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RealTime IT News

Sprint Takes $1.1 Billion Leap Into Future

Sprint is taking on a $1.1 billion gamble with its announcement Monday to let Nortel Networks upgrade their local telephone network to provide asynchronous transfer mode (ATM) packet switching technology, opening up the door to high-quality, data-reliant Internet services.

It's an apparent shift in strategy, as Sprint gives up on one telecommunications initiative in favor of another.

The company's local and long-distance entity, which has seen much of its revenues disappear under its feet the past few years, is pinning its hopes on providing lucrative broadband data services to businesses and small enterprises next year.

These services include providing next-generation applications like voice and video over IP conferencing, virtual private networking (VPN) and digital subscriber line (DSL) service, bundled with its existing local telephone service.

According to Mike Fuller, Sprint local telecommunications division president, the Nortel equipment frees up Sprint's 8.3 million access lines to a significantly larger number of connections at one time, allowing the carrier to carry more traffic (i.e., paying customers) on its network.

"Packetization not only makes the network simpler and more cost-effective, it also opens the door to new services that can be run across existing telephone lines,'' Fuller said. "The conversion from the existing switched network to a packet switched network over the next eight years provides Sprint with product and service capabilities that will enable us to be even more competitive in the ever-changing telecommunications marketplace."

The first phase of its evolution begins January, 2003, when roughly 3.6 million of its access lines are converted to Nortel's line of softswitches and gateways. The four-year project is expected to begin in the fourth quarter of 2001, when Nortel starts shipping out equipment.

Sprint expects to begin selling the high-speed services to its customer base sometime in 2002 to select markets as it begins its heavy-duty conversion process in 2003, when Nortel starts shipping the equipment nationwide.

Digital circuit switching, the network protocol used by Sprint today, is a quickly vanishing breed of technology when compared to packet switching.

Circuit switching, while providing a rock-solid connection between two points, ties up that one telephone line exclusively for the extent of the connection. Packet switching, on the other hand, allows information to travel in packets, allowing users to get away with a simultaneous telephone and data connection.

Carriers have been loath to incorporate the new technology into their networks, since packet-switching is inherently less reliable than circuit switching. But recent advances in gateway and softswitch technologies have opened the door to a "constant" packet-switched network that won't drop essential data and bring down the cost to do business, said Frank Dunn, Nortel president and chief executive officer.

"This will position Sprint to offer -- more cost-effectively than ever before -- all of the high-quality residential and business telephone services its customers have come to expect," Dunn said. "In addition, it will enable Sprint to offer its high-speed Internet services to more people than ever before, and to establish a foundation for delivery of future services like desktop video conferencing and video caller ID."

Sprint has long been known as a long-distance carrier, one of the giants in the field with competitors like AT&T . But dwindling market share in the sector as competitors waged pricing wars to bring pricing down caused many to look for different profit-generating activities.

As early as last year, Sprint's FON Group decided to back away from long-distance and focus on data services like DSL and VOIP.

It's been a painful process culminating in their third quarter 2001 performance announced Oct. 17. Revenues slid down 36 percent from the previous quarter and the carrier was forced to cut 6,000 jobs.