‘Broadband’ competition heats up between Sprint, Cox in Las Vegas

David Strow

Thursday, June 22, 2000 | 11:10 a.m.

Competition between Sprint and Cox Communications is heating up in Las Vegas, as both companies aggressively market their high-speed data services to local residents and businesses.

For years, the two companies each held monopoly status in their respective markets, and rarely crossed paths. Kansas City-based Sprint was entrenched as the area's local telephone operator, while Atlanta-headquartered Cox delivered cable television services.

But that's changed drastically with the advent of so-called "broadband" technologies.

"We don't even call ourselves a cable company anymore," said Cox spokesman Steve Schorr. "We're a broadband telecommunications provider."

"The public's appetite for broadband high-speed products is just incredible," said Rob McCoy, spokesman for Sprint. "That's where the entire telecommunications industry is going."

At this early stage, Cox appears to have the upper hand in Las Vegas with its cable modem offering, which is now available everywhere in the Las Vegas Valley Cox serves. Cox completed upgrading its cable system to allow cable modem service in January at a cost of $65 million. The company now has "tens of thousands of customers" in the area, Schorr said.

"The secret to our success is broadband, that huge (cable) pipe we bring to your home or your business," Schorr said. "We see the future of telecommunications as that broadband pipe."

Sprint's offering goes by the more technical term of "digital subscriber line," a high-speed Internet data service that uses traditional telephone lines. Unlike traditional dial-up services, DSL is always connected to the Internet, and allows calls to be made and received while the modem is connected.

McCoy said Sprint currently has "several thousand" DSL customers in Las Vegas.

To try to compete against Cox, Sprint is engaging in a price-cutting campaign. Through July 31, the company is offering to waive its DSL set-up fees for new customers who sign one-year contracts. Normally, these fees cost up to $400.

"That's a significant investment the homeowner will not have to make," McCoy said.

Fees for the service start at $45 per month, and include an Internet account.

Cox's fee structure somewhat more complex. If a customer has a cable modem and hardware already installed in their computer, the Cox start-up fee is $15.45 -- the cost of installing a new cable outlet.

If the customer needs the necessary hardware installed, the set-up fee is $79.95. A cable modem can be purchased for prices starting at $200, or leased from Cox for $10 per month. The service costs $29.95 per month if the customer buys a modem, and $39.95 if the customer leases.

When asked if Cox planned to match Sprint's price cut, Schorr said, "It's a competitive field. Those things change all the time." He noted that Cox currently offers customers two months access for free if they purchase the modem.

Moreover, Schorr said, "DSL will never be available to 100 percent of the marketplace. Our service is available everywhere cable goes."

But Jeff Hein, spokesman for Mpower Communications -- one of Sprint's larger competitors in the Las Vegas telephone market -- noted that cable has its deficiencies as well. Mpower offers DSL services, but only to business customers.

"If you're in a neighborhood and everyone's connected at the same time, it slows down the (data) pipe," Hein said. "DSL is your own dedicated connection."

The company offers small businesses a $350 per month package that includes eight telephone lines, DSL service and 500 minutes of long distance.

Another major competitor in the high-speed data and telephone market is Nextlink Nevada, operator of a 600-mile fiber-optic network in the Las Vegas Valley.

Referring to the high-speed capability of this network, Nextlink Vice President and General Manager Clark Peterson called these networks "as critical to the future of our cities as freeways and shipping ports were to cities in the past."

But, like Mpower, Nextlink's service focuses on business customers, rather than residential customers.

The location gaps in Sprint's DSL offering is an inequity Sprint will try to rectify through a new service called "multipoint multichannel distribution service," or MMDS. The service is essentially a two-way, high-speed data service using wireless transmission, rather than telephone lines.

"We're investing a lot of money into MMDS," said Lou Emmert, vice president and general manager of Sprint's Southern Nevada operations. "This will help us get to the customers we can't get to today."

Sprint launched the service in Phoenix, its first MMDS city, in May. It has promised the Public Utilities Commission of Nevada that it will launch an MMDS trial in Las Vegas within 6 months of merging with WorldCom, should that merger ultimately be approved.

Sprint is also upgrading its high-speed offering with its "Integrated On-Demand Network," or ION. ION offers twice the speed of DSL and is currently available in Kansas City, Denver and Seattle. No date has been set for a Las Vegas offering.

Cox is also refining its product with "video on demand." A refinement of pay-per-view, video on demand allows customers to order movies with their remote controls, and the movies will begin immediately. Unlike pay-per-view, the movie can also be paused.

Cox has launched this service in San Diego and hopes to bring the service to Las Vegas by the end of 2001.

The key to understanding why Cox and Sprint are so keen on establishing market share goes beyond simple Internet access. It goes to the issue of "convergence" -- the concept of one carrier offering video, telephone and high-speed computer access through a single line.

Each company is missing a single piece of the final puzzle. Cox offers high-speed Internet and video services, but not telephone service. Sprint has telephone and high-speed access, but not video.

Schorr said that will change through a technology called "IP telephony," which would allow the cable line to be used exactly like a phone. Though the technology hasn't progressed beyond very limited trials, Schorr said a widespread offering is only a matter of time.

"IP telephony will be developed in a very short period of time, and it will be the future (of telecommunications)," Schorr said.

Sprint, too, technically has the ability to offer video through its telephone lines, McCoy said, though no services are currently available.

"To say something is not possible today doesn't mean it will be impossible a year from now," McCoy said. "Customers are the ones who are really dictating the marketplace. If that's what the customers really want, we have to be prepared to give it to them."

But Emmert believes that Sprint's ability to offer that wide slate of services would be greatly assisted if the company's mammoth merger with WorldCom -- now facing possible denial by the federal government -- is approved.

Moreover, WorldCom's large international presence would benefit Las Vegas, she said.

"Because Las Vegas is becoming an international city, and (international) businesses that are locating here are doing business locally, a merger with WorldCom would only open up all of the overseas markets," Emmert said. "That would definitely be a big selling point for business customers in Southern Nevada."

Though Sprint and WorldCom are looking at a number of options for making the merger more palatable from an antitrust perspective -- such as selling off assets -- Emmert acknowledged the issue is not in her hands.

"I can't say when or if the merger will be approved, though we hope to know more soon," Emmert said. "We are committed to continue providing high-quality service ... whatever it takes, we'll do it."

The Greenspun family, owner of the Las Vegas Sun, is a minority investor in the Las Vegas Cox system. The family sold its controlling stake in 1998. The Greenspuns also own a minority stake in Nextlink Nevada.