Wireless

Sprint's chief technology officer, Barry West, uses a pair of hedge clippers at the Xohm launch party in Baltimore to cut a copper cord, symbolizing the end of the wired Internet.

(Credit: Marguerite Reardon/CNET News)

BALTIMORE--Executives from Sprint Nextel and its ecosystem of partners ceremonially cut the broadband cord here on Wednesday with the launch of the first mobile WiMax network in the U.S.

Executives also showed off several new laptops that will have embedded WiMax chips, and they announced that Sprint will be offering dual-mode 3G/4G products by the end of the year. The introduction of new devices and integration with Sprint's existing cellular network could help lay to rest worries about the company's initial strategy. But it's still very early days for Xohm and for WiMax in general.

Sprint started selling the new wireless broadband service called Xohm here last week. The service--based on WiMax, a standards-based technology that uses the 2.5GHz spectrum band--offers average download speeds between 2 megabits per second and 4 Mbps, a huge improvement over the 400 Kbps to 700 Kbps speeds offered using 3G cellular technology.

Baltimore is the first city to get Xohm, but it's expected to launch soon in more cities, such as Chicago and Philadelphia. Sprint's chief technology officer, Barry West, said that Baltimore was an ideal place to launch the service because it is representative of many cities in the U.S. both in geography and population. Surrounded by water and full of low-rise brick buildings, the environment also was a challenge for radio frequency engineers designing the network.

But building the network is only part of the challenge. Getting devices in the market that can use the WiMax technology is crucial to making Sprint's 4G strategy a success. Sprint currently claims to have at least a two-year head start over its wireless competitors AT&T and Verizon Wireless, which both plan to use a technology called LTE (Long Term Evolution) to build their 4G network. But unless device makers can get products into the market and in the hands of consumers, the head start might not amount to much. Sprint seems to recognize this.

"The news on September 29 was about the network," West said. "Today it's about the devices, and the defining thing is the embedded model. And it means that everything will come with WiMax."

Sprint was joined at the event by its many partners to celebrate the launch and to show off devices that will be able to access the network. Intel announced that it is now shipping its first-ever combined WiMax Wi-Fi module for laptops. Four notebook manufacturers--Acer, Asus, Lenovo, and Toshiba--said Wednesday that they will include the Centrino 2 chips in their notebooks. These new laptop computers are available now via Amazon.com and NewEgg.com. Dell, Panasonic, Samsung, and Sony also plan to support the WiMax/Wi-Fi chips in their new laptops that will hit the market in 2009.

From Wi-Fi to WiMax
Intel executive vice president Sean Maloney said he expects the evolution of WiMax to follow the same pattern as that of Wi-Fi. He said that seven years ago when Intel first started pushing Wi-Fi into the market, many people didn't believe Wi-Fi would ever take off. But today, Wi-Fi has clearly become a huge success, shipping as a standard feature in almost every laptop on the market. It is also finding its way into dual-mode cell phones, like Apple's iPhone and Google's new G1 offered through T-Mobile.

But Maloney pointed out that Wi-Fi has a "frustrating limitation," which is that it doesn't cover a large geographic area. This is where WiMax comes in. He said that WiMax, which can create a hot spot over an entire city rather than a much smaller area like a coffee shop or a home, provides huge amounts of bandwidth over a big enough footprint to finally make Web 2.0 applications accessible to mobile devices.

But Sprint's WiMax network is still small. Right now, the service is only available in a handful of cities. And even in those cities, it's not 100 percent complete. West acknowledged that Sprint and its soon-to-be partner Clearwire have a long way to go in terms of covering the country with WiMax signals. But he said the new Clearwire, which will combine spectrum assets from Sprint and Clearwire, has more than enough spectrum to build a robust 4G wireless network.

"There are holes in our service today," West said "Over time, we will have the same network as everyone else. But you can't do it all at once."

