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Six technology heavyweights came together Monday to announce an alliance to jointly license patents for the broadband wireless technology WiMax.

The group, which calls itself the Open Patent Alliance, includes Intel, Cisco Systems, Samsung Electronics, Sprint Nextel, Clearwire, and Alcatel-Lucent. The intent of the group is to gather rights to WiMax patents and license them to makers of consumer electronics devices, networking equipment, and computers.

During a Webcast Monday, executives from each of the six companies emphasized the openness of the alliance that was being created. And the companies said they hoped other companies would join the group.

"As a founding member of the alliance, our role is to work with different vendors and evangelize the benefits of an open model," said Sriram Viswanathan, general manager for WiMax at Intel Capital. "We will invite others to join and try to influence players who are whetted to other models to understand the benefits of openness."

WiMax is an IP-based wireless technology that offers high-speed Internet access similar to speeds delivered through Wi-Fi, a short-range wireless technology that uses unlicensed spectrum. So far the technology, which was standardized a couple of years ago, has been used mostly in the developing world to provide fixed wireless broadband.

Now companies such as Intel, Sprint Nextel, and Clearwire are pushing mobile WiMax to bring true broadband wireless to MP3 music players, gaming devices, smartphones, and a plethora of other consumer electronics devices.

Sprint Nextel and Clearwire announced earlier this year they are joining forces to complete the construction of a nationwide WiMax network in the U.S. And Intel already has plans to embed WiMax chips into its Centrino laptop chips. Samsung, Cisco, and Alcatel-Lucent have already been developing infrastructure equipment for WiMax networks.

But these companies all agree that for WiMax to be successful a more robust ecosystem is needed. The OPA is meant to encourage this ecosystem primarily by making WiMax-related patents inexpensive and accessible to anyone.

This is different than the cellular model, in which companies such as Qualcomm, Nokia, and Ericsson have separately developed technology and charged patent royalties for 3G products.

Cell phone makers can spend more than 25 percent of developing a new product on licensing underlying wireless technologies, according to a Wall Street Journal article. Intel's Viswanathan said these high royalties are to blame for stifling innovation. He said that cellular chips have not expanded to other devices such as cameras, music players, or gaming devices because of the high cost of licensing patents.

"We haven't seen a broad proliferation of cellular technology in anything other than handsets because the model is closely held and restrictive," he said.

A similar open patent strategy was devised in the video industry for video compression technology.

That said, WiMax faces many challenges. For one, Sprint Nextel and Clearwire are the only major carriers building a WiMax network in the U.S. The nation's two largest cell phone operators, AT&T and Verizon Wireless, have already said they plan to use a competing technology known as LTE.

Still, WiMax backers say that WiMax has at least a three-year time to market advantage since LTE hasn't even been standardized yet. Intel, which plans to include WiMax in its Centrino platform, says it expects to seed the market quickly.

It's mobile or bust for cable operators that seem to be trying anything and everything to get into the wireless market.

One of the biggest shifts over the next decade in the cable market is likely to be a move toward wireless services. As cable operators face stiff competition from phone companies, cable operators large and small are looking for ways to take their services mobile.

Brian Roberts, CEO of Comcast, the largest cable operator in the U.S., talked up his company's investment in a new joint venture to blanket the country with 4G, or fourth-generation, wireless at the industry's trade show in New Orleans this week.

Earlier this month, Comcast and Time Warner joined forces with Sprint Nextel and Clearwire to form a company that will build the next-generation wireless network using a technology called WiMax. Comcast is fronting $1.05 billion as part of the deal, and Time Warner Cable is putting in $500 million to help make the new network a reality.

Roberts said during his keynote speech Sunday that he sees the network as a way to open up new applications and devices for the company.

But Comcast and Time Warner aren't the only cable operators getting into the wireless game. Cablevision recently announced it will expand its Wi-Fi hot-spot service to create an outdoor Wi-Fi network throughout its existing cable footprint. The idea is to extend its Optimum broadband service to customers on the go.

So why are cable companies, which have no history of successfully doing anything in wireless, so hot to get into the market? The answer is simple. They have to if they want to compete with AT&T and Verizon Communications.

The phone companies have introduced TV service and faster, fiber-based broadband services into cable's territories. Services like Verizon's Fios are gaining market share. And even though the phone companies haven't integrated wireless into their offering yet, it's coming.

But with the cell phone market already 84 percent penetrated--according to the CTIA--the cable industry recognizes it needs to offer a new kind of wireless service. As wireless networks get faster, consumers are taking many of their broadband applications, like e-mail, Web surfing, and social networking, on the go.

"The delineation between wireline and wireless services is starting to blur," said Mike Roudi, group vice president of wireless services for Time Warner Cable. "And we think about mobility as a long-term opportunity that occurs when new networks are built that can deliver true broadband speeds wirelessly."

Roudi said this is why Time Warner has joined Google and Intel as investors in the new Clearwire.

Comcast's head of wireless, Tom Nagel, echoed Roudi's comments.

