A closer look at Sprint's pursuit of cable for WiMax

The motivation for the cable companies to get involved in WiMax is partly to fend off competitive threats from AT&T and Verizon Communications

Sprint Nextel is pushing a Monday deadline for a WiMax joint venture with major cable companies and others, a person familiar with the discussions said.

The Monday deadline being imposed by Sprint on Comcast and Time Warner Cable, America's two biggest cable providers, signals desperation on the part of Sprint to reassure its investors that WiMax is on track after months of promises, several analysts said in interviews.

But beneath the reason to assure investors, Sprint plans raise questions regarding what is driving the push, why Sprint is in need of major investment partners and what interests cable providers have in WiMax.

Sprint Nextel is working with Clearwire, a WiMax start-up headed by wireless pioneer Craig McCaw, to receive at least US$3 billion that would finance a national WiMax network rollout, according to stories first reported last week in the Wall Street Journal and the Washington Post and a person familiar with the situation who spoke on the condition of not being identified.

About US$1 billion would come from Comcast and US$500 million from Time Warner Cable, with possibly US$100 million from a smaller cable player, Bright House Networks, according to these sources. Those amounts would be in addition to at least US$1 billion from Intel and possibly hundreds of millions from Google.

Why is Sprint pushing for a deal now?

The easy answer is that a major wireless conference, CTIA, kicks off in the US on Tuesday. Sprint has scheduled at least two events for analysts and reporters that day, including one that Sprint advertised as a "hands-on preview you won't want to miss" that would be a perfect time to explain the joint venture to an audience thick with representatives for wireless carriers, equipment providers and investors.

Also, Barry West, president of Sprint's Xohm Wimax unit, had already signaled in an early January interview that Sprint was talking to potential investment partners to finance the Xohm initiative, with Sprint remaining the major owner in any scenario. At that time, he said there was a strong possibility that one or more investors would be named by the end of March.

West's comments came after Sprint CEO Gary Forsee resigned, partly over concerns that Sprint should be focusing on its core businesses and not on Xohm.

While the discussions with the cable providers "are in the early stages," one source added that Sprint is nonetheless "pushing to have a deal by Monday."

Why was Sprint seeking investors in the first place?

The simple answer is cash. "Sprint doesn't have a lot of cash in the bank now and anybody who can help them deploy this costly WiMax thing is good," said Jack Gold, an analyst at J. Gold Associates.

From Sprint's point of view, cable companies already have access to residential customers and already have billing systems in place that could be used to bill customers for WiMax access. "That's the harder part of building WiMax," Gold said.

Ken Dulaney, an analyst at Gartner, said at some point, Sprint probably recognized that building a mobile WiMax network to handle roaming users under the 802.16e specification, wasn't going to be easy to provide. At least, it wouldn't be as easy to provide as bringing what's called fixed mobile WiMax (802.16d) to market. "Sprint realized they need more users with fixed connections," Dulaney said.

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