On Friday, Sprint Nextel and Clearwire announced that they had dissolved ausing WiMax technology. Together, the companies were supposed to share resources and the cost of deploying a new fourth-generation wireless network to reach about 100 million users in the next few years.
While the companies have said they are still committed to building their networks separately, the news throws into question whether they'll have the money or shareholder backing to actually get the networks built. And without a nationwide network in one of the largest markets in the world, the WiMax revolution could come to a standstill.
"There will be a fourth-generation wireless technology," said Craig Mathias, principal analyst with Farpoint Group. "But WiMax was never a slam dunk as the clear winner. As a technology, there is nothing wrong with using WiMax, but I think the market will evolve slowly over a long period of time."
Still, companies like Intel, which is a technology partner of Sprint's and a financial supporter of Clearwire, say they will continue to roll out new WiMax products as planned.
"We are still moving forward with our next-generation Centrino chips for notebooks and our silicon for ultramobile PCs," said Kari Aakre, a spokeswoman for Intel. "We're disappointed that the agreement didn't work out, but we are committed to continue working with each of them on their WiMax initiatives."
Like so many other technologies that have come before it,. Many have described it as Wi-Fi on steroids because of the fast broadband transmission speeds it can deliver.
But unlike Wi-Fi, which transmits in a radius of 25 feet to 100 feet, WiMax signals can travel miles, making it more similar to cellular-phone technology. And because WiMax uses wider frequency channels than current 3G wireless technology, it uses wireless spectrum much more efficiently, which should help reduce the cost per bit of delivering data over its network.
It's this combination of features that has fueled the hype machine that has turned WiMax from just another wireless technology in a carrier's toolbox into the savior for the wireless Web.
While no one disputes that WiMax is a useful technology, the real question is which markets it's best suited for. For example, most wireless experts agree that WiMax is hugely useful in developing countries, where little to no wireless or traditional telephone infrastructure exists.
But it's unclear whether the technology can become a major player in a developed market like the U.S., where regular broadband is plentiful and cheap and 3G wireless networks already blanket most major metropolitan areas.
Cisco Systems, which threw its hat into the WiMax ring last month when it, sees a much bigger opportunity for WiMax in emerging markets, such as Africa and Latin America.
"We bought Navini to build networks for the emerging markets," said Jeff Spagnola, vice president of worldwide service provider marketing for Cisco. "In most developed markets, WiMax will be used selectively. But the developing world is a Greenfield opportunity. They don't have the infrastructure to begin with, so it's much easier to provide coverage in those areas than to try to fit into some existing wireless model."
Intel and Motorola also see opportunity in the developing world. But Joe Nardone, general director of Intel's WiMax, team said that WiMax is also an attractive technology for mature markets, which will eventually need more capacity than 3G technology will be able to deliver.
"At some point the carriers will have to make a forklift upgrade to get to the next level," he said. "And WiMax provides the capacity and efficiencies that make it a good choice for their networks."
Indeed, experts say that the 3G wireless networks carriers around the globe spent billions of dollars building are insufficient to handle a flood of wireless data traffic that could be generated from wireless enabled-consumer electronics products such as gaming devices, digital cameras, iPods, and navigation devices.
"3G was designed for voice," said Philip Solis, an analyst with ABI Research. "Right now a single 3G cell site barely supports a half dozen people transmitting data at the same time. WiMax offers much better capacity, which will be essential when people start using more data-intensive applications over wireless."
Solis predicts that 45 million people in North America will use mobile WiMax in 2012, with 200 million using it worldwide in 2012.
But the true fate of WiMax, at least in the U.S., is most likely in the hands of Wall Street investors.
Sprint has alreadyto build its network. The company reiterated its position on Friday. But since the ouster of its CEO Gary Forsee, the company has come under pressure to focus on its core wireless business, which has been steadily losing customers. Some experts , but the uncertainty surrounding the network could slow deployment.
Clearwire also said it's committed to continuing to build its WiMax network, but the company, which reported that its third-quarter net loss widened to $329 million from $60 million a year earlier, may not be able to afford to build the network. In fact, the company admitted that its business plan will require it to "raise substantial additional financing both in the near term and over the next five years or more."
And without enough money backing the deployments, WiMax could easily fade into obscurity as other technologies come of age. WiMax is just one of several technologies based on something called OFDM. Like Wimax, these other technologies--Long Term Evolution (LTE) and Ultra Mobile Broadband (UMB)--also deliver faster speeds and fatter data pipes.
Like WiMax, each technology requires operators to build entirely new networks. To date, WiMax is the only one that has been standardized, which has given it a leg up.
Sprint's announcement a year ago helped cement WiMax's place at the table. The technology got a further boost when large technology companies like Intel and Motorola threw their weight behind it.
While LTE and UMB products aren't expected on the market until at least 2012, Intel will introduce its next generation Centrino chips for laptops that will have WiMax built into them in the second half of 2008. Several laptop makers including Toshiba, Lenovo, and Panasonic, have already agreed to use the new WiMax-enabled chips.
WiMax was further pushed toward legitimacy earlier this year when it was approved by the International Telecommunication Union (ITU) as a 4G radio technology, paving the way for more adoption of the technology throughout the world. And Cisco, the world's largest IP networking company in the world, gave its own nudge of confidence when it announced its purchase of Navini.
"WiMax is a very good technology," said Farpoint's Mathias. "But it's competing with a lot of other technologies. Right now, 3G works fine. And there are a bunch of other 4G technologies that are also coming on the scene. So will WiMax survive? Yes, I believe it will, but its success has never been a slam dunk."