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Sprint to new phone world
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June 2, 1998: 6:04 p.m. ET
No. 3 long-distance carrier aims at local service with high-speed system
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NEW YORK (CNNfn) - In the combat-ridden march toward the telecommunications revolution, Sprint Corp. on Tuesday unveiled a $2 billion system that will allow users to make calls, send faxes and roam the Internet at the same time on a single phone line.
While most phone companies are scrambling to modernize their systems, industry watchers said Sprint may for now have a leg up with the technology.
In its new vision, which Westwood, Kan.-based company hopes to transform the phone business -- and its billing -- from one based on the distance of a call to the bandwidth that a customer demands.
"This will be available in your home, you can use it only as you need it and pay for it only as you use it," said Sprint Chief Executive Officer and Chairman William T. Esrey (210K WAV) or (211K AIFF).
But Sprint's vision, based on a hope to blur the distinction between local and long-distance service, may be cosmetic.
"None of this technology, over time, is proprietary," said Scott Cleland, a telecom analyst at the brokerage firm Legg Mason. "What's significant here is that Sprint says it's ahead."
Most phone giants are spending billions in a race to upgrade outdated networks that often rely on technology not so far removed from the manual switchboard operator of yore.
All from existing phone lines, the new Sprint technology will offer connection speeds up to 100 times faster than current modems and will lower long-distance prices by 70 percent, the company said.
The new service will be rolled out as part of a partnership with networking equipment maker Cisco Systems Inc. and Bellcore, which will make software for the venture.
The system is expected to be available first to businesses by the middle of next year and to consumers later in 1999.
But for all the frills and innovation Sprint touts, its route to the telecom revolution isn't as important to consumers, experts said.
"As long as customers get the service, they don't care how it works," said Jeffrey Kagan, a telecom expert at Kagan & Associates. "It's like a Ford or a Chevy, what's important is that it gets you there."
And there may be glitches along the road.
Sprint said it has come to agreements with many local phone service providers, such as GTE Corp., that will allow the long-distance company to reach individual homes with the new technology.
Any long-distance provider that wants to tap the local market ultimately has to rely on local phone companies, which often have a lock on the so-called "last mile" between switching stations and homes or offices.
Sprint's own foray into the California market recently fell flat because of troubles with local phone companies there, LeMay said.
"There will be bugs with the Baby Bells up front," Kagan said. "I expect them to work out the bugs eventually."
And whether consumers will bite is still a key question mark facing the so-called "Integrated On-Demand Network" system. It will be built around a textbook-sized electronic gadget for home users -- and Sprint hasn't yet decided who will pay for the contraption.
Ronald LeMay, Sprint's president and chief operating officer, side-stepped reports that the gadget may cost about $200, insisting no price has yet been set.
Sprint has earmarked an extra $400 million to launch the technology, with earnings per share to be diluted by 20 to 25 cents in 1998 and by 60 cents a share in 1999 and 2000. After that, earnings are expected to be positive.
"The benefits far outweigh the costs," LeMay said. Sprint expects its customer maintenance costs to fall by half, he said.
A top Sprint competitor had a muted response about the Tuesday unveiling. "It's interesting, but it is hard for us to see what is new and different," said MCI Communications Inc. spokesperson Leslie Aun.
As the rollout nears, Sprint said it will begin offering round-the-clock long-distance phone service at a rate of 10 cents a minute for users who pay a $4.95 monthly fee or spend at least $30 a month.
That's an improvement from the company's current deal -- 10 cents a minute only in off-peak hours. Rival AT&T Corp. offers 10 cents a minute but doesn't waive its fee, and MCI Communications Inc. charges 5 cents a minute on Sundays.
Shares of Sprint (FON) closed up 1/2 at 72-7/16 early Tuesday.
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