Grand Rapids Chooses WiMax

Choosing a relatively untried technology for municipal wireless deployments, the city of Grand Rapids has chosen deep-pocketed startup Clearwire LLC (Nasdaq: CLWR) to build and operate a WiMax-based network over the town's 45 square miles. The choice of Clearwire's proprietary "pre-WiMax" technology means that Grand Rapids is breaking with other U.S. cities that are moving forward rapidly with municipal WiFi networks.

Calling the Clearwire system "cost effective and sustainable," Grand Rapids city manager Kurt Kimball described the network as the first large-scale municipal WiMax network in the country.

Like many citywide WiFi networks, the Clearwire system will have a public safety channel for police and fire personnel and other city agencies, plus free "hybrid" hotzones using WiFi connections and a discounted version of Internet access for disadvantaged citizens, costing $9.95 a month.

The price of the full Clearwire service has not been determined. As part of its bid process, Grand Rapids stated that the network will be installed at no cost to taxpayers -- in fact, Clearwire is reportedly reimbursing the city for the cost of choosing a provider. Clearwire won the bid from a field of nine other companies including EarthLink, the AT&T Inc. (NYSE: T)/IBM Corp. (NYSE: IBM) muni-networks joint venture, NeoReach Inc. , and Pronto Networks Inc.

No firm date for the beginning of installation has been announced.

Unlike WiFi networks, which transmit and receive using access points mounted on light poles and buildings, the Clearwire system uses equipment mounted on cellular towers -- which in theory should dramatically reduce the cost per square mile of deployments.

Founded by maverick cellular pioneer Craig McCaw in 2003, Clearwire offers fixed wireless broadband Internet service in the 2.5GHz (U.S.) and 3.5GHz (European) spectrum bands. The wireless ISP has deployed private networks in 31 markets, potentially covering more than eight million potential subscribers, though its current subscriber base is less than 200,000.

The Grand Rapids project is Clearwire's first foray into the municipal wireless market. While the Grand Rapids network will use Clearwire's proprietary "fixed WiMax" technology, the company plans to move toward the 802.16e mobile version of the technology when that standard becomes widespread.

The equipment vendor for the Grand Rapids deployment has not been announced, though it's thought that Motorola Inc. (NYSE: MOT), which earlier this year acquired Clearwire gear unit NextNet Wireless, will be the company's primary supplier.

For Grand Rapids, which is not only spending zero city funds on the project but is not giving away leasing rights on city-owned infrastructure, the risk is all in the technology: Either it will work as advertised or it won't. For Clearwire, which has almost $1 billion in investment from McCaw, Intel Capital , and Motorola Ventures , the relatively low cost of deploying fixed WiMax for a population of 200,000 is likely an inexpensive billboard for its municipal-deployment capability.

In July, Clearwire said it was abandoning its plans for an IPO and instead accepting around $900 million in venture funding -- $600 million from Intel and $300 million from Motorola. The company says it plans to use the bulk of that capital to develop and deploy mobile WiMax networks.

Most analysts have said that the initial deployments for WiMax will come in the developing world, where there's little competition from wireline providers offering services like DSL and cable. Craig McCaw and the city of Grand Rapids are betting they're wrong.

— Richard Martin, Senior Editor, Unstrung

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