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

In essence, Sprint would have to build more infrastructure at greater cost for mobile WiMax than for fixed WiMax, since roaming users would need to connect to more cell towers to stay connected as they drive on the highways or visit the beach using a WiMax-capable handheld or other device. Sprint saw it would be logical to sell fixed wireless to home-based users as a cable replacement, or to help reach homes that don't have cable services to make a connection to receive data or video content, Dulaney said. Hence, Sprint would want to reach out to cable companies already focused on residential customers.

The costs of the WiMax rollout are a major motivator in the discussions, according to several sources. Last year, Forsee predicted a US$1 billion rollout, without specifying what that included, but some estimates for the rollout have ranged as high as US$5 billion, while the joint venture would be financed at about US$3 billion. A WiMax upgrade is expensive because it involves buying and upgrading more equipment in cellular stations than some other wireless upgrades, such as from CDMA to LTE (Long Term Evolution). LTE is an upgrade pathway envisioned by Verizon Wireless and AT&T to support faster wireless networks, analysts and industry sources said.

Why cable companies are interested in 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, which are positioning themselves to offer "quadruple play" services for wired telephone, Internet access, wireless phone and video, analysts said. Competition against AT&T and Verizon also helps Sprint.

But more centrally, WiMax means wireless access for cable customers. "It taps into mobility for data and video content ... to a laptop, PDA or cell phone," said the source familiar with the Sprint-cable discussions. "Mobility is increasingly attractive."

Ultimately, cable operators could save money by working with Sprint's WiMax. "It's an inexpensive way for Comcast and others in cable to develop a wireless play," said the source.

Gold agreed, noting that Comcast could invest US$1 billion in the joint venture, and even if it went under in a few years, that would be less expensive than investing US$10 billion to build a wireless network. And since Sprint has licenses for the wireless spectrum that would be the channel for WiMax, Sprint becomes the logical choice.

In summary, a deal with cable companies and Sprint/Clearwire for Wimax "makes sense," Gold said. "If cable [companies are] not thinking along these lines, they are foolish."