The closely watched bid from Sprint Nextel and Clearwire Corp. to offer high-speed mobile Internet service based on WiMAX technology hit a legal stumbling block today when a Sprint affiliate that covers much of the Midwest won a court battle over the proposed merger.

 

Officials at iPCS, Inc., a Schaumburg, Illinois-based company, say the Circuit Court of Cook County denied Sprint’s motion seeking to dismiss complaints that the merger would violate their exclusivity arrangement. iPCS (News - Alert) essentially believes that it has the exclusive right to sell Sprint-brand wireless mobility communications network products and services in its 80-odd markets.

 

Timothy M. Yager, president and chief executive officer of iPCS, said he was “very pleased.”

 

“Technological advances are central to any wireless business and we are confident that after the evidence is presented in this case the Court will uphold the business deal that we reached with Sprint over ten years ago to ‘be Sprint’ in our exclusive territories and offer the most advanced seamless wireless nationwide network to our subscribers,” Yager said. “The Illinois courts have consistently upheld our contractual rights and we are confident they will continue to do so.”

 

A Clearwire spokesperson declined to comment when reached by TMCnet.

 

Clearwire shareholders late last year approved a plan that would see their company merge with Sprint Nextel’s (News - Alert) wireless broadband network. Specifically, the landmark deal would combine Clearwire’s personal broadband and mobile Internet services with Sprint’s mobile WiMAX business.

 

As part of the deal, Clearwire approved an investment of $3.2 billion by Intel, Google, Comcast, Time Warner (News - Alert) Cable, Bright House Networks and Trilogy Partners, to form the new company – a move that the company has said would lead to “paving the way for a new era in mobile Internet services in the (United States).”

 

The IT and telecom media spaces were abuzz with the news when Sprint and Clearwire resurrected their WiMAX plans last summer.

 

At the time, analysts seemed to think that the opportunity for WiMAX was big. One market research firm, Juniper Research, forecasted that by 2013, WiMAX would displace up to 12 percent of the global DSL installed base, with deployments in the Far East set to lead the pack with better than 20 percent of the projected subscriber base.

 

As TMCnet’s Greg Galitzine (News - Alert) reported at the time, Juniper analyst Howard Wilcox said WiMAX would be especially attractive in areas where there are no wired networks, and in areas where the existing DSL speed is suboptimal.

 

“WiMAX will solve the broadband access problem for users located at the fringes of DSL coverage,” Wilcox said. “This is in fact the case in a number of developed nations such as UK, USA, Ireland and Scandinavia, and WiMAX network operators are deploying networks to address this market need. Additionally in developing countries, such as India, network operators are aiming to provide basic connectivity.”

 

But in the past several months, another 4G technology – long-term evolution or “LTE (News - Alert)” – appears to have gained ground on WiMAX.

 

For example, more than 18 operators worldwide are pursuing future broadband and wireless communications by carrying out LTE application development plans.

 

Verizon already has announced acceleration of its LTE deployment timetable, bringing the launch forward from 2010 to 2009, and that others are looking at 2011 or 2012.

 

According to ABI Senior Analyst Nadine Manjaro, NTT also is expected to deploy LTE in Japan in 2009.

 

“We forecast that by 2013 operators will spend over $8.6 billion on LTE base station infrastructure alone,” Manjaro said. “For operators that have already deployed 3G networks, LTE will be a key CAPEX driver over the next five years.”

 

That all appears to spell bad news for WiMAX – but it’s far too early to say the technology is dead or even dying.

 

Even so, today’s news is not good for Clearwire or Sprint.

 

Officials at iPCS say in their amended complaint, filed in January, that Sprint has improperly withheld 4G technology from them in connection with the Clearwire transaction, which closed in November. The amended complaint seeks, among other things, a permanent injunction enjoining Sprint from “obtaining directly or indirectly the benefits of advanced technology without providing that technology and sharing its benefits with its Affiliates.”

 

The court also ruled that the iPCS subsidiaries’ claims for relief could not include certain types of monetary relief but that, in addition to the existing claims for injunctive relief, the subsidiaries would not be prevented from making “a claim for any actual or direct damages.”

 

Yager said he’s “looking forward to Sprint’s compliance” with the ruling.

 

We’ll wait and see about that.

 

Meanwhile, the technology itself is expected to continue developing, likely signaling a period of growth down the road.

 

As Galitzine notes, carriers looking to deploy 4G technology face the same financial difficulties as the rest of us.

 

“However, one cannot lose sight of the fact that on the other side of this financial mess, one might imagine a new period of growth,” he said. “Companies that make investments in technology today might not see an immediate return however, they should take solace that the evolution to broadband wireless is going to happen sooner or later.”