The Wall Street Journal and the Washington Post are reporting yet another development in the long-running WiMAX saga.  I posted an article on WiMAX a few days ago, noting the rather dismal state of affairs in the US WiMAX market. In short, our two fledgling WiMAX providers, Sprint and Clearwire Communications, are both in need of a serious capital infusion if they are to have any hope of getting their services deployed in this decade. It has become painfully clear that our hopes of getting a national WiMAX network in the US, hinge on someone stepping up to provide financing. Intel Capital, who made a $600 million investment in Clearwire in 2006, is mentioned regularly as is Google whose ambitions in the wireless space have been widely reported.

The new report is that cable behemoths Comcast and Time Warner are considering investments of $1 billion and $500 million respectively in a joint WiMAX venture that combines the Sprint and Clearwire networks. Bright House Networks, the country’s sixth largest cable operator, is reportedly considering an investment in the $100 to $200 million range. The big question now becomes, is that enough money to build a WiMAX network, and what type of service enhancements are the cable companies expecting to get out of WiMAX?

Wireless is a strategic concern for the cable companies. For the moment, they are besting the regional telephone companies with their cable telephony offerings,which compete with the Telcos’ fiber-to-the-neighborhood/premises (FTTN/FTTP) deployments. The initial focus of those packaged offerings was the triple-play (voice/Internet access/video), but the Telcos have discovered that adding wireless to the mix (i.e. thequadruple play)produces a significantly stronger offering, and one that the cable companies can’t match. The two major telcos, AT&T and Verizon, also control to the two largest cellular carriers, so adding the fourth component to the mix is an obvious strategy.

I’ve heard endless speculation regarding the cable companies’ intentions with regard to WiMAX, but there’s only one wireless market that’s worth pursuing- voice. Mobile data services have been showing significant growth, but they still represent less than 20% of the cellular carriers’ revenue stream; most of that revenue is text messaging. No one is going to want to lug around an alternative wireless device, so unless it can make phone calls, a non-voice WiMAX device is probably not leaving the house.

If you take voice out of the equation, the only play for WiMAX is to mobilize something else like a laptop or a mobile video player. As the market for wireless mobile video players doesn’t exist, the laptop market looks like the reasonable target. However, in that space WiMAX will be butting heads with the cellular carriers’ more widely available 3G data services (i.e. HSDPA and EV-DO). They also overlap with Wi-Fi Hot Spot services, but with AT&T’s triumph in Starbucks, the target price for that service is rapidly approaching zero.

The problem with predicting the future of WiMAX is that while the technology can do so much, it has done virtually nothing as yet.Technically WiMAX can provide either voice or high-speed data access, but you can’t lose sight of the fact that the wireless market today is dominated by voice; the cellular carrier own the mobile voice market. Deploying a completely new wireless network that ignores the big market while targeting the minority part of the incumbent’s business is a strategy that’s doomed from the start.

The biggest problem that any WiMAX provider will have to face is that the few billions of dollars they’re budgeting is not going to cover much of the US. The original Sprint/Clearwire plan was to cover about 100 million people at a cost ranging between $3 and $5 billion. While that is 1/3 of the US population, they would reach that number by targeting metro areas. That strategy still leaves the vast majority of the country without WiMAX coverage for years to come. So the two choices for WiMAX would be to address targeted markets/applications or offer a service that combines cellular with WiMAX.

Sprint seems to be pushing their potential investors so they have something to announce at next week’s CTIA show. I wonder if these cable guys are getting railroaded.