Cisco Systems has acquired a stake in a company that sells components for Smart Grids, intelligent systems for monitoring and managing power distribution infrastructure. The deal could have an impact on the future of fourth generation mobile networking technology WiMax.

Grid Net, whose other investors include GE and Intel and whose CEO is a former Cisco employee, offers utility providers network management software and communications infrastructure with which to track customer usage and automate power distribution.

The California-based company is unusual in that its communications products, which perform such tasks as transmitting readings from in-home meters, are based on the WiMax wireless communications standard. Most systems are based on either proprietary or mobile telephony networks.

Grid Net says the benefits of using WiMax in its smart grid products include the fact that the networking standard already has radio spectrum allocated to it – in the US, at least.

In the UK, however, the situation is complicated by the fact that the allocation of radio spectrum to so-called 4G standards has been postponed by a dispute over spectrum ‘refarming’.

Last year, Smart Grid infrastructure provider SilverSpring – whose technology uses a wireless mesh, not WiMax, to communicate between devices – called on the UK’s telecommunications watchdog Ofcom to assign specific radio frequency spectrum for smart grid systems.

“None of the communications alternatives currently available in the UK will fully meet the [requirements of Smart Grid],” the company wrote at the time. “Conversations with utilities suggest that the lack of viable communications options is holding back deployment of Smart Grid in the UK, while other countries move ahead aggressively.”   

Nevertheless, Cisco’s investment suggests WiMax may have a future despite comments from such players as Alcatel-Lucent, which said in February that the industry had taken "a clear direction taken by the industry towards [alternative 4G networking standard] LTE".

Cisco was initially dismissive of WiMax, which allows high volumes of data to be broadcast wirelessly. In 2005, Cisco’s then CTO Charles Giancarlo declared: “We do not believe there is a good business model for WiMax”.

It appeared to reverse that position in 2007 when it acquired WiMax equipment manufacturer Navini Networks for $330 million.

But earlier this month, the company announced that it would cease manufacture of WiMax base stations, although it pledged to continue selling components for the ‘edge and core of the network’. Despite Cisco’s assertion that it will continue to be a “big player in the WiMAX space”, the move was seen by some as an endorsement for LTE.

In October 2009, Cisco acquired Starent Networks for $2.9 billion, a move that strengthened its LTE offerings.