"Customers are already showing us that mobility and wireless are important," Nagel said. "And with wireless we can let them enjoy our products inside and outside the home with ubiquitous connectivity to a high-speed network."

Cablevision is taking a slightly different route. The company is using Wi-Fi to extend its existing broadband network to more customers, a smart choice considering the number of Wi-Fi devices already in the market. Not only do most laptops come with Wi-Fi embedded in them, many cell phones are also getting Wi-Fi. In fact, in the next three years some 1.2 billion Wi-Fi-enabled gadgets will be in the market, according to IDC.

"As more and more devices become Wi-Fi enabled, whether they be laptops, iPhones, BlackBerrys, or other portable devices, we believe we can create a compelling broadband wireless network throughout our footprint for our Optimum Online high-speed data service customers," Tom Rutledge, Cablevision's COO, said during the company's conference call with investors this month.

Cablevision will build the new network in the same footprint as its existing cable infrastructure. And the network, which will take two years to deploy, will deliver 1.5 megabits per second. The service will be an extension of it broadband service and will be offered free of charge.

Cablevision already has Wi-Fi hot spots up and running in 15 highly trafficked areas, such as tourist destinations. For example, Cablevision's Wi-Fi is available on all three Bridgeport & Port Jefferson Ferry boats that connect Long Island, N.Y., to Bridgeport, Conn., a popular summertime route for many Optimum Online customers.

Risky business for cable
While it makes sense for cable operators to get into the wireless market, there's no guarantee that any of the plans that have been announced will actually work. In 2005, Comcast and Time Warner, along with Cox Communications and Advance/Newhouse Communications, formed a joint venture with Sprint Nextel called Pivot that was supposed to develop wireless services that the cable operators could bundle and resell to their customers. Two and a half years later, Comcast and Time Warner have pulled out of the partnership and Pivot is essentially dead.

Executives at the cable companies say the new Clearwire deal is different from the Pivot relationship.

"When we did Pivot it was a co-marketing arrangement with Sprint," Time Warner's Roudi said. "From a retail perspective, Time Warner was selling a Sprint-branded service and device. But with Clearwire, we will control the customer relationship including the service and phones. We will handle pricing, marketing, customer care, and billing."

Comcast and Time Warner believe that they each learned a great deal from the Pivot experience. And the companies believe they won't make the same mistakes in the new Clearwire partnership.

But many of the same challenges that the companies faced before haven't gone away. For instance, Comcast and Time Warner still need to figure out how to integrate their existing services and platforms into a wireless network. And while they may be marketing and selling the service themselves, technological integrations are still difficult when working with a partner that controls the network.

Even AT&T and Verizon Wireless, which essentially own their wireless networks, are still trying to figure out how to integrate their services.

Cable's "plan C"
But if the Sprint Nextel/Clearwire investment doesn't pan out, Comcast and Time Warner still have another shot at the wireless market with 20 megahertz of spectrum they acquired from the Federal Communications Commission's Advanced Wireless Spectrum auction held in 2006. Through a consortium called SpectrumCo., Comcast, Time Warner, and other cable operators spent $2.37 billion on a large swath of wireless spectrum that covers about 99 percent of the country.

Comcast's hiring last month of Dave Williams, the former CTO of Telefonica O2 Europe and former vice president of strategic planning at Cingular Wireless, prompted speculation that the company may be considering building its own wireless network or even buying a wireless company. But so far the company remains mum on its plans for the spectrum.

"Wireless spectrum is a valuable commodity," said Comcast's Nagel. "It's like holding the rights to oil or water. It will always have value. And it gives us flexibility for the future. We don't have any specific plans now, but over time we'll understand how to best use or monetize the spectrum."

But as cable companies, like Comcast, look to invest in new wireless networks, they might be overlooking a big opportunity. In cities, such as Philadelphia and New Orleans, citywide Wi-Fi networks built by EarthLink are being shut down as the Internet service provider abandons the network service market.

Comcast, which serves Philadelphia, and Cox Communications, which serves New Orleans, could easily buy these assets for a fraction of what EarthLink paid to install them. (EarthLink spent $20 million to build Philadelphia's network, which is 80 percent complete.)

For example, Comcast could test new wireless services using the existing network. It could see how customers use wireless broadband services outside their home, and then apply the lessons learned to services it plans to develop for the Clearwire WiMax network.

But so far, Comcast has not shown any interest in the network. The reason is likely political. Comcast was among the most vocal opponents to the Philadelphia Wi-Fi network. So justifying the purchase of these assets might be too difficult to spin.

But as other citywide Wi-Fi networks falter, cable operators in different parts of the country might consider picking up the assets. According to The Wall Street Journal, MetroFi, a Wi-Fi service provider, is also struggling. It has networks in Portland, Ore.; Aurora, Ill.; San Jose, Calif.; and other Silicon Valley towns.

