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Wednesday, June 3, 1998
Sprint takes the lead in data technology
By PHILIP DEMONT
Telecom Reporter The Financial Post
U.S.-based Sprint Corp. yesterday became the first major long-distance telephone company to
build a communications network based on next-generation data technology, rather than traditional
voice technology.
The Kansas City, Mo., carrier plans to spend US$2 billion over the next five years to develop a
network to carry voice, faxes and Internet traffic over the same phone line.
The system, which is set to start operation by mid-1999, could allow savings of up to 70% on
long-distance calls, Sprint said.
"This truly is the Big Bang that expands the universe of what telecommunications can do in our
homes and businesses," said chairman and chief executive William Esrey.
However, the most revolutionary thing about Sprint's announcement may be its timetable, not its
technology, industry watchers said.
"Their plans are very aggressive but have more to do with making headlines," said Hilary Mine,
senior vice-president of Probe Research Inc., a New Jersey-based technology research firm.
Instead of trying to reconfigure its voice-based network, Sprint is building a system on
asynchronous transfer mode technology, an efficient method for moving data signals. This has
problems handling voice traffic.
"If Sprint finishes its system, it will be the first company to get over these hurdles on a large scale,"
said Michael Arellano, an analyst with Degas Communications Group Inc., a New York-based
consultancy.
While newcomers such as QWest Communications International Inc. are building similar data
networks, Sprint is the first big player to promise to replace its voice system with an ATM-based
network. It is unlikely to be the only one.
That's because, by 2000, about 80% of the traffic on North American phone networks will be data
signals.
"Everybody is talking about data," said Gurinder Parhar, a technology analyst with HSBC
Securities Inc.
Some companies, such as Bell Canada, already have announced plans for large data networks.
"But no one is spending significant money on voice," Parhar said.
Sprint said it doesn't plan to buy more voice circuit switches. Instead, it will use equipment
networking firm Cisco Systems Inc. to provide ATM switching and transmission equipment for the
new network.
This year, AT&T Corp. delayed upgrading voice switches, although it has not outlined an ATM
strategy.
Analysts are split on how much Sprint's move to Cisco hurts long-time supplier Northern Telecom
Ltd. "This is a major setback for Nortel," said one analyst who asked not to be identified. "They do
well in traditional voice switches. They don't do well in ATM."
But other observers said choosing Cisco is Sprint's way of telling Nortel not to become too
comfortable in its supplier relationship.
"It's a wake-up call," Mine said.
The Canadian equipment maker still should supply large amounts of switches and other gear for
Sprint's new network, she said.
Sprint shares (FON/NYSE) closed at US$72 3/16, up 1/4. Cisco stock (CSCO/ NYSE) finished
at US$76 7/16, up US$2 7/8. Nortel shares (NTL/TSE) ended at $93.50, down 50›.
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