Industry spellbound by future of WiMax
SEATTLE - Today, the Internet reaches our homes mostly through "pipes" assembled by telephone and cable companies.
But that's changing. More and more, the Internet is in the air, transferring data to us wirelessly. Phone calls, e-mail and video hover around us in a cloud.
Put another way, Motorola Chief Executive Ed Zander said: "The Internet is going airborne."
The idea of wireless broadband is expanding every day. The required networks for the next great leap are under construction and are expected to be switched on next year.
That promise has drawn serious interest from companies across the board in what could turn into an all-out battle among communications providers. The campaign is fueled by billions of dollars from investors, service providers and industry giants.
Showing interest are cable companies, wireless carriers, satellite-TV companies and even emerging startups.
The frenzy has escalated in the past couple of months after major players made deep commitments to a particular flavor of wireless broadband: WiMax. Clearwire and Sprint Nextel have declared they will build competing nationwide WiMax networks.
The commitment suggests the industry has turned a corner and has the momentum of a Mack truck.
"I think the industry as a whole had a lot of doubts and was very skeptical of WiMax," said Joe Nardone, general manager for Intel's WiMax solutions division in Hillsboro, Ore. "But I think now with Sprint and Clearwire adopting it in the U.S., it's an indication that it was the right technology."
The concept of wireless broadband is not new. Engineers have been tinkering with the technology for years.
Today, that technology largely comes in two forms.
One involves Internet access through high-speed mobile-phone connections that use the cellular network. Adoption of this so-called 3G technology has been slow.
Oftentimes, users must buy a modem, sign up for a service plan and pay about $50 a month - leaving it a luxury for business travelers.
The service, similar to DSL, is offered by Verizon Wireless, Cingular Wireless and Sprint Nextel.
Another, more common use is Wi-Fi, found mostly in coffee shops, hotels or shared among neighbors. But it does not travel far and can be unreliable.
WiMax seems to be the compromise.
"The question is: How do you get beyond Wi-Fi hotspots when that's clearly what consumers are expressing a lot of interest in?" asked Ben Wolff, co-chief executive of Clearwire, the Kirkland, Wash.-based company charging ahead with an early version of WiMax.
Heavy development and billion-dollar investments have advanced the technology to the point where there are two versions of WiMax. One is fixed and can be used from a single location. The other is mobile and hands off a signal between towers, much as cell phones do.
Both provide fast Internet access that can support voice services and streaming video. Today, it is being positioned as a competitor to DSL and cable, but it may eventually build its own ecosystem, bringing about new products and services not yet dreamed of.
If there is one reason why all of these companies are interested in providing wireless broadband, it's competition.
An increasing number of communications providers today sell TV, Internet access, telephone and wireless-phone services. The so-called "quadruple play" provides one-stop shopping and one bill.
Beyond generating less paperwork for customers, the services will eventually be intertwined. For instance, you could record your favorite TV show from a mobile phone and watch it on TV later at home.
The more the services are integrated, the less likely a customer would switch providers.
That's why companies that can't provide all four services are starting to worry and are moving quickly to expand their offerings.
Take Verizon Communications, which owns both wireless and wireline networks. It is rolling out fiber networks that can offer customers Internet access, voice calling and Internet-based television at home.
Through Verizon Wireless, a joint venture between Verizon and Vodafone, it can also bundle wireless-phone service into the package.
Cable companies, including Comcast, Time Warner, Cox and Newhouse have partnered with Sprint Nextel to provide wireless-phone services bundled with TV, voice (Internet-based phone service) and Internet access.
With a growing number of companies able to offer bundles, companies that can't are at a distinct disadvantage. The companies in the most defensive position are satellite-TV providers DirecTV and EchoStar, which can't provide high-quality Internet access today.
Through alliances with phone companies such as Qwest, the satellite companies have been bundling services on a city-by-city basis but they have no nationwide solution.
DirecTV is also forging relationships with EarthLink and WildBlue, a company that delivers slow Internet service through satellite links.
