Firms Race to Offer Access to Broad-Band Networks
Sprint’s broad-band network will undergo its first major test this spring, when it moves from a trial with a few dozen families in the tiny town of Gardner, Kan., to a 27-city roll-out in markets including Los Angeles, New York, Chicago, Dallas, Atlanta, Denver and Kansas City.
Initially, the company will target big businesses in an effort to lure these lucrative customers onto its high-speed network. Sprint, the nation’s third-largest long-distance carrier, hopes to offer its Integrated On-Demand Network, or ION, to small businesses and residential customers by next winter.
Cable and telecom companies, and more recently Internet service providers, are racing to provide business and residential customers with access to broad-band networks, which allow voice and data to travel more efficiently over the same phone line.
Last week, AT&T; announced it will launch a broad-band business network, and Pacific Bell said recently that it will lower prices and expand coverage for its high-speed service. Other providers, including cable companies such as Tele-Communications Inc., also are competing for a piece of this fledgling market.
The $2.4-billion ION relies on asynchronous transfer mode technology, which combines with Sprint’s existing fiber-optic network. ATM technology transfers data in “packets,” a system that allows for multiple uses simultaneously and is always turned on. ATM allows Internet connections up to 100 times faster than today’s 56.6-kilobit-per-second dial-up modem.
But ION will be competing with digital subscriber lines and cable modems, both high-speed networks that have been offered in limited areas for about a year and are expected to become more widely available in 1999.
“When you talk about the average consumer and walk up to their door and say, ‘You can have DSL or ATM, which do you prefer?’ You know what their answer is going to be, and that’s ‘Huh?’ ” said Boyd Peterson, an analyst with Yankee Group, a Boston-based market research firm. “If we step back for a moment and say it’s just high-speed access and that’s what consumers want, whether it’s DSL or cable is less relevant, compared to how the company positions itself in comparison to others.”
Analysts expect high-speed cable and telecom networks to capture about 14% of households by the end of this year. That could add up to a $4.2-billion market for high-speed modem sales, according to a report by Insight Research, a Parsippany, N.J.-based research firm.
When Sprint announced its ambitious plans for a high-speed network last year, it said it would locate some of its switching equipment in offices owned by the Baby Bells. Since then, Sprint has said it would build its own facilities in some areas--a move that could slow the introduction in residential markets.
But perhaps a bigger challenge for Sprint will be differentiating its service from the others. Kansas City-based Sprint is hoping business usage will help introduce ION to residential users.
“One of the reasons we’ve gotten great receptivity from the business market is that they know we’re committing to the consumer market and that it will lead to greater value for them,” said Mike McRoberts, director of next-generation network product management at Sprint. “A lot of them have objectives to have better corporate work-at-home programs.”
For now, businesses will continue to be charged fees based on per-minute use for long-distance and local toll calls and flat rates for Internet use. In addition, the company will introduce a new pricing system based on the amount of data that flows through the network. Sprint hopes eventually to switch entirely to per-bit pricing.
“The problem with large business customers is that they know how to budget in a traditional pricing paradigm and have trouble figuring out a new pricing paradigm--particularly when you’re giving them way more bandwidth than they’ve had before,” McRoberts said.
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Times staff writer Jennifer Oldham can be reached via e-mail at jennifer.oldham@latimes.com.
