Cisco-Clearwire 'alliance' could portend much more

And what could that Cisco WiMax device be? A Flip video camera? A VoIP phone?

The multiyear alliance announced today between Cisco Systems Inc. and Clearwire Corp. could be as simple as WiMax network provider Clearwire's finding a big, reliable wireless IP infrastructure supplier in Cisco.

Yet, the fact that the two companies called it an "alliance," instead of simply a supplier agreement, and that Cisco will be building WiMax gear, including some kind of mobile device, portends much more.

Industry observers came up with a few scenarios for what the expected WiMax mobile device could be. One possibility is a Flip video camera, since Cisco recently purchased the maker of the Flip, Pure Digital Technologies Inc. However, this device might work over long-range WiMax wireless and allow users to send and receive video streams or hold live video chats, said Yankee Group analyst Zeus Kerravala.

"That would be a pretty cool product," he said.

Another possibility for a Cisco mobile WiMax device is a WiMax VoIP phone. Since Cisco already has a VoIP phone that works over Wi-Fi, the networking gear vendor could easily convert the Wi-Fi radio to WiMax, said Jack Gold, an analyst at J. Gold Associates.

Despite the possibilities, Cisco and Clearwire would only say that Cisco plans to introduce its first mobile WiMax device "later this year."

The companies also said that future converged WiMax and Wi-Fi devices are planned as part of the Linksys by Cisco line of consumer routers. Those products would probably be routers used in a home or small-office setting that bring in a signal from outside via WiMax and spread it through the home via Wi-Fi.

None of the financial terms of the alliance were revealed, but Cisco could earn millions of dollars by selling its 7600 series routers and optical networking gear to Clearwire to support the WiMax network rollout. However, the dollar amount would ultimately depend on how well WiMax catches on in the U.S., these analysts said.

The two companies called the alliance "multi-year," and then strongly implied that Cisco would provide infrastructure for the 80 U.S. cities where Clearwire will begin offering its Clear branded service by the end of 2010. Several analysts said that Clearwire's rollout schedule is ambitious, at best.

One reason the announcement drew attention is that Cisco seems to be endorsing WiMax with the Clearwire alliance. However, Cisco is not closing any doors to the WiMax competitor in high-speed wireless network technology known as LTE (Long Term Evolution).

LTE will be deployed by Verizon Wireless and AT&T Inc. in coming years. As the next-generation (4G) technology favored by GSM wireless carriers that dominate wireless services globally, LTE would seem to have the upper hand in the long run.

Analyst Craig Mathias of Farpoint Group noted that LTE has an IP core, "and guess who builds IP networks? Cisco is in a good spot with WiMax and LTE, and they have always been in a good spot with IP."

Mathias also said Cisco and any other WiMax supplier can make impressive revenues with WiMax as the technology expands into emerging countries and the U.S.

"WiMax has a bright future in front of it" despite LTE, he said. Assuming there are eventually many billions of users for high-speed wireless services globally, "if WiMax gets even 20% of that total, that's still a good market," he said.

Kerravala, however, said Cisco is more likely to be "hedging its bets" in the battle between LTE and WiMax. "LTE is right around the corner, and WiMax is used mainly in emerging markets, so Cisco is saying on the off-chance that WiMax is successful, let's keep our hands in all the wireless pots without committing to any of them."

Gartner Inc. analyst Phillip Redman considers WiMax a "niche" technology when compared to LTE and said it doesn't make sense for Cisco to pursue a costly research and development process for new products to work with WiMax. It would be relatively easy for Cisco to build a WiMax/Wi-Fi router, but arguably more costly to build a WiMax mobile device.

"I can see Cisco going after the combined router device because that is low cost to get into, but I don't understand the strategy of developing mobile devices, if that ever comes about," he said.

Aside from the possibility of a mobile VoIP device that works over WiMax, Gold said something much deeper could be going on in today's alliance announcement. Clearwire and its backers may believe the entire technology needs a heavyweight player like Cisco to give it a boost.

Gold said Clearwire has relied on billions of dollars invested into the Clear network by Intel Corp., Google Inc., Time Warner and cable companies that have a vested interest in furthering the technology.

"If you read between the lines in this announcement, this is really about how Clearwire has interesting partners in Intel, Google and Time Warner who may feel Clearwire needs more heavyweight partners," he said. "Since WiMax has gotten a bad rap, and several carriers say it is silly to use it with LTE coming, Clearwire needs another heavyweight backer. So the partners down the street could be leaning on Cisco to join the effort."

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