"These citywide Wi-Fi networks could let cable companies put their toe in the water," said Craig Settles, an independent consultant specializing in municipal Wi-Fi. "Wi-Fi networks in many cities have failed because of the business models, not because of the technology. Cable companies already have the customer base and the services that could be rolled out onto these networks. So it makes sense."

Update 9:52 AM ET: A typo has been fixed in paragraph 6, changing a reference of megabits per second to kilobits per second.

An AT&T executive said Wednesday that the cell phone company will offer 20Mbps downloads over its wireless network as soon as next year. But don't get too excited; the real speed will likely be a lot slower.

Still, AT&T's network upgrade plan is expected to boost speeds significantly, which means that users of the hotly anticipated 3G iPhone, which is expected this summer, will be surfing the Web at lightning speeds compared with the slow 2.5G network they currently use.

It also means that AT&T's network, which is based on a GSM standard known as UMTS, or Universal Mobile Telecommunications System, will remain competitive with the new WiMax network currently being built jointly by Sprint Nextel and Clearwire.

"The two-year head-start that Sprint and Clearwire keep talking about is getting smaller and smaller every day," said Roger Entner, a senior vice president at IAG Research.

On Wednesday, Ralph de la Vega, AT&T's mobility chief, told investors at Morgan Stanley's annual Communications Conference that AT&T is currently upgrading its 3G wireless network to the newest and fastest version of the UMTS technology known as HSUPA, or High Speed Uplink Packet Access-enabled. This new technology will increase the speed of the network fivefold, he said. But exactly how fast the network will run is somewhat debatable.

Today, AT&T's 3G network, which uses the UMTS technology called HSDPA, or High Speed Data Packet Access, can theoretically deliver download speeds of about 3.6Mbps. But in the real world, speeds are closer to 400Kbps to 700Kbps. The new version of the network, which will use HSUPA, will have a theoretical speed of 20Mbps and actual download speeds of between 4Mbps and 6.6Mbps.

Because the actual speed of a network is dependent on several factors, such as how many users are on the network and how far apart the cell sites are spaced, Entner says he typically divides theoretical speeds by three in order to get a ballpark idea of how fast the network actually performs. But even that calculation is likely to be generous. Many experts say real networks typically run only 20 percent of the theoretical speed the technology used allows.

That said, AT&T's HSUPA network will likely provide download speeds that are competitive with speeds that the Sprint Nextel-Clearwire alliance plans to deliver with its new network, which uses a different technology, known as WiMax.

Theoretically, WiMax can deliver downloads between 40Mbps and 70Mbps. But Sprint has publicly stated that its customers will likely see speeds in the range of 2Mbps to 4Mbps, which are in line with expected speeds using HSPUA.

The best part of AT&T's strategy is that it can achieve these new speeds simply by upgrading software in its existing 3G infrastructure. 3G handsets, such as the anticipated new iPhone, will also be able to take advantage of the higher speeds simply by upgrading their software. Meanwhile, the new Clearwire still has to build its network and get WiMax-enabled devices in the hands of subscribers.

"AT&T is in a good position right now," Entner said. "It can ride the technological wave of HSDPA and HSUPA technology for a while and get increasingly faster speeds."

Indeed, other carriers using different technology, such as Verizon Wireless and Sprint Nextel, which have used a 3G technology known as EV-DO, or Evolution Data Optimized, will not have the same growth curve in their existing infrastructure.

EV-DO infrastructure can also be upgraded by combining wireless channels. But even doing that will likely produce only a theoretical maximum speed of about 14.4Mbps. That is one big reason that Sprint Nextel said it will build a 4G network using WiMax and why Verizon Wireless has said it will use newly won 700 Mhz spectrum to build a 4G network using a technology called LTE, or Long Term Evolution.

LTE offers a theoretical download speed of 100Mbps. And AT&T has said that when it exhausts its UMTS/HSDPA/HSUPA network, it will also build a new network using LTE.

Sprint Nextel's plan to spin off its WiMax network and form a $14.5 billion joint venture with Clearwire may have hit a speed bump.

On Monday iPCS, Sprint Nextel's largest affiliate, said it will try to block the deal that was announced last week. iPCS, which serves 640,600 subscribers in seven states, said three of its subsidiaries have filed suit in Cook County Circuit Court in Illinois against Sprint for violating an exclusivity contract.

Sprint Nextel is spinning off its 2.5 GHz assets to form a joint venture with Clearwire. The new company, called Clearwire, will sell 4G wireless services using a technology called WiMax. Comcast, Time Warner Cable, Intel, Google, and Bright House Networks have invested $3.2 billion in the new company.

iPCS , which sells wireless services under the Sprint brand in states like Illinois and Iowa, says it has the exclusive right to sell services under the Sprint brand in 81 markets. In its lawsuit, the company says that the new Clearwire service would compete against its iPCS's service, violating the exclusivity contract it has had with Sprint since 1999.

iPCS has already sued Sprint once before for violating the same exclusivity contract when it bought Nextel Communications in 2005. Earlier this year, an appellate court in Illinois upheld a lower court ruling that found Sprint in violation of this contract. And it ordered Sprint to divest itself of all Nextel assets in the iPCS territory. Sprint is appealing the decision.

