iPCS Inc. Sues to Stop Clearwire WiMax Network

Last week Sprint Nextel announced that it was partnered with Clearwire to build a high-speed WiMax network in major U.S. markets. Investors like Intel, Google, Comcast and Time Warner Cable have agreed to invest $3.2 billion in the Sprint and Clearwater partnership. The new company, called Clearwire, is slated to have over $15 billion in assets. But lawsuits filed in Illinois by iPCS subsidiaries may put the brakes on Clearwire’s plans.

Sprint is affiliated with iPCS. iPCS has 640,000 subscribers in seven states. Three of iPCS’s subsidiaries have filed suit in Cook County Circuit Court in Illinois, claiming a Clearwire service would compete with iPCS within its markets and violate an exclusivity agreement between Sprint and iPCS that goes back to 1999.

An Illinois appellate court upheld a lower court ruling that found Sprint’s 2005 purchase of Nextel Communications violated its exclusivity agreement with iPCS. The court ordered Sprint to divest itself of all Nextel assets in iPCS territory. Sprint is currently appealing that decision, but unless the appellate court is overturned by a higher court, it looks as though Clearwater’s move may be blocked in iPCS coverage areas subject to the exclusivity agreement.

Last week, Sprint filed a preemptive lawsuit in the Delaware Chancery Court. Sprint is asking the Delaware court for a declaratory judgment ruling that Sprint’s affiliate agreement with iPCS doesn’t prevent the new Clearwire company from competing in iPCS territory because of Clearwire’s association with Sprint.

There are a lot of juicy legal issues to sort out in all of this but unless you are a legal scholar you probably don’t care. All this may end up in some sort of billion dollar settlement between Sprint and iPCS, or it could languish in the courts for years, stunting the growth of the Clearwire project.