Sprint Suggests Cable Strategy

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Chicago -- Sprint Corp.'s CEO and other top executives
responded last week to critics of their new broadband-access strategy, suggesting that
cable could offer an avenue into the consumer market, even if it takes new regulations to
open the way.

"We also hope to have network access through cable
companies," Sprint chairman and CEO William Esrey said, after listing some of the
limitations associated with depending on ADSL (asymmetrical-digital-subscriber-line)
technology over telco lines.

In a speech delivered at the Internet World conference
here, he called DSL a "workable way to bring broadband to the home," but he made
it clear that his company would require other options, as well.

"Sprint's Integrated On-Demand Network [ION] is
compatible with cable modems," Esrey said. "That's clearly a plus not only
for Sprint and cable companies, but also for consumers."

Sprint officials noted that the company was looking for
partners, including MSOs, in its quest to achieve market access for its integrated voice,
data and video service platform. Moreover, Esrey and others inside Sprint indicated that
cable could also become an option through fiat if the rules were changed to match the
"unbundling" regime imposed on telephone companies by the Telecommunications Act
of 1996.

"The proposed AT&T [Corp.] acquisition of TCI
[Tele-Communications Inc.] would hurt competition unless the combined company is required
to offer unbundled access to the cable loop in the same manner that local phone companies
must allow access to telephone loops today," Esrey said.

"When unbundled cable loops become available, the
reshaping of communications can proceed in a way that truly safeguards and services the
customers' interests," he added.

The cable option, little mentioned in the original
announcement of Sprint's ION strategy a month-and-a-half ago, was a much more
prominent counterpoint to the concerns that Esrey raised about ADSL in this latest
discussion of Sprint's plans.

"One concern is that DSL links are still the province
of the regional phone companies, and that we will have to negotiate deals with them,"
he said.

Such dealmaking should be made easier by the unbundling
requirements and by competitive pressures on telcos: Competitive local-exchange carriers
are readying DSL service, and others are prepping fixed-wireless-access options, Esrey
said.

"ION is a facilities-based alternative," he said,
"so, rather than a threat, if the RBOCs [regional Bell operating companies] are
serious about opening their markets, they should view Sprint as an opportunity and a
partner."

But even if all goes well on the negotiation front -- and
Sprint said it now has metropolitan-network-access deals, but not local-access deals, with
Southwestern Bell, Ameritech Corp., GTE Corp. and BellSouth Corp. -- the long-distance
carrier still has to contend with the limited reach of ADSL.

Esrey said he was convinced that DSL would be available
over "as much as one-third" of all lines in the United States within two years,
which leaves two-thirds of the market to be accounted for either by waiting for more DSL
to deploy or by turning to other options.

Sprint officials indicated that they're counting on
market developments to drive any future bargaining with cable, suggesting that no serious
deals have been put on the table yet.

"As far as all of that is concerned, our access
options will be worked out in the marketplace, where the consumer will drive
activity," said Terri Morrow, assistant vice president of emerging markets for Sprint
Consumer Services.

Sprint plans to begin offering local services in the
high-end business sector later this year, following the completion of beta-trials with a
handful of big customers, with smaller businesses coming online in the first half of next
year and consumers in the second half, officials said.

The ION strategy calls for the use of new premises-mounted
integrated-service hubs equipped to combine voice, data and video signals into the cell
format of asynchronous transfer mode, with new router/switches that combine ATM and IP
(Internet-protocol) technology functioning in lieu of traditional circuit switches at the
network edge.

All voice traffic, including residential voice, will be
converted at the point of origin to IP-over-ATM, said Fred Harris, director of network
planning and design for Sprint Technology Services.

This is a clarification of earlier speculation by
executives at two of the key suppliers to Sprint's ION -- Bell Communications
Research and Cisco Systems Inc. -- that residential voice would be packetized not at the
premises, but at IP-voice-gateway servers at central switching points.

But even if Sprint customers' outgoing calls are
packetized at the premises, incoming calls will have to be packetized at the edge of the
Sprint network through IP-voice gateways, leaving open the question of how Sprint will
achieve toll-quality service in so short a time frame.

In recent interviews, Bellcore officials and a number of
executives affiliated with providers of IP-voice technology have suggested that it would
be 18 to 24 months before packet-voice service reaches parity with circuit voice,
including feature provisioning, as well as basic performance quality.

Sprint officials offered to explain in future briefings how
they planned to shorten the evolutionary process.

A spokeswoman said Sprint has solutions in the offing that
will be made public this fall.

Whatever such solutions turn out to be, the bandwidth
limitations of ADSL raised questions as to just how far the company could go in delivering
on the claim that, as Esrey put it, ION will support "a single communications torrent
with the raging power of a Niagara Falls."

The Universal ADSL Working Group -- the forum of carriers,
computer interests and vendors that has been seeking to make the technology more
consumer-friendly -- has opted for 1.5 megabits per second as the top rate for its
"ADSL.Lite" standard, with provisions for scaling rates down from that level
over lines that are longer or noisier than average.

Morrow said that while Sprint's aim was to ultimately
support multiple voice lines; video- and voice-enhanced "chat"; and game playing
and other interactive-video entertainment, as well as high-speed Internet access,
customers in the early phase of the rollout would be happy just getting a second line and
high-speed access. The key to the ION strategy, she added, is that the network itself will
be equipped to deliver on the full breadth of Sprint's claims, as the company finds
ways to offer more bandwidth over the last mile.

AT&T believes that it has found that means in cable.

Apparently, the cable industry can expect Sprint to come
its way in search of the same thing, although possibly in a less stock-friendly mode than
the acquisition route taken by its competitor.

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