Sprint Plans National Expansionas CLEC

Posted: 2/2003

Sprint Plans National Expansion
as CLEC

By Josh Long

SPRINT CORP. PLANS TO GO HEAD to
head this year with the RBOCs, to vie for customers in business markets where it
traditionally has stayed away.

The use of nearby incumbent assets
will be integral to its strategy, though Sprint will take into consideration
other factors in determining where to compete, says Wil Wilhelm, vice president
and general manager of Sprint’s general business markets.

Distressed by the entry of the Baby
Bells into the long-distance market, shrinking its market share, Sprint also
plans to unveil a strategy to compete for residential local phone customers
outside of its LEC territory.

"I would expect we will make
some decisions this spring, probably in the first quarter," Sprint
spokesman James Fisher said.

Analysts say other incumbents have
demonstrated success as CLECs by using nearby infrastructure. Craig Clausen,
senior vice president of New Paradigm Resources Group Inc., says Sprint should
succeed. "I think it’s one of the few winning strategies in the CLEC sector
now," he says.

However, Clausen says he does not
foresee Sprint venturing into the largest U.S. cities for the next 12 months to
two years, primarily due to capital expenditure restraints and market
uncertainties.

"Sprint is quickly becoming
viewed as a solid service provider, but for them to suddenly enter the fray in
the larger metro markets doesn’t make sense," Clausen says.

Michael Lauricella, an analyst at
the Yankee Group, says Sprint is positioned to differentiate itself among its
competition, particularly since it can bundle wireless under its own brand.
However, analysts say it is doubtful Sprint will create a major headache for the
Bells in the near term.

"What we have seen happen, they
[CLECs] capture a small enough number of lines each year, but it falls below the
incumbent’s radar screen," Clausen says. However, the carrier could have a
notable impact on market share in the long term, analysts say.

Sprint, the No. 3 long-distance
carrier, has been providing local phone service to businesses in Columbus, Ohio,
since October 2002, the first time it entered a city as a CLEC.

Sprint, which has nearby incumbent
operations in Pataskala, Ohio, is offering Columbus businesses bundles of local
and long-distance phone and data services. Sprint also plans to incorporate its
wireless service, Sprint PCS.

The Columbus launch is significant
because it marks a prelude to expansion into local business markets outside of
Sprint’s incumbent territory. Sprint has incumbent operations in parts of 18
states through its local division.

Sprint is targeting businesses
ranging from five employees to 1,000, but the sweet spot is up to 500 employees,
Wilhelm says.

"We see this segment being
underserved, not just in Columbus but across the United States," he says.
"What we have learned to date in Columbus has been customers are demanding
a reliable alternative to the ILEC, a simple alternative and a scalable
alternative. There have been a lot of bad experiences, and so that reliability
has become a big deal for us."

The purpose of competition in
Columbus is twofold: Sprint aims to acquire customers in what it perceives as an
underserved market while generating a better return on its incumbent assets,
Wilhelm says.

There are approximately 80
registered CLECs in Columbus, Wilhelm says, including main rivals AT&T Corp.
and Worldcom Inc. He says Sprint "already has created problems" for
one of those two, but declined to specify which one.

Sprint also is not disclosing what
cities it may enter as a CLEC, but spokeswoman Stephanie Meisse says the company
could go public with plans in the first quarter.

As part of a nationwide strategy,
Sprint has no plans to rely solely on the controversial resale method known as
the unbundled network element-platform (UNE-P), Wilhelm says. The Federal
Communications Commission (FCC) is set to issue new rules governing the
availability of network elements at UNE rates based on forward-looking costs.

"As we have plans across Sprint
… we would have a more sustainable entry model that leverages all of our
assets than putting all our eggs into the UNE-P basket," Wilhelm says.

In Columbus Sprint is tapping its
network equipment in Ameritech Corp.’s central office, as well as a Class 5
switch in nearby Pataskala. Sprint is leasing only the copper loops from
Ameritech parent SBC Communications Inc. as a UNE, Wilhelm says.

In determining where to compete,
Sprint will consider more than just nearby incumbent operations, Wilhelm says.
Those considerations will include whether Sprint has a metropolitan area network
(MAN) in the city, how easy it is to do business with the incumbent and the
difference between tariffs and the UNE rates on copper loops, he says.