Sprint and Clearwire, which value their new company at $14.5 billion, said they expect the deal to close in the fourth quarter of this year. But the current legal troubles could slow down the process.

In anticipation of legal challenges, Sprint last week asked a Delaware Chancery Court to rule that the Clearwire transaction doesn't violate the exclusivity arrangement with iPCS.

A Sprint representative said that iPCS's lawsuit was in response to this filing.

Since the Nextel merger, Sprint has bought at least seven affiliates to resolve legal issues. And some analysts believe the company may try to acquire iPCS to ensure the WiMax spin-off goes smoothly. But with Sprint's core customer base dwindling and its losses widening, it may be difficult for the company to put a deal together any time soon.

Also on Monday, Sprint announced it had lost another 1.1 million customers. The company also reported a quarterly loss of $505 million.

The deal to merge Sprint Nextel's WiMax business unit with Clearwire to build a nationwide 4G network is finally complete, but the newly formed company could be doomed before it even gets out of the gate.

On Wednesday the companies said they would combine the two entities to form a new company, called Clearwire. Cable companies Comcast, Time Warner, and Bright House Networks, along with technology giants Intel and Google, are contributing a combined $3.2 billion, bringing the total investment in the company to $14.5 billion.

In many ways the new venture is a win-win situation for Sprint and Clearwire, which, if truth be told, had no other option than to team up. Sprint, which has steadily been losing customers after its failed 2005 merger with Nextel, gets to shed an expensive and resource-sucking venture. And Clearwire, which hasn't been profitable since it went public a year ago, gets more spectrum assets and capital to build the network. Wall Street had been getting fed up with each company, so a deal to merge the entities was a no-brainer.

But as someone who has watched big technology mergers form and unwind over the past decade, I'm not convinced that the new Clearwire will actually make it in the end. That said, I think at the very least the new company will spur quicker innovation of broadband wireless technology and force operators like AT&T and Verizon Wireless to deploy their own networks more quickly. In this respect, consumers will likely have Sprint and Clearwire to thank for helping bring true wireless broadband services to a plethora of consumer electronics devices.

But the big question yet to be answered is whether the new Clearwire will be the company delivering that network and whether WiMax, its technology of choice, will be used to do it.

My prediction is that the new Clearwire still has a long road ahead of it and its success is far from guaranteed even with backing from big names like Comcast, Time Warner, Intel, and Google.

The main reason I am such a skeptic is that the new Clearwire appears to have too many cooks in the kitchen. The new Clearwire has a total of seven major partners with five of those partners holding board seats. That alone should give anyone looking at the viability of this company pause. I can't think of any successful venture of this magnitude that has survived with so many major companies involved.

Atish Gude, senior vice president of Sprint's mobile broadband initiative, said this shouldn't be an issue because the new Clearwire will be run as an independent company.

Still, I am not convinced, especially since it took these seven companies at least two months to dot the i's and cross the t's in their final contract to form the company. What's more, Sprint and the cable companies have been down this road before. In 2005, the companies formed a joint venture known as Pivot that would allow cable operators to resell Sprint's wireless service as part of their bundle of services that includes broadband, TV, and home phone service. The companies were also supposedly working to integrate Sprint's wireless service with the cable services to extend the content and services cable offered to a wireless device.

The joint venture eventually fell apart when it became apparent that the integration was too difficult and that customers weren't all that interested in repackaged Sprint phone service.

But Tom Nagel, senior vice president of wireless initiatives for Comcast, said the companies have applied lessons learned from Pivot to the new deal with Clearwire.

"We learned a lot from Pivot," he said. "I wouldn't trade that experience for anything. And we have structured this partnership in a completely different way."

For one, Comcast will have more control in the new relationship, he said. Instead of simply reselling Sprint's service, Comcast will own the relationship with the customer and will be able to develop services on the 3G network as well as Clearwire's new 4G network that can leverage Comcast's services and content.

But this leads to another potential problem in the partnership. Four of the main partners will essentially be selling services using the same network to some of the same customers. Sprint will offer its 3G wireless service and will be reselling the 4G Clearwire service under its own brand. Clearwire will in turn be selling its own 4G service, but reselling Sprint's 3G service too. And Comcast and Time Warner Cable will both be reselling Sprint's 3G service as well as Clearwire's 4G service.

Sprint's Gude doesn't see these overlaps in service or customer base as a problem.

"We acknowledge there might be some conflicts and overlap in customers," he said. "But we see this as a good thing. It opens access to different distribution channels and innovation."

For example, he said that a customer who wants to watch his favorite cable TV shows on some WiMax-enabled video playing device, could have that bundled into his cable TV package instead of expecting that kind of service from his or her cell phone operator.

