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Wizard of Wireless

Clearwire?s Craig McCaw is offering a new kind of broadband wireless service.

GARY VIS just wants a system that will let him communicate with his cows. Craig McCaw may have it.

McCaw, the maverick billionaire, has started Clearwire, a broadband wireless Internet service that has its skeptics, but may provide answers for Gary Vis. Vis is a no-nonsense manager running the operations of Edaleen Dairy, a family-owned producer and bottler of milk in the rolling farmlands near Washington's border with Canada. The company's Lynden offices are too remote for a high-speed Internet service like DSL or cable. Yet Vis needs a communication link to transmit information on everything from milk production data generated by transponders on cows, to e-mails from their offices. In nearby Bellingham, Qwest, Comcast and local carriers offer plentiful broadband. But for the rural towns that surround the city, wires abruptly stop where people - and profits - are few.

For Vis, Clearwire's system wasn't just the best choice, it was the only affordable one once it became available a year ago. Like the Wi- Fi systems available at airports and many coffee shops, Clearwire uses radio frequencies to connect computers with the Internet, at speeds (1.5Mbps) and prices ($40-$50 per month, plus $4.99 modem lease or $99 purchase) comparable to DSL and cable. But the technology dubbed WiMax operates in licensed spectrum, permitting a cleaner, more powerful signal than Wi-Fi, which typically travels about 300 feet. A single WiMax antenna can reach nearly 20 miles, at a fraction of the per-customer cost of building wireline service.

As the largest dairy farm in Whatcom County, with 2,800 cows, Edaleen serves big customers. The milk in the lattes that Olympia's politicians order at Starbucks likely came from Edaleen's barns, as does the cream that Seattle's cruise passengers pour. "If you're working with someone like the Heinz Corporation," says Vis, "they want to communicate by e-mail, period. If we don't have that, it can jeopardize our ability to do business." Serving its wholesale customers often means exchanging digital photos, for which, Vis snorts, "dial-up doesn't work too well."

That perceived need for universal access to the Internet encouraged the venture arms of Intel and Motorola to invest a combined $900 million in Clearwire in June, underscoring the hardware company's commitment to WiMax. Additional debt financing increased Clearwire's capital pool to $1.1 billion, about four times the amount it expected to raise from an IPO.

Soon after the investments were secured, Sprint Nextel, which controls an estimated 75 percent of needed spectrum licenses, announced plans to spend $3 billion over the next two years to build a rival nationwide WiMax network. While the two systems would compete in some markets, both companies will benefit from the spread of the technology.

Clearwire's co-President Perry Saterlee marvels, "We've had customers use this in ways we never would have imagined," including remote ATM kiosks and online service on public buses. One enterprising DJ uses the Clearwire modem to stream digital music to his portable laptop at the client's party from his home library.

But most experts note that Clearwire's significance is not in its technology. "WiMax is a big deal," says Joe Laszlo, a wireless analyst with Jupiter Research, "but it's more of a big deal in the threat of competition that wireless creates." In most markets where DSL and cable providers seldom compete for the same customer, the real effect of WiMax, he notes, will be "in keeping wireline providers honest. The big guys don't like responding to competition, but when they have to, they do."

Those competitive stresses can intensify as Clearwire expands its offering of Voice-over-Internet-Protocol (VoIP), a $20-per-month add-on that provides telephone service with unlimited long-distance calling. The growth of WiMax systems could shake things up for cellular companies as well.

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