwire will have to spend a lot more money to build its network. The company has received capital from several big name companies, but analyst Roger Entner of IAG Research says the money pledged so far probably won't go far enough.

MR. ROGER ENTNER (IAG Research): The funding that Clearwire has now is undoubtedly impressive, with, you know, $3.2 billion. They still have to raise a lot more money to actually build this out.

ZARROLI: Some analysts also note that Clearwire's complex ownership structure could make managing the company difficult. Among those helping to finance the network will be Google, Time Warner and Comcast; all of them have their own interests in wanting to see WiMax technology succeed. If Clearwire is to gain a share of the growing wireless market, it will have to satisfy a lot of competing demands.

Jim Zarroli, NPR News, New York. Transcript provided by NPR, Copyright NPR.