Wednesday, June 3, 1998

Sprint unveils new phone system

By EILEEN GLANTON / AP Business Writer

NEW YORK (AP) -- Imagine logging on to the Internet, sending a fax and talking on the phone, all from the same telephone line.

Sprint Corp. on Tuesday unveiled a revolutionary new system that allows one telephone line to handle virtually every telecommunications function.

Sprint is hoping to take advantage of an explosion of communications in the American workplace and home.

"There is a rush-hour traffic jam on the information superhighway," said William T. Esrey, Sprint's chairman and chief executive. "We're going to change the way individuals and businesses communicate."

The company is leapfrogging its competitors to offer voice and data transmission over one vast network. Currently, phone calls travel over a single circuit, and while the circuit is open, it can't handle any other communication.

The new system combines such old-fashioned circuit-switching with fiber optics and high-speed data transmission technology. It should allow users to log onto the Internet, send a fax, play a video game and conduct a telephone conversation simultaneously.

And instead of separate accounts for local, long-distance and Internet service, customers would receive one bill, though it wasn't clear Tuesday whether that bill would be any cheaper.

While Sprint may be the first to do so, analysts said virtually every phone company is working on a similar network.

Sprint's new system, dubbed the Integrated On-Demand Network or ION, will initially be available to businesses. Several companies, including accounting and consulting giant Ernst & Young, software and computer system maker Silicon Graphics and leading food distributor Sysco Corp., already have signed up for the service, which will debut later this year.

By early 1999, Sprint will offer the service to small and home-based businesses, and by late 1999, to residential customers.

Ronald T. LeMay, Sprint's president and chief operating officer, said the primary residential users will be those who already spend heavily on communications. LeMay said 16 million American households currently spend $110 or more per month on phone and online services.

Sprint officials and analysts said consumers may not pay less than that if they subscribe to ION. But they will get more for their money, said Jeffrey Kagan of Kagan Telecom Associates in Atlanta. For instance, an Internet connection would operate up to 100 times faster than with a conventional modem on a traditional phone line.

At the same time, Esrey said Sprint's costs for delivering a typical voice phone call will drop by more than 70 percent. A video call will be cheaper than a typical long-distance call today.

Sprint would bill its customers more like an electric utility than a traditional phone company. Once the system is installed, it remains open all the time. The customer would pay according to usage, which would be tracked by a monitor available from Sprint or at Radio Shack stores, under an agreement with Sprint.

Sprint officials said they have not determined the price of the monitor. Customers may be able to choose between varying levels of service, so that someone who uses ION mostly for telephone calls and e-mail would pay less than one who conducts high-tech video conferences.

Ken McGee, a vice president and research fellow with Gartner Group, said the network should be attractive to consumers frustrated by the dinnertime pitches and competitive tactics of the phone companies.

"The fact remains, consumers are dissatisfied with the sheer number of carriers they have to deal with," he said. "There is pent-up demand to find the one carrier who can do it all."

Sprint, which has spent $2 billion to develop ION over the past five years, said it expects to spend about $400 million over the next two years as its rolls out its network.

Sprint will need approval from various local phone companies to hook its new network to local phone systems. That could lead to difficult negotiations, analysts said, particularly since the new network will allow Sprint to compete with local carriers.

Wall Street was mildly optimistic. Shares of Sprint rose 50 cents, less than 1 percent, to close at $72.43-3/4 a share on the New York Stock Exchange.