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WiMax could change cell phone contracts

If deployment of WiMax, a wide-area wireless networking technology, takes off, it could dramatically change the way the cellular industry does business, according to one venture capitalist.

CORONADO, Calif.--Fed up with a cell phone contract that seemingly renews for another two years every time you call to check the balance? Try WiMax.

Kamran Elahian, chairman of Global Catalyst Partners and an investor in WiMax chipmaker Beceem Communications, compared the current state of cellular data communications on smart phones to the old America Online days. Right now, carriers want to have control similar to AOL's control of your dial-up connection, as it tried to keep you within its own network, discouraging exploration of that wild, wooly Internet thing.

But that changed as other ISPs simply connected PC users to the Internet, doing away with the fancy AOL-only portals. The same thing is going to happen to the cellular smart phone industry if carriers can bring high-speed Internet connections to phones and PCs using WiMax technology.

"The world wants a fat pipe," Elahian said. The problem, of course, is that carriers want to recoup their investment in expensive networking technology required to build that fat pipe by charging users hand over fist, he said. The idea behind WiMax appears to be that you would have several WiMax devices, like a laptop and a cell phone, but only pay for one service contract rather than by the device.

That would end the carrier subsidy model, but it would also mean they no longer get to control every aspect of your mobile data surfing, Elahian said. He pointed to Apple's iPhone, with its built-in Wi-Fi chips, as something that might start to change the game. Those early iPhone users might find it easier to get a cheap basic data plan and do all their heavy Internet uploading or downloading over Wi-Fi, and maybe one day WiMax. That's lost revenue for the carrier.