Sprint Pursuing Bundled Broadband Strategy
By Evan Blackwell
from the June 4, 2001 issue of Broadband Week
KANSAS CITY -- When long distance power Sprint Corp. jumped into the consumer broadband world in with the 1999 launch of its bundled product called ION, the company was convinced it was sitting on a gold mine.
Nearly two years later, the broadband sector and Sprint's own ambitious broadband plans have taken new shapes.
By adding new layers to ION, and slowly expanding into the fixed wireless business via its Broadband Direct service, Kansas City-based Sprint remains confident it can play in the broadband market aimed at consumers and small to mid-sized businesses.
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KANSAS CITY -- Besides new permutations of the voice and data packages offered under its ION product umbrella, Sprint Corp. is looking to other possible enhancements to the ION service lineup.
Applications such as home networking (already available) and possibly video-on-demand --currently still in the exploration stage--are enhanced services the carrier sees as ways of boosting ION subscribership and creating ancillary revenue potential from the existing customer base.
"We never looked at ION as a point-to-point solution," says Jeff Luther, director of product management in Sprint's consumer broadband wireline division. "You have to look at how customers can proliferate the broadband capability throughout the home, which is why we pay so much attention to the home gateway device and home networking."
The ION home or business gateway connects the customer premise via ADSL to Sprint's ATM network, and provides multiple phone and Ethernet ports plus the ADSL modem and a battery power backup.
Ownership of the network means Sprint can offer such network-based subscription capabilities as firewall protection that eventually will extend to all devices linked to the specific customer: PC, wireless-connected laptop and handheld devices such as Web phones or PDAs.
Inside the premise the company offers an optional local area network setup based on home phoneline networking technology, the key element for distributing the broadband connection and creating new product and service opportunities
One challenge inherent in that scenario: Network management and troubleshooting in an era where problems with an interior CPE may result in lengthy customer service calls or possibly even a truck roll.
Luther says Sprint is working with outside vendors that want to either embed troubleshooting tools into the gateway, the network or the end-user device to streamline service management. "The day where the CSR can peer into the home LAN is not that far off, because there are a lot of third party vendors who see these needs and want to create solutions," Luther says.
The company also is looking heavily into third-party applications--software for rent, network storage and automatic data backup, to name several that might provide value to broadband customers.
Software on demand so far has been focused on business customers, "but there's an opportunity on the residential side to stream games and productivity software," Luther notes. Sprint already is working with several vendors such as Into Networks and MediaStation, providers of online gaming and entertainment software.
The company also is looking hard at online audio and video delivery, but hasn't yet decided whether there's a market for it. Luther notes the complicated licensing and retail relationships tied to delivery of that content from record labels and movie studios as two factors that must be resolved, along with technical aspects of such elements as digital set-top boxes.
Trials are underway although Sprint isn't ready to talk about details yet.
"It's just one of those things that's not quite ready for prime time," Luther says. "We're not rushing to judgment like some of the other providers, who are quite frankly spending a lot of money and not getting a lot for it."
-- Broadband Week Staff
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Confidence will be crucial going forward, as Sprint like other voice-oriented national carriers sees continuing serious erosion in its traditional sources of revenue. Reflecting the decline of businesses associated with long distance, Sprint recently reduced the operating cash flow forecast for its wireline operations and indicated that revenue for the full year will grow only at a low single-digit percentage rate over 2000.
That puts even more importance on new sectors such as broadband, where Sprint wants to be seen as a provider of premium advanced services, which eventually will include ancillary products such as home networking and possibly video programming over copper and fiber.
ION is its flagship in that arena, offering what Sprint contends remains a unique palette of converged voice and broadband Internet services over a single connection, with customer-configured bandwidth.
"The upside to the ION architecture is limitless," says Jeff Luther, Sprint's director of broadband applications for the company's national consumer organization. It's certainly invented a realm of possibilities."
