The deal between Sprint and Clearwire, the one that had hung up in the past, finally closed and brought along a bunch of partners ranging from Intel and Google to Time-Warner and Comcast. The deal got good PR support too, but all the partners and press in the world can’t answer the question of whether there is really business here at all, and whether the strange alliance that’s now been formed can get the business that is there.

WiMAX is coming in at the very moment its star competitor, municipal WiFi, seems to be bowing out. The Earthlink deal in Philadelphia has died, and MetroFi has announced it wants to close a lot of its networks and possibly sell itself as an alternative to just sinking. All of this begs the question of why WiMAX could produce a different financial result, and though it could do that it’s not a slam dunk by any means.

On the surface, WiMAX seems an arrestingly good idea. It’s a wireless broadband technology that can link to homes as a competitor to wireline, it’s good for mobile and portable data at high speeds, you can make voice calls on it, the range is up to about 20 miles … what else could you want? The problem is that the benefits of WiMAX aren’t free; you have to establish a business framework in which the limitations of WiMAX, which are the limits of any wireless broadband technology, don’t stall deployment and success.

All wireless broadband has a common challenge, which is how it deals with the Internet. There is no data service or content service you can name that holds customer interest except Internet access, and yet the Internet poses two problems for wireless operators. First, it opens a pipeline for over-the-top players to deliver stuff that would compete with walled-garden content offerings. That reduces the profit of broadband wireless. Second, since most Internet content is available at no additional charge, there is no financial barrier to over-use other than the wireless network’s own pricing plan.

Here’s the thing. Many reports say that municipal Wi-Fi was plagued by snail-rate performance. One user of the Philadelphia system told me that dial-up was faster. WiMAX and Wi-Fi are both 50 Mbps technologies, meaning that everyone in the service area of a cell shares that capacity. When one cell user starts a YouTube download it draws from the capacity pool, and if enough do that there’s not enough left to create a satisfactory experience for anyone else in that cell. WiMAX can support much larger cells than Wi-Fi, but the larger number of people inside a bigger cell creates a larger population to consume the bandwidth. That constrains cell size, and thus limits WiMAX benefits. The only solution is some discipline on usage.

Is this a challenge that WiMAX can meet? As a “new” service, WiMAX could set its own more realistic boundaries on usage, but with Google pushing Android appliances and touting net neutrality, it’s hard to see how the Clearwire Coalition could get consensus from its partners on this one. Particularly when the media tends to tout 4G as beneficial for its blazing speed in content and downloads, both things that could easily kill the capacity of a cell. Think about it; you believe you will be able to download streaming HD from “the Internet,” right? Say that’s a 10 Mbps proposition with almost continuous usage. Four or five such users would saturate WiMAX capacity. To prevent that, you could shrink the cells to something around the size of four or five households. Now, how do you get the broadband connection to each of the cells? The backhaul problem starts to look like you’re deploying wireline broadband, only to cells instead of to households.

There is no way that WiMAX can be competitive to wireline broadband where the latter can be economically deployed. Sure, there are second- and third-world applications of WiMAX where very low population density means the number of people per cell will be low, and where wireline services aren’t available. There are likely similar rural opportunity examples in industrial nations, including the U.S. But WiMAX isn’t going to cover the city of San Francisco with twenty-odd cells and generate a service experience that will keep Clearwire and WiMAX credible if the standard of performance is to be as good as wireline.

The value of WiMAX has to be in doing something it can do uniquely well, not doing something that other wireline technologies do better. Intel’s notion of wireless data to automobiles, or the notion of portable access to email and “light web applications” are examples of the kind of application that has WiMAX written all over it. If you applied the mobile video broadcast standard DVB-H to WiMAX as an “application layer” you could support mobile-quality IPTV. You could use WiMAX to deliver the channel guides to set-top boxes, to deliver commercials for insertion at the home, and of course to support the hospitality hot-spot applications that WiFi now supports. In short, there are a lot of very useful applications for WiMAX.

The consortium that made the Clearwire deal possible may be its undoing. WiMAX needs laser focus to succeed, and there are players pulling on Clearwire in a half-dozen directions. Even if every single partner knows the right answer, the only answer, for WiMAX there is no assurance that answer fits in the business framework of each player. If it doesn’t, Clearwire will fall apart and WiMAX will become the premier strategy for broadband to thin markets. We should challenge each of the Clearwire partners to face reality, or we face a loss of the value WiMAX could really bring us.

Tom Nolle is principal of CIMI Corp. and can be reached at