But potential partnership conflicts aren't the only thing threatening this new venture. Another major reason the merger could be doomed is the technology that the companies have chosen to use. While there is no question that WiMax can provide wireless broadband service to a large number of consumers, the problem is that Sprint and Clearwire are the only major operators in the world to date that have committed to using it for mobile broadband service.

Most of the other WiMax deployments are Internet service providers providing fixed wireless broadband service. AT&T and Verizon Wireless in the U.S. and a slew of European carriers have already said they plan to use a competing technology called LTE.

And this means those working in the infrastructure, chip, and device ecosystem will be focusing much of their attention on the much larger LTE market. And there is a chance that WiMax innovation could lag and prices could potentially be higher for WiMax deployments.

That said, executives at Nortel Networks, a telecommunications equipment supplier, say the WiMax network is still big enough and the technology is close enough to LTE, that it shouldn't be too much of a problem.

"The LTE and WiMax networks will both be driven by devices other than cell phones," said Scott Wickware, vice president of Carrier Networks for Nortel Networks. "And that means the integration will be at the chip level and the cost structures are not likely to be that different."

Ultimately, the success of the service, if the company even makes it far enough to full network deployment, will be determined by the pricing and perceived value of the service. So far consumers have not wanted to pay a premium for embedded 3G laptop service. They don't want their laptops tied to a specific carrier and the service itself, which averages about $60 per month, is too high.

Ben Wolff, however, CEO of the new Clearwire, believes the company will be able to find a sweet spot in terms of pricing.

Sprint Nextel and Clearwire are combining network assets to build a new nationwide 4G wireless network that the companies say has huge benefits for each of them.

Until now, Sprint and Clearwire have been on separate paths to build nationwide broadband wireless networks using WiMax, an IP technology that can blanket entire cities and provides more than five times the speed of 3G wireless networks. Now they are joining forces and creating a new company that will have access to more wireless spectrum than any other company in the entire country.

Cable operators Comcast, Time Warner Cable, and Bright House Networks, as well as tech giants Intel and Google have invested a combined $3.2 billion in the new company, which is valued at $14.5 billion.

Dan Hesse, Sprint's CEO and Ben Wolff, Clearwire's CEO and the CEO of the new joint venture, hosted a conference call Wednesday morning to provide details of the transaction and explain why combining the companies is a good idea.

According to the executives, the companies believe the deal is a win-win for them both. And in many ways, that appears to be the case. Sprint, which has steadily been losing customers after its failed 2005 merger with Nextel, is in no position to spend the capital it would take to build a new 4G network. And Clearwire, which hasn't been profitable since it went public a year ago, doesn't have the spectrum assets or resources to build a competitive 4G network on its own that will rival networks being planned by bigger wireless operators, such as AT&T and Verizon Wireless.

Together with the help of the cable companies, Google, and Intel--Sprint and Clearwire can build the network and still get their new service up and running at least two years before rivals AT&T and Verizon Wireless are able to build similar networks using a technology called LTE.

"As we looked forward it became evident that our assets along with our business priorities lined up with Clearwire's," Dan Hesse, Sprint's CEO said on the call.

As part of the deal, Sprint plans to lease capacity on the new 4G network and offer the service under its own brand as an MVNO or a mobile virtual network operator. This will allow it to sell both its 3G wireless service as well as a faster 4G service.

But in exchange for getting access to a 4G network on the cheap, Sprint will have to give up its coveted 2.5G wireless spectrum asset for a 51 percent stake in the new company. Still, Hesse said it is worth it.

Dan Hesse, Sprint Nextel president and CEO

(Credit: Sprint Nextel)

"Because we are an early investor, the economics are favorable," he said. "And it brings us 4G without having to spend the (capital expenditure) we'd have to spend if we built it on our own. We looked at it holistically and decided it makes sense to shareholders."

Also as part of the deal, Clearwire will be able to resell Sprint's 3G service along with the new 4G service. And the cable companies, Comcast, Time Warner, and Bright House, will be able to resell Sprint's 3G service as well as Clearwire's 4G service under their own brands as an MVNO.

Comcast and Time Warner Cable had already developed a joint venture with Sprint to develop a wireless service they could bundle with their existing broadband, home phone, and TV offerings. But the so-called Pivot venture fell apart when it became evident that it was too difficult to integrate services. The cable operators also realized that simply reselling wireless service added little value to their strategy.

"The economics and structure of this deal are completely different than the Pivot joint venture," Tom Nagel, executive vice president of Comcast's wireless division said in an interview. "We will be the provider of the new service and own that customer relationship, which means we can integrate the wireless service into our existing service. And we will also be able to integrate the 4G piece of the network into our services."

Operational efficiencies
Sprint's Hesse and Clearwire's Wolff said that the deal also offered operational efficiencies for each company. For example, Clearwire will lease space on Sprint's existing cell towers to build the network below market rates. It will also be able to use Sprint's long distance fiber network to transport the 4G wireless traffic throughout the country. In exchange for that, Sprint will have access to Clearwire's wireless backhaul network. This high-speed wireless network can be used to more efficiently aggregate Sprint's existing cellular traffic onto its own long distance fiber network for transport around the country.