Until Sprint is able to complete its 4G network, the company plans to use its 3G cellular network to augment the service. Sprint CEO Dan Hesse announced at the event here that the company will be offering devices that will be able to automatically switch between the 4G Xohm WiMax network and its EV-DO 3G cellular network. Sprint will be offering the first dual-mode 4G and 3G wireless technology in its laptop air cards by the end of the year. Pricing details for a combined service haven't been released, but Hesse said consumers can expect to pay more for higher speeds and better coverage.

"It will take a while for the new (4G) network to be built ubiquitously," Hesse said. "And we will have new multimode devices that will use 4G where it's available, and when it's not it will downshift to 3G to provide that ubiquitous data coverage."

But the current economic crisis has led many skeptics to question whether Sprint and Clearwire will have enough money to finish building their nationwide network. The companies, which announced their proposed merger in May, expect to get final regulatory approval by the end of the year.

Hesse said the Clearwire will need a total of about $5 billion to complete its network. The company has initial funding of about $3.2 billion, which means it will need to raise another $2 billion to complete the network. He acknowledged that the current economic crisis could make accessing this capital difficult. But he said he is confident that if the company found itself unable to get the necessary funding that it could turn to its partners for the cash.

"Just look at the cash on our partners' balance sheets," he said "We've got Intel, Google, the cable companies, and even our own cash. That is the advantage of having six well-capitalized founders."

Despite early signs that it's performing well, Sprint's new 4G network could be heading down the same doomed path as EarthLink's citywide Wi-Fi networks.

On Monday, two years after announcing plans to use WiMax to build a 4G network, Sprint began selling the new service, Xohm, in Baltimore. The network, which offers wireless broadband downloads in the 2Mbps to 4Mbps range, is supposed to be a leap forward in terms of throughput for wireless networks. And according to bloggers and journalists who have tested the network in the first two days it's been up and running, it seems to be performing as expected.

This is a huge accomplishment, especially because it is the first commercial network in the U.S. to use mobile WiMax technology. But given the paucity of devices available that can even access the network, Sprint is being forced to apply traditional broadband and wireless business models to the new network. And as a result, the company will initially compete with existing broadband services and 3G data services.

"This particular offering is not really fulfilling an unmet need," said Charles Golvin, senior analyst with Forrester Research. "So the prospects for the service are limited. But I see this particular deployment more as an experiment to see how the market will react and what pricing model is best."

It may only be a test bed for future WiMax deployments, but I think the business model Sprint is using in Baltimore looks eerily similar to what EarthLink attempted to do with its citywide Wi-Fi business. As a result, I see Sprint facing many of the same hurdles that EarthLink faced in trying to sell this service to consumers.

Price matters
EarthLink planned to blanket cities with Wi-Fi and compete directly with cable and DSL providers. It offered its service for about $20 a month, slightly less than services from cable and phone companies. But consumers didn't see the value in the service, and subscription uptake was dismally low. Within three years of hatching its vision, EarthLink pulled out of the citywide Wi-Fi business, even abandoning assets in some cities.

Like EarthLink, Sprint is targeting incumbent cable and DSL providers with its service. The big difference is that it's also offering mobility. But because there are only a handful of devices that support WiMax today, most people subscribing to the service will likely only be as mobile as they can be with an air card plugged into their laptop. In other words, they probably won't be walking around town surfing the Net. Instead, if they aren't at home, they'll be parked in a coffee shop or library where Wi-Fi is typically already available.

And even though Sprint is competing directly with fixed broadband providers, it is not offering customers a huge discount. The home service, which requires users buy a $79 WiMax modem, costs $25 initially, but will eventually be priced at $35 per month. It's also offering a mobile only service, which requires users buy a $59 WiMax wireless card for their laptop. This service starts at $30 and will increase to $45 after six months. The combination service, which allows users to share their bandwidth with other users at home and also offers mobility, will initially cost $50 a month. But the price is expected to eventually jump to $65 a month.

These prices are not drastically different from other broadband options. In Baltimore, Comcast offers a 6Mbps download service for about $43. Verizon Communications offers a 3Mbps DSL service for about $30 a month.

And even though initial reports on the network's performance are good, reviewers note that wireless signal strength can greatly affect throughput speeds. In other words, consumers will be asked to subscribe to a service that costs about the same or slightly less than what they can get from a fixed broadband provider with less throughput consistency.