In an effort to change that, DirecTV, which is owned by News Corp., has said it will dedicate up to $1 billion for an investment in wireless broadband. Last month, it said it was getting close to signing a partnership, which could be revealed by the end of the year.
"They are worried they are going to lose customers based on the bundling of services," said Michael Arden, principal analyst at ABI Research. "The satellite guys have two options: Buy or lease DSL lines, or use WiMax or some other wireless broadband technology. That's their motivation."
Arden said Clearwire is the most likely partner for DirecTV or EchoStar. Fueled by more than $2 billion in capital from investors and partners including Intel and Motorola, Clearwire is building its own WiMax network.
Arden said Clearwire is the more likely WiMax partner for satellite companies because Sprint already is locked in a partnership with the cable companies. But besides Clearwire and Sprint, other companies could roll out WiMax or a similar technology using a satellite service.
Both ICO, which has offices in Kirkland, and Clearwire are backed by Craig McCaw, who started McCaw Cellular Communications, the company bought by AT&T in 1994 for $11.5 billion and later renamed AT&T Wireless.
WiMax may be a popular bet for some reasons, but it does involve one big hurdle: Anyone building a wireless network, whether for cellphones or for WiMax, needs to acquire licensed airwaves, an expensive and scarce resource sold at auction by the federal government.
Currently, Sprint Nextel owns the most spectrum for use by WiMax. Clearwire is second.
An auction that ended last month demonstrated the wide interest in new wireless technologies. Participants included the usual players, such as Bellevue, Wash.-based T-Mobile USA and Verizon Wireless, which need more capacity as they add cellphone subscribers and offer faster data speeds.
The auction also drew unlikely participants, including DirecTV and EchoStar, as well as cable companies: Comcast, Time Warner and Cox. Cablevision also placed bids. As it turned out, though, the satellite companies dropped out as bidding prices rose.
Another hurdle to mass WiMax adoption is that it is based on technology not used by wireless carriers today.
That's the problem, said Kris Rinne, Cingular's chief technology officer. She said WiMax would represent a major derailment from the technology in which Cingular has already invested billions.
But the standards for the next generation of cell phone technology have not yet been written. That could take until 2010 or 2012, Rinne said.
For now, she said, the networks - which are capable of DSL and faster speeds - are sufficient. "It more than meets the needs," she said.
The intense interest in rolling out wireless services are likely to have two results: At the minimum, consumers will have more choice when it comes to how they want to access the Web. At the maximum, it will spawn new services and devices not yet on drawing boards.
"We don't have a clear vision of what the applications and services are going to look like, but we have a strong feeling that what they could be is a whole next wave of innovation," said Intel's Nardone.
Intel is pushing for chips to be integrated into new laptops that would allow consumers to instantly know when a network is available. Motorola would like to see chips in phones and Nintendo could add WiMax capabilities to its portable gaming devices.
Automobiles could connect to provide drivers with directions and other information.
One example of how WiMax could differ from existing 3G services is that consumers may pay for access at home and then pay only incrementally for access on the road through the same provider.
Already, Clearwire has aggressive plans to roll out a proprietary version of WiMax across the United States and parts of Europe. It has launched in about 30 markets in the United States.
Wolff said WiMax is not just replacing DSL or cable. He already sees customers using it outside of the home, even though for now it requires lugging around a bulky modem.
"We do fill a void that isn't filled today by any of the parties," he said. "A lot of people ask us who our competitors are. I like to say we compete with a lot of people in some ways and we don't compete with any in other ways."
Sprint Nextel is matching Clearwire's commitment by vowing to spend $3 billion to provide WiMax access for more than 100 million people by 2008.
With so much riding on a developing technology, that could be risky.
Could it fail?
Arden said that with the kind of momentum WiMax has now, "Even when it has problems, they will find a way around it."
© 2006, The Seattle Times. Distributed by McClatchy-Tribune Information Services.