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LAS VEGAS--Sprint Nextel will launch its first commercial WiMax service in Baltimore in September, Sprint CEO Dan Hesse said Wednesday during a speech at the NxtComm trade show.

Dan Hesse, Sprint Nextel CEO

(Credit: Marguerite Reardon/CNET Networks)

Sprint will turn up WiMax service in two other cities, Chicago and Washington, before the end of the year, Hesse added. But he didn't give a specific time frame for these deployments.

The much-anticipated WiMax service has been delayed several times. Initially, the company had said it would launch the service in the first half of the year. More recently, it has been vague about when it would deploy the service. It's been testing the mobile WiMax service with download speeds of between 2 megabits per second and 4 Mbps since the end of last year in Chicago and the Washington-Baltimore area.

The company has faced some delays due to technical issues having to do with backhauling or connecting traffic back to Sprint's core network. But much of the delay seems to be a result of financial and management issues at the company.

In an effort to appease shareholders and refocus the company on its core cell phone business, Sprint announced last month that it would spin off its WiMax assets and team with another service provider, Clearwire, to build a nationwide WiMax network. Clearwire has already been offering a fixed WiMax service in parts of the U.S., and it is currently testing a mobile WiMax service in Portland, Ore.

The new joint venture, called Clearwire, will be majority-owned by Sprint and has taken investment from cable operators Comcast and Time Warner Cable as well as from big tech companies such as Intel and Google.

During his speech, Hesse said that the new Sprint Clearwire venture has at least a two-year advantage over other wireless operators who plan to build 4G wireless networks. And he emphasized that this was a key differentiator given the fact that existing 2G and 3G networks were already running out of capacity for data services.

"As fast as (3G networks) are today, nothing will define wireless broadband like WiMax," he said. "The 4G technology is wireless at rocket speeds. And Sprint could have a two-year head start in providing broadband wirelessly at landline speeds."

He talked about using the new WiMax network to provide Internet connectivity to a slew of consumer electronics devices such as cameras, as well as bringing new services to cars, allowing parents to download videos directly to their cars while traveling so their kids could watch movies in the back seat.

Experts following the WiMax market say it is critical for Sprint to get a commercial WiMax up and running as soon as possible.

"Nothing beats proof of concept," said Paul Kapustka, founder and editor of Sidecut Reports, which has recently published a report on the WiMax market. "It's great to talk about this stuff, but seeing a network in action goes a long way. If Sprint wasn't able to get a commercial deployment out before the end of the year, then there would have been real questions about the viability."

But even if Sprint is able to hit its new September deadline, there are still big questions surrounding WiMax's future. Even with big technology companies such as Intel and Motorola backing the technology, some experts question whether mobile WiMax can be anything other than a niche market. Most of the world's major cell phone companies including AT&T, Verizon Wireless, and Vodafone, the world's largest cell phone operator, say they will use a competing technology known as Long Term Evolution or LTE to build their 4G wireless networks.

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."

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.

Sprint Nextel subscribers continue to jump ship, as the company's sales decline and losses widen.

The company has been struggling for several quarters as customers have complained of poor service, especially from its Nextel division. Sprint bought Nextel for $35 billion in 2005, and the merger has largely been a failure, costing the company billions of dollars to integrate while causing the company to also lose millions of newly dissatisfied customers. Many Nextel customers have complained of poor service and a lack of handset choices.

Investors have been pushing the company to sell assets and focus on its core cell phone business. Recently, the company has been rumored to be in talks to sell its Nextel division. And last week, it announced would spin off its next-generation WiMax network in a joint venture that includes six other companies.

CEO Dan Hesse wouldn't comment on rumors that the company is thinking about dumping Nextel, but he acknowledged that Sprint has considered selling some assets. He said a spin-off of Nextel assets would involve "significant complexities."

The company lost $505 million for the quarter, compared to a loss of $211 million a year earlier. In February, the company announced a whopping $29.5 billion loss for the fourth quarter. This was due to the write-down of most of the assets from the Nextel merger.

Revenue in the first quarter also fell 7.5 percent, to $9.33 billion.

Sprint continued to lose customers in the first quarter, with about 1.1 million "post paid" subscribers, or customers who pay a monthly bill for service, ditching the service. This is compared to 1.07 million post-paid customers who left in the fourth quarter and a loss of 1.2 million customers in all of 2007. Hesse had warned in February that Sprint expected to lose about 1.2 million customers in the first quarter.

Sprint also lost about 543,000 prepaid customers, or customers who pay for service in advance. On the flipside, the company gained 343,000 customers through its youth-oriented brand, Boost. And it gained 183,000 subscribers from carriers that wholesale its network.

In total, Sprint now has 52.8 million subscribers.

The company's churn rate, or the rate at which people cancel its service, increased to 2.45 percent from 2.3 percent last quarter.

Meanwhile, Sprint's competitors have been adding customers. AT&T added 1.3 million wireless subscribers during the first quarter. And Verizon Wireless gained 1.5 million customers.

Despite the disappointing quarter, Hesse tried to remain positive. During the fourth-quarter earnings call, he had said it would take several quarters for Sprint to recover. And while the company is still clearly a long way away from a full recovery, Hesse said he sees "improved profitability in the long term."

The company is taking initiatives to get back on track. It is using its new "Simply Everything" service plan to help retain customers. This plan offers unlimited voice, data, text messaging, and Web surfing for $99.99 a month. Hesse wouldn't divulge specifics, but he said during the call that the plan is selling better than expected and has helped keep some customers.

Hesse is also continuing to cut costs. The company expects to lay off 4,000 workers. It also plans to close some retail stores.

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."

Qwest Communications International is ending its relationship with Sprint Nextel and has struck a new deal to resell wireless service through Verizon Wireless.

The company said Monday that it plans to resell wireless service from Verizon Wireless starting this summer. The companies have signed a five-year contract. Financial terms of the deal weren't disclosed.

Qwest has been reselling Sprint's wireless service since 2004 under its own brand. A spokesman for the phone company said it will continue to service customers on the Sprint network until its contract expires with Sprint in February 2009. Current customers will be given the option to move over to Verizon's service. Subscribers will also likely be given free replacement phones if they choose to keep their service and switch to Verizon.

Under the terms of the new deal, Qwest will not market the new Verizon offering under its own brand, but it will sell the service as part of a packaged bundle with customers still getting a single bill for all their Qwest services.

Qwest's CEO said earlier this year that the company was looking at other partners in wireless. There had been speculation at the time that Verizon Wireless would be the new partner.

The news surely comes as a blow to Sprint Nextel, which has been losing customers the past several quarters. Qwest has about 824,000 wireless subscribers that use Sprint's network. Sprint ended 2007 with about 53.8 million subscribers in total.

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.