ION connects the customer premise through a gateway--which also has the functionality enabling the customer to allocate bandwidth among voice and data applications--that connects via asymmetric DSL to the Sprint network. Long distance and Internet traffic travel over Sprint's ATM backbone.
Sprint executives acknowledge that deployment numbers have not been exactly mass market, a situation that has raised criticism from some analysts who follow the company. One reason might be that ION remains a high-end product, priced at a premium to compete with ADSL options offering similar bandwidth.
But that differential is changing, and not just because competitors have been raising DSL subscriber fees. Sprint has revamped ION into several service variations designed to address a different level of technology-savvy, "communications intensive," customer, the market Sprint has targeted as its niche.
In several markets, Sprint long distance customers can start small with "ION direct," which offers simple high-speed Internet access at $44.99 a month. The customer can then graduate up to the "ION xt" series of products, which can add different layers of local and long distance phone service that can go as high as $149.99 a month for up to four phone lines and 750 minutes of domestic long distance.
Sprint also has begun offering "Sprint ION Home LAN," which brings home phoneline networking into the product mix.
Layering on additional products and services such as networking are central to Sprint's ION vision, that the product goes beyond simple transport to include applications, broadband content and other aspects that will differentiate the service and create value that supports its premium price, executives say.
"Do you get to consumers by just pushing speed or access? The answer is no," says Mark Bolar, Sprint's director of ION product management. "It's a diverse market today, and there's got to be other things you can do. With ION, we can adjust bandwidth to suit the customer's needs."
Sprint, like almost everyone in the market, continues falling short of its installation plans. But demand remains strong, with executives saying that ION has hit all the necessary sales objectives in its current cities, which include Kansas City, Dallas, Phoenix, Denver, Los Angeles and San Diego.
As a less-complicated offshoot of ION, Sprint rolled out its newest broadband service in April. Sprint Business DSL will be targeted at small business customers that aren't quite ready to take on all the layers of ION. The service will be powered by the ION infrastructure, and will be a standard ADSL product with 1.5 megabits per second downstream and 384 kilobits per second upstream connectivity.
"Some customers don't want to switch tier voice services, for whatever reason," says Kirk Heinlein, a group manager with Sprint Business. "So we launched Sprint Business DSL as a lower cost alternative to T1 access."
The carrier also is trying to expand ION takeup by extending its footprint. As of the end of the first quarter Sprint says it had installed DSL equipment in more than 1,100 central offices in 45 markets, and will reach more than 2,000 COs in 86 markets by year's end. That, it says, will put 18 million homes and 3 million business locations in ION's footprint.
Sprint's two-way fixed wireless service, Broadband Direct, will be launched to business customers in more than a dozen markets by the end of the year, joining San Francisco, Phoenix, Denver, Houston and Detroit. The company has slowed its earlier plans for the deployments in order to get its hands on near line-of-sight receiving gear that remains in the testing phase.
However for all the optimism and plans for the future, Sprint is struggling in the present just like others in the telecom industry. The company set the tone for the spring season of first quarter financial numbers as the first large carrier to release the figures in mid-April. Sprint's data revenues grew by only 6 percent in the first quarter due to the weak economy, far less than expected.
Sprint's more recent reduced earnings forecast issued in May followed earlier downgrades by many analysts who already had sliced their expectations for its Internet revenue growth in half. Peter Jarich, director of broadband research at The Strategis Group, says Sprint and the other long distance powers like AT&T and WorldCom all are suffering from the same problem.
"All of the long distance carriers would be in a much safer position from being bought if they hadn't spun off their wireless units," Jarich says. "Now they all have one high-flying division, and another Internet division that's being dragged down by the shrinking long distance margins."
But Jarich says Sprint still has positioned itself as an innovator and trendsetter. The evolution of ION seems to make sense with the current market pressures, and the Broadband Direct program has put Sprint in an early position of leadership in deployments among MMDS providers.
"They're doing a good job of evolving and they've been smart about it," Jarich says. "Still, I don't think it's going to take some genius technology to be successful in broadband. You just have to find the right way to execute."
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