Clearwire's WiMAX Launch

Clearwire's mobile broadband service performed well at top speeds during its debut in Portland, Ore. But will consumers want to shell out for the service?

By Olga Kharif

You could hardly turn around in Portland, Ore., in recent weeks without bumping into ads for the new mobile broadband service from Clearwire (CLWR). Product reps demoed the service at at least one college alumni association holiday party. Clearwire placed ads on TV and in The Oregonian. And at an over-the-top Jan. 6 launch, right in front of the swanky RiverPlace Hotel downtown, Clearwire parked a semi with a see-through trailer that housed a portable living room—complete with couch, coffee table, and what appeared to be a student hammering away on her PC. "This is not a truck," read a sign on the side of the vehicle. "It's yet another place to get super-fast mobile Internet."

The question is, will consumers elsewhere in the city opt to get super-fast mobile Internet from Clearwire? And more important, does Clearwire have the firepower it needs to roll out the service in other parts of the U.S.?

Skeptical Investors Drive Down Stock Price

Clearwire's Clear relies on so-called WiMAX technology that, like Wi-Fi, lets users log on to the Internet without wires. But unlike Wi-Fi, which operates in limited areas such as a home or coffee shop, Clear provides wireless Web access over a much larger area—in the case of Portland, about 700 square miles. So using a Clear-enabled device, users could stay logged on to the Internet while riding in a car or other vehicle—all the while enjoying roughly the same download speeds as with a DSL line at home.

It's an attractive proposition, but Clearwire faces strong, entrenched competition from such cash-rich incumbents as Verizon (VZ), AT&T (T), and Comcast (CMCSA). And it's trying to do so at a time when consumers are cutting back on spending—not looking for new ways to shell out. In a sign of investors' concern over Clearwire's prospects, the shares have lost 85% of their value since reaching an all-time high of 33.3 a year and a half ago. On Jan. 7, one of Clearwire's biggest investors, Intel (INTC), said it would incur fourth-quarter costs of $950 million to reflect the decline in Clearwire's value. Shares of Clearwire fell 2.16%, to 4.98, on Jan. 7.

Clearwire is not letting the pessimism dampen its ambitions for Portland. The company aims to sign up 25% of the 1.7 million users covered by its network in the Portland area. "We are seeing very robust demand," Clearwire Chief Executive Ben Wolff tells BusinessWeek.com. "I am very pleased with the early days."

Speedy Downloads, Some Glitches

Consumers, too, may be pleased with the performance of Clear's network. During a recent test in downtown Portland, the service logged download speeds of up to 7 megabits per second and upload speeds of 2.5 megabits per second. The mobile Internet service from Verizon Wireless offers download speeds of 600 Kbps to 1.4 Mbps and average upload speeds of 500 Kbps to 800 Kbps, according to the company—though it's also cheaper in some cases. Verizon Wireless charges as little as $40 a month for wireless broadband access, while Clear costs $30 a month for occasional usage to $50 a month for unlimited use.

Like any new technology, Clear isn't immune to glitches. During the test, an HD movie streaming into a moving car from Hulu.com froze slightly a couple of times; still, it performed far better than comparable media would over the comparable services from AT&T and Verizon Wireless. Even Qualcomm's (QCOM) MediaFlo, designed for watching video on mobile devices, doesn't work that well in a moving vehicle.