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WiMax, a new radio technology for fast wireless communications, could lead to more changes in the communications industry than any development since the telephone upstaged the telegraph 150 years ago. WiMax is essentially a new industry standard that merges powerful computer chips and efficient radios to ensure strong and interoperable radio communications. Investors are already pouring money into the technology, manufacturers are building products, regulators are taking notice, and the existing wireline and wireless companies are preparing for the challenge. To understand WiMax, short for “Worldwide Interoperability for Microwave Access,” imagine three familiar communications tools — wireless telephone, computer, and Internet service — packed into a device the size of today’s mobile phone. This new device will link directly to the Internet and will transmit information 10 times faster than any BlackBerry or other smart phone on the market. In other words, calls will be clear and secure, while television and video files will flow instantly. Internet applications formerly accessible only at the desktop or in an abbreviated version for mobile devices will be available with full features at the handset. WiMax systems will have twice the range of current phones, with fewer dropped calls. As a bonus, the device could provide online and stored music, video and still photography, and GPS satellite location and direction services. WiMax is already in commercial service in Korea, and it is part of serious business plans in America. Sprint Nextel plans to invest $3 billion in a nationwide WiMax system. Clearwire, backed by Craig McCaw, a telecommunications entrepreneur, is building WiMax systems in dozens of markets. Intel has invested hundreds of millions of dollars to develop and promote WiMax computer chips. Industry proponents of WiMax have organized the WiMax Forum, an active association that has brought together scores of large and small companies building WiMax products. FOURTH GENERATION? WiMax would replace the relatively new 3G, or third generation, technologies that are much better than earlier wireless phones. But better is only a half step ahead in the wireless world, where speed of data transfer is the standard. A 3G system can deliver data at the rate of 1.5 megabits per second (Mbps), which allows, for example, good television reception. Compare that rate with WiMax, designed to deliver up to 65 Mbps. If the computer age has taught us anything, it is that we will always find use for faster communications services, so 3G that seems amazingly fast today soon will be inadequate for normal mobile applications. WiMax, built on computer chips, represents the natural step forward in speed for mobile devices. Computers and wireless radio first were merged on a large scale in WiFi technology. WiFi is the name of the short-range wireless networks that operate without licenses from the Federal Communications Commission and allow Internet surfing from coffee shops and public parks. WiFi’s major contribution to WiMax is the awkwardly named “WiFi VoIP.” VoIP, or voice over Internet protocol, was created as a way for people to use computers for landline telephone calls over the Internet. VoIP is almost cost-free because Internet telephone calls avoid all charges by local and long-distance telephone companies. VoIP providers Skype and Vonage, along with many others, have drawn millions of users away from traditional landline telephone service. On the wireless side, VoIP calling was delayed until wireless telephones were powerful enough to manage both the WiFi connection and the VoIP software. Today some wireless telephones have WiFi and VoIP capability, and as a result, wireless carriers are beginning to see the same loss of customers to the much cheaper VoIP service as the wireline companies first saw. Inventors have even begun to establish broad networks of VoIP service by creating “mesh” networks that allow the short-range WiFi calls to be relayed from one site to another over long distances, thus avoiding more and more of the traditional telephone system. The practical and commercial difficulty of establishing links among many unrelated WiFi providers, however, hinders the development of WiFi VoIP as a replacement for existing telephone systems. For the 2.5 billion mobile telephone users around the world, WiMax is the perfect technological complement to VoIP, making it a serious challenger to wireline and wireless companies. WiMax has a longer range and much higher speed than WiFi, so WiMax needs fewer antennas than WiFi and delivers better service. The cost savings and performance improvements mean that WiMax with VoIP paves the way for the creation of the mobile Internet and a new Internet-based telephone system. Technological advances, though, do not easily become standards in mature industries. Despite all the momentum of the WiMax standard and its apparent efficiency and business logic, today there is no major WiMax company, much less a nationwide system. Technical standards are still being developed, and any WiMax network would require new hardware, new business operations, and standards for exchange of billing and payment information. Financial factors also slow the adoption of new technologies. Wireless companies have invested billions of dollars in spectrum licenses, software licenses, switches, towers, and radios. A high-capacity, low-cost, unregulated Web-based telephone system inevitably would attract customers of the existing companies; therefore, WiMax raises the specter of shrinking businesses, declining stock prices, and industry consolidation. Existing telecommunications companies naturally will seek to protect existing markets, jobs, and investments. Telecommunications-industry financial issues often find their way to policy-makers, and the telecommunications industry has long experience in protecting its business in Congress and before the FCC. Congress and the FCC may soon face, in other words, a mix of old and new policy questions involving historical common-carriage rules, spectrum-allocation policy, and network neutrality. NEUTRAL OR NOT? Net neutrality is important to a potential WiMax network that could have millions of its customers surfing the Internet and making VoIP calls from their wireless devices. Net neutrality proponents argue that such users would pay for Internet access through their accounts with an Internet service provider (ISP). ISPs in turn pay the owners of the Internet’s physical infrastructure for their customers’ use of the wires and connections. On the other hand, the owners of the Internet’s infrastructure, such as AT&T and Verizon, argue that they have the right to charge not only the ISPs for access but also the ISPs’ customers and content providers if those customers or providers are heavy users of the infrastructure. As an Internet-based enterprise, a WiMax communications network would find its profits directly affected by the amount it needed to pay for use of the Internet. The stakes for a WiMax operator would be especially high when the company depended on use of networks owned by AT&T or Verizon, which both operate wireless and wireline telephone businesses that could be threatened by WiMax. A new WiMax operator might therefore seek regulatory protection to ensure nondiscriminatory access to Internet infrastructure, treating its competitors as common carriers in the traditional regulatory model. The entry of WiMax could lead to a repeat of many battles first fought between incumbent providers and the new telephone companies that were encouraged to enter the telecommunications market after the Telecommunications Act of 1996 was passed. FCC spectrum policy also would have to address a WiMax network. Today the FCC auctions the rights to exclusive use of certain bands of the radio spectrum, with some large swaths of spectrum being left unlicensed. The unlicensed bands, like those used for WiFi, are free to all users and are subject to very few rules. A WiMax system could be based on the expensive licensed spectrum, but it also could work, like WiFi, in unlicensed spectrum bands. As computer chips increase in power, they will be able to prevent interference among multiple users in the unlicensed spectrum by directing signals to unused spectrum. The ability of computers to choose spectrum not only advances stated FCC policy to make more efficient use of spectrum but also makes the unlicensed spectrum more attractive for WiMax communications. Moreover, since lower radio frequencies are better suited for wireless and mobile communications, some future WiMax player might express interest in using unlicensed spectrum in the lower bands. For example, television broadcasters are scheduled to abandon a large block of spectrum in the 700 MHz band as they shift to digital transmissions. The abandoned spectrum is ideal for mobile communications, and it has long been sought by the wireless companies and other potential users. The 700 MHz band could serve WiMax well, and it would come as no surprise to see wireless companies oppose any use, licensed or unlicensed, of the spectrum. The promises of WiMax — higher speed and better, cheaper service than present wireless systems — are a replay of the process that has been at work since the days of the telegraph, once thought to be a wonderful communications tool. The 100,000-fold increase of 3G telephones is a grand advance, but the industry and its consumers will continue to move forward by adopting WiMax with its data rates of 20 million bits per second and more. While technology and consumer demand race ahead, the telecommunications industry, Congress, and the FCC will have to find ways to accommodate the financial, technical, and political disruptions of WiMax technology.
George M. Foote leads the telecommunications practice at Bracewell & Giuliani and is based in the D.C. office

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