As for the build out, the companies are each continuing as previously planned. Eventually, the companies expect the network to include some 120 million to 140 million points of presence or POPs. Wolff said that Clearwire has about 30 million POPs in development right now. And Sprint expects to have 15 million POPs built by the end of the year.

Wolff added that he expects the network construction to accelerate in 2009 and 2010, with much of the build-out happening in 2010.

"This is one of the largest and fastest network build out plans ever done," Wolff said. "It is a massive undertaking. Our current capital will get us to a 110 million POPs by mid-2010."

He said the company could either slow or accelerate the construction plan depending on whether it raises more capital.

Initially, the company will focus its network build on thoroughly covering the top 100 markets, he added. But Wolff said Sprint's 3G footprint, which will augment the 4G network, will have a wider footprint for some time.

As for the cost of the new service, Wolff wouldn't talk specifics, but he said the efficiencies already inherent in the WiMax technology would provide four times the performance at one time the cost, which means that on a per-bit basis, the service will cost less to deliver than 3G. What that means in terms of pricing for consumers is still unknown. Today's 3G PC-card wireless broadband services for laptops are priced around $60 a month and are believed to be too high for most consumers.

"We are focused on the value proposition of WiMax," he said. "And we have the ability to compress pricing if we need to in order to attract customers. We will have to see how it goes. But the economics are attractive."

Update at 4:07 a.m. PDT on Wednesday, May 7: This article has been updated to reflect the official announcement.

Sprint Nextel and Clearwire will create a new joint venture that will combine both companies' WiMax assets to create a nationwide broadband wireless network, the companies said Wednesday.

The deal, which will be valued at about $14.5 billion, is being backed by cable operators Comcast and Time Warner, as well as Intel and Google.

News of the deal was earlier reporter in The Wall Street Journal.

The new joint venture has raised a total of $3.2 billion in outside financing from these investors. According to the Journal, Comcast has contributed $1.05 billion; Time Warner Cable is putting in $500 million; Intel is investing $1 billion, and Google is fronting about $500 million. Another smaller cable provider, Bright House Networks, has contributed about $100 million.

The new company will be called Clearwire. The deal calls for a target price of $20 per share of Clearwire's common stock, the companies said. Industry veteran John Stanton would also invest directly in the new company.

Sprint will own the largest stake in the new company, with approximately 51 percent equity ownership. Clearwire investors will own about 27 percent, and the new strategic investors, as a group, will be acquiring approximately 22 percent for their investment of $3.2 billion.

Investors were hammering out the final details on Tuesday, the Journal reported. Rumors of the deal were reported in the newspaper in March, just before the big industry trade show CTIA. Sprint's CEO Dan Hesse had hoped to have the deal finished by then to announce at the trade show.

Sprint is expected to have a majority ownership in the new joint venture, since it owns most of the 2.5GHz spectrum that is being used to the build the network. The new venture will be called Clearwire and will be run by Clearwire CEO Ben Wolff. Craig McCaw, the cell phone pioneer and Clearwire founder, will remain chairman.

The new company will offer both traditional voice service and new wireless broadband services. The cable operators involved in the joint venture will be able to use the new network to sell wireless service.

Comcast and Time Warner recently stopped marketing service through a joint venture called Pivot, which they had formed with Sprint Nextel. Pivot, which allowed the cable companies to bundle wireless service with their own broadband, TV, and home phone service, was not selling well, and integrating new features and services with their own services proved to be too complicated.

Sprint's decision to spin off the WiMax technology comes as the company continues to lose customers in its core business. Sprint has been losing customers ever since its 2005 merger with Nextel. The company's stock price has plummeted over the past year, and Wall Street has been pressuring the company to refocus its efforts on its traditional cell phone business.

If the deal is complete, and Sprint is able to spin off the WiMax network, it will free up resources for the company to focus on what to do next with its traditional cell phone business. Rumors have circulated this week that the company is also considering selling its Nextel assets.

Meanwhile, Clearwire, which went public last year, has also been struggling to come up with the necessary cash to finish the nationwide build-out of its WiMax network. The companies had talked about a partnership for several months. And combining forces seemed like the most logical plan.

Now the companies will combine forces to build a next-generation broadband wireless network that will offer download speeds far greater than what is available today with 3G wireless.

A network such as this will be used to connect a whole slew of devices to the Internet wirelessly. So instead of just cell phones surfing the Web, users might connect cameras, gaming devices, and a number of other consumer electronics to the network via a WiMax network.

Sprint competitors AT&T and Verizon Wireless are also looking at building a next-generation broadband wireless network. But they have decided to use a competing technology known as LTE. Most European carriers have also committed to using LTE for their next-generation network.

Sprint contends that WiMax is at least two to three years ahead of LTE, and the company believes that using WiMax will give it a head-start in the market. That remains to be seen, especially given that the ecosystem, and research and development dollars, will most likely follow the bigger market opportunity, which is LTE.

