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Archive for Wednesday, May 21, 2003

Sprint plans to expand services

Overland Park company’s push reflects changes in industry

May 21, 2003

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— Sprint Corp. is moving to sell local phone service to its cellular and long-distance customers, a belated embrace of the industry's attempts to overcome its tumult by wooing consumers with all-inclusive calling plans.

It may seem counterintuitive, but Sprint believes the local plan could develop into an effort to get more people to drop landlines and go all wireless. That strategy, described by a Sprint executive Tuesday, acknowledges the grave threat that Internet-based communications and other technologies pose to traditional landline calling.

Sprint has been test-marketing packages of local, long-distance and wireless service to customers in 35 states for several months.

The company plans to extend the packages without much fanfare, largely by adding inserts to bills to its 18 million cellular and 6 million long-distance customers, Len Lauer, head of Sprint PCS, the company's wireless division, said in an interview.

The move is designed to keep Overland Park-based Sprint competitive with telecommunications rivals that offer "bundles" of services. Sprint's top two long-distance competitors, AT&T and MCI, offer local service in many states.

Meanwhile, the Baby Bell regional phone carriers are aggressively packaging long-distance with local service, high-speed Internet access and in some cases wireless calling. Verizon Communications Inc., the main local carrier in the Northeast, surpassed Sprint last fall as the No. 3 long-distance seller in terms of customers, though Sprint remains third in revenue.

Sprint already offers local service in parts of 18 states by using network infrastructure it owns. Sprint is pulling off this expansion by leasing, as AT&T and MCI do, local phone lines owned by the regional Bell companies.

The Bells have fought to get the network-sharing requirement changed or dropped. The Federal Communications Commission ruled in February to let the system largely stand, leaving details to individual state regulators.

Lauer said that if the local network-leasing rules are phased out or made too costly for Bell rivals in a year or two, Sprint will encourage many customers to drop landline service and go entirely wireless.

An estimated 5 percent of phone customers have cut the cord and use a cell phone as their primary or only line. That is a large reason why the number of fixed access lines in the United States dropped by about 4 million between 2000 and 2002, according to FCC figures.

Lauer believes the all-wireless rate could reach 7 to 9 percent in a year and surpass 10 percent in two years, though improvements in 911 service from wireless phones are still needed.

Lauer also predicted that wireless networks will be better able than traditional landline systems to incorporate technology that converts calls to packets of data and routes them over the Internet.

Some analysts said that before Sprint talks too much about increasing wireless substitution, it needs to improve its cellular service and clear up financial problems plaguing affiliated companies that provide much of Sprint's wireless coverage.

"Anybody in this industry who tells you they know what they'll be doing in a year and a half is just blowing smoke," said Phil Jacobson of analyst firm Network Conceptions. "I think what they're doing makes perfect sense, but it's absolutely a defensive strategy. ... Without bundles these days, you're dead meat."

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