What Now For Sprint’s WiMAX Network, and WiMAX Itself?

xohm.jpgUS operator Sprint has been under the gun for quite a while. Since it merged with Nextel a few years back, business hasn’t been good. The company managed to annoy plenty of high-spending, loyal Nextel users with poor service, and it’s been bleeding subscribers and gained a reputation for terrible customer service. Former CEO Gary Forsee made a big bet on WiMAX, and led Sprint’s plans to roll the technology out nationwide under the Xohm brand. The move has been widely debated, as has the commercial viability of WiMAX itself.

It was a bold — and some would say rash — move. Betting billions on a new and largely unproven technology, promising new business models and services. While I’m not completely convinced about WiMAX, I think that Sprint’s move has the potential to be pretty disruptive to the US market, which is generally a good thing. In any case, Sprint was looking to reduce its outlay by partnering with rival WiMAX operator Clearwire — a company who’s essentially marketing WiMAX as a fixed broadband replacement. Despite Craig McCaw being behind Clearwire, which is a golden ticket for some people, I don’t see much of a future for it. It’s spending far too much money to build out a network to ever have a chance of turning a profit in a market with rapidly declining prices.

But the network-sharing deal the companies were exploring made a lot of sense, as network-sharing deals generally do. But now, the two companies say they’ve scrapped their plans to work together, and it’s not good news for either one. Clearwire needed Sprint’s coverage in major cities and other areas; using Clearwire’s coverage in smaller markets gave Sprint an opportunity to cut network costs. The split also raises further speculation that Sprint might try to get out of the WiMAX business completely.

It’s hard to see this as a positive move for WiMAX in any way. While lots of operators worldwide have committed to the technology, the Sprint network is supposed to be its showpiece, because of its scale, but also because Sprint was planning mobile service from the start, and not just fixed broadband replacement. The sunk costs of the network to date will ensure that Sprint will carry on in some form, but I’d be surprised at this point to see things progress outside its initial launch markets (just a handful of US cities) very quickly.

Indeed, a spin-off or sale of some sort seems more likely. Such a move might appease Sprint investors and would win management some points with them — even though it would mean Sprint losing all its 2.5 GHz licenses. A lot hinges on January’s 700 MHz spectrum auction. Sprint could be looking to close a sale before the auction, and plow the proceeds into it, buying what is, in many ways, better spectrum.

But who would buy a partially built WiMAX network and all those licenses? It’s hard to imagine many buyers with the scale to raise sufficient cash, and to take on the project and see it out. Google’s name will get tossed around, but it’s not going to build its own network. Perhaps it might throw some cash in to finance the deal in a JV with somebody who can build out the network and run it. I imagine it would still prefer to grab the truly nationwide 700 MHz licenses, though, instead of Sprint’s patchwork of 2.5 GHz coverage.

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