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Technology

Sprint Eyes Fiber To Nodes

2/27/2005 7:00 PM Eastern

Sprint Corp.’s local-telephone division plans to conduct a fiber-to-the-node video trial later this year, adding another video-platform option to an arsenal that already includes a co-marketing agreement with EchoStar Communications Corp. that’s yielded 24,000 Dish Network subscribers.

Sprint’s local phone division is scheduled to be spun off from parent Sprint Corp. after it completes its merger with Nextel Communications. The resultant combined Sprint-Nextel company will house the two groups’ existing wireless phone business, Sprint’s long-distance business and the backbone network that Time Warner Cable, Comcast Corp., Charter Communications Inc. and Mediacom Communications Corp. use to deliver voice-over-Internet protocol.

SPRINT’S BUSY

To further complicate matters, Time Warner is testing a Sprint wireless extension in Kansas City, while the to-be-spun-off local Sprint unit (which will be renamed) plans to continue selling Sprint PCS bundles in its markets — many of which are in Time Warner territory.

Chalk it all up to the evolving competitive telecommunications landscape.

The FTTN trial “is similar to what SBC [Communications Inc.] announced,” said Sprint Local Telecommunications Division president and chief operating officer Mike Fuller said in a Feb. 10 analyst briefing.

“It’s a switched-video product with shorter copper runs to the home, capable of delivering 20 [Mbps],” he said.

The 5,000-home trial will be a technical, marketing, operational and packaging test. Sprint is working with an unnamed content aggregator to supply it what passes for a typical cable lineup today, executives said.

“We will have a full range of video channels,” Fuller said. (The company also conducted three FTTH trials last in three greenfield markets, and plans to use that technology in those builds when it makes sense, Fuller said.)

So while the larger, corporate, wireless-based Sprint becomes a cable ally, its local telephony and DSL business will become even more of a competitor, with a two-pronged video strategy.

Fuller said Sprint launched its Dish Network service in May and generated 24,000 units by year’s end. In December, the company added 300 units a day, he said, and projects it will reach 100,000 subscribers by year-end 2005.

The company added nearly 200,000 DSL subscribers in 2004 to end the year at just under 500,000 subscribers, and believes it can capture 50% market share each quarter going forward.

DECLINING REVENUE

The new local Sprint phone company, expected to be spun off early next year, will be roughly the size of Cox Communications Inc., with $6 billion in revenue from operations in 18 states, Fuller said.

The company serves 7.7 million telephone subscribers, but Fuller told analysts it will see low single-digit revenue declines in the local access business in 2005, as customers move to wireless. Sprint estimated 7% of its homes have “cut the cord.”

The company, though, still sells Sprint PCS service and expects that to continue after the spin-off.

“We’ll have a wholesale relationship [with Sprint-Nextel], we think, in our territory,” Fuller said.

Sprint’s primary phone operations are in North and South Carolina, Kansas and Florida, but it also has sizable operations in Missouri, Virginia, Pennsylvania, Ohio, Indiana and Las Vegas.

During the analyst briefing, Sprint Corp. executives lauded their cable VoIP backbone deals, which executive vice president and chief financial officer Bob Dellinger estimated would bring in $350 million in revenue by 2007. The average cable VoIP subscriber generates between $6 and $20 a month for Sprint, depending on how many services the telco delivers to the operator, Dellinger said.

Those services can range from the low end of simple transport to transport combined with directory assistance, 911 service and network monitoring, he said.

September