At this point, it's difficult to say whether the new WiMax joint venture will be a big success. The involvement of Google and Intel are good signs, but it remains to be seen if this network will ever have the legs it needs to compete against networks built by competitors using a technology with a greater following.

Is Sprint Nextel getting ready for a fire sale?

It sure looks that way following speculation around Wall Street on Monday of a possible sale or breakup of the beleaguered wireless operator. First, The Wall Street Journal reported that German phone company Deutsche Telekom was considering buying the company. Later the same day, another Wall Street Journal article cited sources who said Sprint Nextel is considering unloading its Nextel assets, a move that might make the $22.3 billion wireless operator more attractive to potential buyers.

While a Deutsche Telekom sale seems like a long shot, it's not surprising that the company is considering spinning off the Nextel unit. If Sprint Nextel is able to unload the Nextel network, it could open it up for sale to another bidder--just not Deutsche Telekom.

Why? There are three reasons.

Bigger isn't better
According to the WSJ article, Deutsche Telekom is looking to expand international wireless networks as its wireline business declines. In particular, the company is looking to bulk up its U.S. subsidiary, T-Mobile USA, which is among its fastest-growing properties. The company added some 3.6 million subscribers in 2007 for a total of about 28.7 million subscribers.

If T-Mobile USA acquired Sprint Nextel, it would gain an additional 53.8 million subscribers and become the largest U.S. cell operator, surpassing both AT&T and Verizon Wireless, the No. 1 and No. 2 cell phone carriers, respectively, in the country today.

But making T-Mobile bigger wouldn't necessarily make it better. The main problem is that T-Mobile USA and its European counterpart, T-Mobile, use a different wireless standard than Sprint Nextel. T-Mobile is GSM-based, whereas Sprint uses CDMA and Nextel uses i-DEN.

If Deutsche Telekom tried to merge T-Mobile USA with Sprint Nextel, it would end up with a huge integration nightmare as it tried to accommodate not just two different technologies, but three. In fact, it would essentially be repeating the same mistake that doomed the 2005 merger between Sprint and Nextel.

Sprint Nextel has been bleeding customers since that acquisition, as Nextel customers, in particular, have dumped the company due to poor service. In early 2006, Nextel had roughly 16.6 million subscribers. By the end of 2007, it had about 13.2 million, according to the WSJ article. And some experts think that number could shrink even further to about 5 million to 7 million in two years.

"When you're looking for market share and scale advantages, it's critical that the technology piece works," said Charles Golvin, an analyst with Forrester Research. "And (Deutsche Telekom and Sprint Nextel) don't have that. They'd have a whole bunch of integration issues, just like they did with the Sprint Nextel merger."

Regulatory headaches
Spinning off Nextel could help alleviate some of the integration headaches for a potential buyer. That said, I still don't think Deutsche Telekom would buy Sprint, mainly because I don't think U.S. regulators would accept the deal.

Right now, the U.S. wireless market with four major competitors is viewed as a competitive-market success story. And it's conceivable that U.S. regulators could block the sale between the No. 3 and No. 4 wireless companies, which together would become the No. 1 wireless operator in the country. Additionally, it's likely that U.S. regulators wouldn't like the deal, because it would mean that a foreign company--Deutsche Telekom--would control the largest wireless communications network in the country, something security experts probably wouldn't like.

Better options elsewhere
That said, spinning off Nextel could help attract other bidders for Sprint. The WSJ reported that the company is examining several options. It has supposedly been in talks with Nextel co-founder Morgan O'Brien, who also founded a public service wireless company called Cyren Call. O'Brien is supposedly putting together a consortium of investors to acquire Nextel, which pioneered the push-to-talk, walkie-talkie phone service. The idea is that the Nextel network and service, which is already used by construction workers, airline workers, and public safety workers, would be combined with other spectrum assets to create a nationwide public safety network.

Cyren Call has been working closely with the Federal Communications Commission to develop a plan for the sliver of spectrum in the 700MHz spectrum auction known as the D block, which was created to help build this nationwide public safety network.

The spinoff of Nextel would finally cement the $35 billion tie-up between Sprint and Nextel as a major failure. Sprint would likely only get a fraction of what it paid for the company if it sold it today. But dumping Nextel would make it easier for Sprint's management team to more nimbly direct its core PCS business. It might even give executives room to focus more attention on its next-generation WiMax network called Xohm.

But word has it that Sprint is also looking to spin off that business. The company has supposedly been in talks with Clearwire, which is also building a nationwide WiMax network, to form a joint venture backed by Intel and Google and possibly cable operators Comcast and Time Warner. The idea is that splitting up all of Sprint Nextel's assets could bring more value to the company than keeping everything together.

Right now, one thing is certain. The Sprint executive team, led by CEO Dan Hesse, seems to be examining all its options. With second-quarter earnings coming out next Monday, there's likely to be more speculation over the next couple of weeks about what the company will do next. So stay tuned.

