Sprint Expanding Internet Phone Service
Posted on: Monday, 2 August 2004, 06:00 CDT
KANSAS CITY, Mo. - Sprint Corp. on Monday announced its second Internet phone service partner, this time trying to establish a niche with small- and medium-sized cable companies.
USA Companies, a Kearney, Neb., cable provider with 63,000 customers in Nebraska, California and Montana, said it hopes to have the service in subscribers' homes by early next year.
Terms of the five-year deal were not disclosed.
In December, Time Warner Cable, with 11 million customers, announced that it would use both Sprint and MCI Inc. to provide phone service across the country through technology the industry calls voice-over-Internet protocol.
More and more cable companies want to get into phone service as a way to remain competitive, especially as satellite companies and even local telephone carriers are snatching away customers by offering video and high-speed Internet capability.
"It's a free-for-all land grab in the home telephone market and Sprint is just providing the ammo," said Greg Gorbatenko, a telecommunications analyst for Marquis Investment Research.
In voice-over-Internet, customers make calls with their regular phones, but the calls travel as packets of data over the Internet instead of on a traditional telephone line.
Once the data reaches a switching station, the call is transferred to Sprint's phone network and into the format that reaches most phone users.
The biggest problem facing small carriers, such as USA Companies, is that they lack the money to build a telephone network.
Sprint, however, already owns its own local and long-distance service networks, much of which lie dormant in the evenings when businesses are closed but many residential customers want to make calls.
"Prior to the last year, getting into voice was considered capital-intensive and out of reach for small- and medium-level operators," said Mark Bishop, senior vice president of the 1,100-member National Cable Television Cooperative. "But the price has come down and companies like Sprint have come into the market to offer the 'back office' infrastructure to make voice possible."
Sprint is not alone in becoming a supplier for cable companies, as carriers like Level 3 have also sold the use of their infrastructure. Verizon Communications and AT&T Corp. are selling Internet phone service directly to the public, an environment Gorbatenko said Sprint should stay out of.
"Verizon is getting in the pit and slugging it out," he said. "Sprint is in the grandstands cheering them on because they'll sell the Band-Aids when the fight is over."
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