As seen on USA TODAY

By Leslie Cauley

The Italian Job, a Hollywood action flick starring Charlize Theron, is streaming live to a laptop computer. Speed: about 3 megabits a second.

What makes this demonstration so unusual is that the movie is streaming in triplicate to a laptop in a Sprint minivan that’s tearing around downtown Baltimore.

“That’s better than most people can get at home,” says Sprint technician Lee Mellon, pointing to the trio of Hollywood-perfect video streams. “WiMax rocks.”

The question is: Will anybody care?

Sprint (S) is about to find out. Baltimore recently became the first city in the USA to go live with WiMax. Short for Worldwide Interoperability for Microwave Access, WiMax is a fourth-generation (4G) wireless technology that can turn whole cities into one big hot spot. Sprint has an even grander vision: It wants to turn the entire USA into a mobile surfing zone.

The mobile data network is designed to cater to the needs of mobile laptop users, not cellphone users, for a fee. Because the speeds are so fast 10 megabits or better, potentially it could easily be used as a replacement for DSL or cable modem service in the home and office.

Sprint has been deploying WiMax here for months on the theory that once people get a taste for its speed, they won’t want to go back to conventional mobile networks.

Sprint’s partner in this massive undertaking is Clearwire, (CLWR) a small Seattle-based carrier that has long extolled the virtues of WiMax. The warm embrace is owed, in part, to the vision of its chairman, cellular pioneer Craig McCaw.

Sprint and Clearwire are merging WiMax assets to create a new company dedicated to the 4G technology. (The new company will also be called Clearwire.) Financial backers include Google, (GOOG) Intel (INTC) and Comcast. (CMCSA)

Ben Wolff, CEO of Clearwire he’ll also head the combined company says WiMax is good for consumers. “We’re on the cusp of giving people a brand new Internet experience” by offering true mobile broadband, he says. “WiMax is the next generation of the Internet.”

If he’s right, WiMax could wind up ushering in a new era in mobile broadband, one that is defined by seamless performance and super-fast Internet cruising speeds. That could have a dramatic impact on the expectations of wireless consumers, putting pressure on big rivals to improve their game.

If Wolff is wrong, WiMax could become just another example of how difficult it is to change the status quo in a business dominated by giants, particularly when it comes to a big-money game such as wireless.

A contest ahead

While rivals keep an eye peeled on Baltimore, Sprint and Clearwire are moving ahead. WiMax networks in five markets Chicago, Portland, Ore., Philadelphia, Washington and Dallas/Fort Worth will go live by early 2009, Wolff says.

By the end of 2009, WiMax will be available to 60 million to 80 million consumers; by 2010, up to 140 million, he predicts. As early as 2011, assuming consumer demand develops, WiMax could be available to more than 200 million.

But it all starts with Baltimore. The service is currently marketed as “Xohm,” Sprint’s WiMax brand name. That will probably change after the merger closes.

To use Xohm, for now, you’ll need a special WiMax air card or modem. Cost: Around $45. (Discounts may apply, depending how much you buy.) Prices start at $10 for a day pass good for 24 hours worth of unlimited usage. Monthly service starts at $30. Contracts are not required, or even available.

Speed is the real draw. Sprint is promising average speeds of 2 to 4 megabits, though surfing speeds can rocket to 10 megabits or more. The technology itself is capable of higher speeds.

AT&T (T) and Verizon (VZ) aren’t exactly sitting on their hands. Both have announced plans to upgrade their 3G networks to a 4G technology known as LTE, or “Long Term Evolution.” LTE, like WiMax, offers significantly better performance.

Moving to LTE will be expensive and time-consuming, however. For that reason, LTE-based services probably won’t hit the market until 2012 at the earliest, predicts Jane Zweig, CEO of The Shosteck Group, which tracks the wireless industry.

Shahid Kahn, a senior partner with IBB Consulting in Princeton, N.J., says consumers are the biggest beneficiaries of the coming contest between WiMax and LTE.

“In the long term, consumers could come out as winners, because they’ll have better services, better devices and better prices,” he says.

That said, Kahn thinks Sprint and Clearwire have a tough slog ahead. Launching service in Baltimore “is just the beginning of the battle,” he says. “They still have to market to consumers and convince them (that WiMax) is better” than conventional 3G offerings, which, while not as fast, still deliver good performance. “It’s a high hurdle.”

Capacity builds confidence

Roger Entner, a senior vice president at Nielsen IAG, says one of the biggest hurdles is lack of ubiquity. After two years of chipping away at it, Sprint has only upgraded about 1,300 of its 65,000 cell sites nationwide. Before WiMax can claim national status, it will have to upgrade another 34,000 or so. That will take at least two years.

“That’s a lifetime in the wireless business,” Entner says.

Charles Golvin, a senior wireless analyst at Forrester, agrees. “The lack of ubiquitous service that’s going to be a big disconnect for many consumers.”

Wolff says he’s not worried. “Once you get used to that (WiMax) experience, it’ll be like a broadband customer trying to go back to dial-up.”

Intel, the big chipmaker, is working with a number of hardware makers to develop a crush of WiMax-enabled devices. The result: More than 100 WiMax-enabled devices air cards, PCs and residential modems are now in the final stages of certification. They’ll start hitting the market later this year.

Over time, Wolff says the plan is have WiMax built into laptops and PCs, as well as consumer products such as cameras and even automobiles. Think video streaming to moving cars.

The real sweet spot, however, is spectrum. Sprint and Clearwire own 150 megahertz enough to provide high-performance WiMax from Maine to Malibu of 4G spectrum. (The entire load will go to the new Clearwire.) AT&T and Verizon own only about 25 megahertz apiece of 4G spectrum.

Barry West, Xohm president, says that big difference is the main reason he doesn’t worry too much about competitors. “I don’t think they can do anything” to counter-punch if WiMax takes off, he says.

Why so confident? One word: capacity. In the wireless world, surfing speed is determined by capacity, and capacity is determined by the amount of wireless spectrum you own.

Take Baltimore. The only reason Xohm can handle bandwidth-guzzling applications such as high-definition video and “peer-to-peer” file sharing is due to the massive amount of capacity that Sprint has at its disposal. Most wireless carriers wouldn’t even attempt that. Not enough juice.

Talking up WiMax is one thing; building a commercial-grade network that can support millions of users is quite another. In Baltimore, work has been ongoing for two long years. So far, Sprint says, it has upgraded only about 170 of the 400 local cell sites.

There are the usual headaches zoning permits, local ordinances and the like. And unusual ones, too. Crews discovered that cellphone towers provide an ideal nesting environment for ospreys, a hunting bird common in these parts. In keeping with U.S. Fish and Wildlife guidelines, crews take care to not disturb the nests. “We just have to wait them out,” says Gary Smith, a local Sprint field supervisor.

Mellon, who’s been testing the network here for weeks, is betting all the hard work will pay off.

“It’s a good product,” he says, steadying the laptop as colleague Eliana Castro steers the Sprint minivan around another corner. “We’ve thrown just about everything we can think of at it, and we know it works; we see how it works.” He quickly adds: “We’re just hoping other people see the same thing we do.”