This was the same conundrum that many EarthLink customers faced. And in the end, most consumers didn't see enough differentiation to switch to Wi-Fi. I expect the same thing will happen with WiMax.

Where Sprint may be able to win customers is among some business travelers. Sprint's mobile service is $45 a month, about $15 a month cheaper than 3G data services from carriers such as Verizon Wireless, which charges roughly $60 a month for 5GB worth of downloads.

Sprint is also offering $10 day passes, which is a clear differentiator from the 3G data services offered today for laptop users. 3G data services require a monthly contract. But considering that WiMax day pass users would have to dish out $60 for a WiMax wireless card to even access the $10 a day service, I don't see this being a huge hit, especially when Wi-Fi is also widely available either for free or for $10 a day.

"There isn't much differentiation right now in the WiMax offering," said Roger Entner, senior vice president in the communications sector at Nielsen IAG. "It might be a little cheaper than cable or DSL, but not much. But they really needed to show Wall Street and their investors that the technology works."

Small footprint
The other big problem for Xohm is that it's limited in terms of footprint. So far, the company has only launched a network in Baltimore. More cities will soon follow, including Philadelphia, Chicago, Washington, D.C., Providence, R.I., Boston, and Dallas. But even then, the service will only be available in a handful of cities. And when people in those cities venture to the suburbs, they won't be able to access the network.

Sprint has talked about leveraging its 3G network to augment coverage until WiMax is ubiquitous. It's also teaming up with Clearwire in a joint venture to combine WiMax assets in an effort to jump-start deployments. But right now it doesn't have an extensive footprint nor does it offer roaming between the WiMax network and the cellular network.

And because mobility is dependent on network coverage, it's unlikely that the mobile aspect of Sprint's WiMax network will appeal to more than a niche audience.

Sprint recognizes this reality. And its long-term vision is to create a ubiquitous 4G network that will provide wireless broadband to all kinds of portable devices, including everything from digital cameras to music players to portable gaming devices.

Several large companies such as Intel, Nokia, and Motorola have thrown their weight behind WiMax. And they promise to launch new components and devices to support the technology. But so far, devices with WiMax have been few and far between. Nokia has announced the N810 "Portable Internet Tablet," and Samsung has announced a WiMax-capable Q1 Ultra Premium Mobile PC. And Intel will soon be including WiMax in its chipsets. But so far there is not a critical mass of WiMax products in the market.

Like Sprint, EarthLink also lacked network coverage. But it did have an abundance of devices able to access its Wi-Fi network, such as laptops with embedded Wi-Fi and the Apple iPhone. And yet these devices weren't enough on their own to drive demand for the service.

The other major problem facing Sprint as it rolls out more of its WiMax cities is the fact that the economy is in utter shambles. Not only does it make it less likely that consumers will spend more on broadband services. But more importantly, it will likely mean that Sprint and its soon-to-be-partner Clearwire won't be able to access capital necessary for finishing their network.

Entner speculates the companies will need at least an additional $2 billion in 2009 to build the network.

"In a market that is over 80 percent penetrated, it becomes difficult to convince investors and creditors to give you money, especially in a market like the one we're in now," he said. "If the economy and the credit markets don't improve, there's a healthy chance that this whole project will die."

That said, Entner believes that Sprint's big picture vision is correct. Consumers want faster wireless connectivity. And they will gobble up whatever bandwidth capacity they are offered. The problem is that Sprint has to give them a compelling enough reason to spend money on WiMax instead of subscribing to increasingly faster cellular services. For example, AT&T says it will soon offer 7Mbps downloads over its 3G HSPA network next year. And Verizon has big plans to roll out its 4G network in a few years.

"I don't think it's a forgone conclusion that Sprint's WiMax network will be dead within a year," Entner said. "But it has an extremely tough road ahead of it, absolutely. They cannot afford any hiccups."

New details about Sprint Nextel's soon-to-be-launched WiMax service are coming to light as the company prepares to launch its first city this month.

The service called Xohm is set to launch this month in Baltimore. More cities are expected to go online in the fourth quarter.