Comcast and Time Warner Cable are looking to help bankroll a new joint venture between Sprint Nextel and Clearwire to deliver 4G wireless services, according to a report in Wednesday's Wall Street Journal.

According to unnamed sources, the companies are discussing a plan to provide funding for a new wireless company that would be operated by Sprint Nextel and Clearwire. The new company would use network spectrum and assets from both companies to form a nationwide wireless network using WiMax.

Last summer, Sprint and Clearwire announced they'd be working together to build a nationwide network. In November, they terminated their agreement, but each company has said separately that it is talking to the other about ways to work together. For months, rumors have floated around that Sprint would spin off its WiMax network, known as Xohm, and combine it with Clearwire's network.

The Journal said the companies are now trying to raise $3 billion to create the joint venture. Comcast, the nation's largest cable operator, would put in about $1 billion, while Time Warner, the second largest cable operator in the country, is willing to pony up $500 million, the Journal said.

Bright House Networks, a smaller cable operator, is also supposedly in the talks and could contribute around $100 million to $200 million. Intel might be contributing $1 billion, and Google could throw in a couple of hundred million too, the article said.

For years now, the cable companies have been competing vigorously with traditional phone companies AT&T and Verizon Communications for customers. Cable operators have been eating away at phone companies' traditional phone businesses, and phone companies are starting to make inroads in certain markets with their TV services. The two groups have competed for high-speed broadband customers, too.

Wireless is the one place where cable hasn't been able to compete so far, but the cable industry has been trying to plug that hole. In late 2005, Comcast, Time Warner, Cox Communications, and Advance/Newhouse Communications announced a joint venture with Sprint Nextel to offer wireless service as part of their bundle of services.

The cable companies had hoped that they could integrate mobility into their offering to add more value to existing services like telephony, TV, and broadband. The companies started offering their bundled wireless service, called Pivot, early last year in certain markets, but by the end of the year demand was so low they stopped marketing it. Part of the problem is that nearly 80 percent of U.S. residents already subscribe to a cell phone service. And the cable operators weren't given much freedom in pricing or packaging the Pivot service to make it enticing enough for people to switch carriers.

New networks on the horizon
Meanwhile, the wireless industry is gearing up to build the next generation of networks. These so-called 4G networks will allow people to connect a wide array of consumer electronic devices to the Internet, including cell phones, PDAs, music players, gaming devices, digital cameras, and more.

AT&T and Verizon Wireless, which is owned by Verizon Communications and Vodafone, have already said they plan to use technology known as LTE (Long Term Evolution) for their 4G network. LTE has been positioned as an alternative to WiMax, but so far the technology is at least a couple of years behind WiMax in terms of development.

Sprint has placed its bet on WiMax. And the mobile operator, which is in third place in the U.S. behind AT&T and Verizon Wireless, hopes WiMax will give it a running start for the next generation of networks.

The problem is that Sprint's core cell phone business is in shambles. The 2005 merger with Nextel, which uses a completely different network technology than Sprint, is largely to blame. And the company has been bleeding customers for several quarters.

For months, analysts have criticized Sprint and its management team for focusing too much on WiMax. As a result, Sprint's new CEO, Dan Hesse, has been looking for ways to spin off Xohm, but still retain some benefit to Sprint's shareholders and to the company in general. A deal with Clearwire, a company started by wireless magnate Craig McCaw that is also building a nationwide WiMax network, seems like a perfect marriage.

Of course, the biggest hurdle is finding the money to fund such a joint venture.

This is where the cable companies come in. Cable needs to make a play in 4G wireless. And Sprint and Clearwire need the money. So it makes perfect sense for the two sides to come together.

Comcast and Time Warner signaled their intent to get into the 4G wireless market during the Federal Communications Commission's Advanced Wireless Service auction in the summer of 2006. Bidding under the name SpectrumCo, the Sprint/cable joint venture, which includes Comcast and Time Warner, agreed to pay $2.4 billion for 137 licenses in cities including New York, Boston, Washington, Detroit, and Atlanta.

The cable companies haven't specified what they plan to do with the spectrum, but like the 2.5 GHz spectrum that Sprint and Clearwire are using to build their WiMax networks, the AWS spectrum, which is in the 1.7GHz to 2.1 GHz band, is well suited for wireless broadband services, which will likely include mobile video.

Cox Communications, which is involved in Spectrum Co., has signaled that it might try to build its own wireless network in its region. In the recent FCC 700 MHz auction, the company spent $305 million on 22 spectrum licenses, mainly in its territory in the South and Southwest.

According to the Journal, Comcast and Time Warner would get equity in the new Sprint/Clearwire company in exchange for funding it. They'd also have the option to buy wholesale access to the network so they can offer their own wireless broadband service.

The Journal article said a deal is expected to be finalized by the end of the week--before Sprint and Clearwire head to Las Vegas for the big CTIA tradeshow. So stay tuned.