The Competition in The Internet Access Business

In a move designed to accelerate the spread of high-speed wireless Internet access, two leading companies are combining their efforts to bring the emerging WiMax technology to market across the country.

Kirkland-based Clearwire, the company founded by wireless entrepreneur Craig McCaw, is partnering with rival Sprint Nextel to build a nationwide mobile WiMax network.

The partnership, announced this morning and outlined in a letter of intent , is expected to be finalized in the next two months. The deal will be subject to review by the Department of Justice.

The two companies said that with the partnership they would be able to build the network faster, providing online access to consumers, businesses and even the federal government for public safety use.

Since 2003, Clearwire has been working to build a nationwide network by quietly acquiring airwaves for wireless broadband and raising billions of dollars through private placements, public offerings and debt.

About a year ago, Sprint Nextel also announced its intent to build a nationwide WiMax network.

Today, Clearwire is operating a proprietary wireless broadband network in 39 U.S. cities (to about 258,000 customers, which includes subscribers in networks abroad), and Sprint Nextel expects to get into an initial handful of markets by the end of the year.

Both companies have faced skepticism for the role that the new networks will play in the daily lives of consumers and corporate customers, especially as cellphone companies expand their own high-speed networks, called 3G.

"Our companies share a vision of doing for the Internet what cellular and PCS networks did for voice communications starting more than 20 years ago," Clearwire Chief Executive Ben Wolff said. "Based on this shared vision and the expected benefits to each company and our respective shareholders and customers, it is natural that we would work together."

In the deal, Sprint Nextel and Clearwire expect to build out a portion of the nationwide network and enable roaming between their two systems. Sprint Nextel covers the more populated areas, potentially reaching up to 185 million people, or about 75 percent of the population in the 50 largest markets. Clearwire is focusing on areas covering about 115 million people. The two companies expect to be able to cover about 100 million people by the end of next year.

The companies also said today that they will work jointly on product and service evolution, shared infrastructure, branding, marketing and distribution. They also intend to exchange selected airwaves acquired in federal auctions. Spectrum license transfers must be approved by the Federal Communications Commission.

The two plan to market the service under one brand, and Clearwire will be able to bundle 3G service from Sprint Nextel to its customers. The initial partnership is for 20 years with three 10-year renewal periods.

The deal recalls another McCaw venture. When he was reorganizing Nextel Communications into a cellular company, he helped to start Kirkland-based Nextel Partners, a company responsible for rolling out in rural and smaller markets, freeing the larger Nextel to focus on bigger markets.

source:seattletimes.nwsource.com