Last week, the company started providing more details about what the service will be able to do and where it will be offered next.

Sprint announced last week that it has signed deals with several partners to provide location services to make it easier for subscribers to find nearby restaurants, movie theaters, and other points of interest as well as plot routes on maps and get detailed information and directions on the go.

The location-aware technology will be available on a wide range of products using the Xohm network from laptops to mobile handsets to car navigation systems and even digital camera's.

Sprint is also making the application programming interfaces for XOHM available so that developers can create new services for Xohm devices.

The specific location-based services that will be available at launch include: uLocate Communications, which will offer its Buddy Beacon technology for tracking friends as well as its Where platform for accessing local information about restaurants, news, events and weather; Yelp, which provides local business reviews of restaurants, doctors, and more; Eventful, which offers local event listings with a map view; Topix, which provides local news; Navteq, which offers real time local traffic information; Accuweather, which offers local weather; and Google, which will offer its local search.

Barry West, president of the Xohm or Sprint Nextel, also revealed some other details last week during an interview with the Web site MuniWireless. He said that Sprint is at least a month ahead of its internal schedule for deploying WiMax access points with nodes already running Baltimore, Chicago and Washington, D.C., the site reported. The company has also begun installing equipment in Boston, Philadelphia and Dallas/Fort Worth. But he wouldn't give a specific timeframe for launching the new sites.

He confirmed the average download speed of the service is expected to be between 3 to 5 Mbps. And the company plans to have a range of devices available when Xohm launches in September including, modems from Zyxel and ZTE, a PC card from Samsung, and Nokia's already announced WiMax tablet.

Earlier this year, Sprint said it would merge its WiMax business with Clearwire's business, which is already operating a fixed-WiMax network in parts of the U.S. The combined company, which will be 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.

Sprint has been moving forward with its Xohm deployment as the company seeks the necessary regulatory approvals for its merger with Clearwire.

But the Xohm project has hit a few speed bumps along the way, as Sprint has struggled to get its core business back on track. Initially, the company had said it would launch the service in the first half of the year. It's been testing the mobile WiMax service since the end of last year in Chicago and the Washington-Baltimore area. In June it gave a firm launch time frame of September.

AT&T is looking to put a kibosh on the proposed merger of Sprint Nextel's nationwide WiMax assets with those of Clearwire.

On Thursday, the nation's largest phone company filed a petition with the Federal Communications Commission, asking it to deny approval of the merger.

Sprint Nextel announced in May that it was teaming up with Clearwire to form a new joint venture that would combine both companies' WiMax assets to create a nationwide broadband wireless network. The deal, which has been valued at about $14.5 billion, is being backed by cable operators Comcast and Time Warner, as well as Intel and Google.

The FCC, which is currently reviewing the merger, must give its blessing for the deal to be completed.

In its filing, AT&T argues that the proposed merger, "openly state[s] that they (Sprint Nextel and Clearwire) intend to compete with other national wireless providers--including AT&T--yet they fail to make the required showings necessary for the commission's review."

It's funny that AT&T is putting up any kind of stink to the merger, considering that the company exists in its current state only because of several massive mergers in the past few years, including the multibillion dollar merger between AT&T and BellSouth, which put full ownership of the wireless operator under one owner, and the purchase of wireless assets from rural operator Dobson Communications last year.

But it's clear that AT&T is nervous about the new Clearwire's plans. AT&T is currently still deploying 3G technology throughout its territory and is busy upgrading its existing network. But it is years away from taking the next big leap toward building a 4G network, which will use a competing technology known as Long Term Evolution, or LTE. By contrast, WiMax technology is available and working today. And regardless of the outcome of the merger, Sprint expects to launch its first WiMax deployments in September. What's more, devices supporting WiMax have already been developed and will hit the market by year's end.

While analysts still aren't sure whether WiMax will survive in the long run as a mobile technology here in the U.S., it appears from AT&T's latest moves that it's at least a little bit scared that the new Clearwire network, with backing from heavyweights like Intel and Google, could get enough traction to threaten its current and future wireless business.