Sprint in $1.1 billion pact with Nortel to upgrade local networks

Kevin Ferguson

Tuesday, Nov. 6, 2001 | 10:53 a.m.

Sprint Corp. said Monday its local phone division signed a $1.1 billion deal with Nortel Networks that will allow Las Vegas' major local phone provider to transform its network into a "packet-based" system that will efficiently move more traffic.

This technology advancement will cover Sprint's local network, which includes markets in 18 states. The Las Vegas market is Sprint's largest local phone operation. It includes 1 million phone lines and 2,000 employees in Southern Nevada.

Packet switching will allow multiple phone calls or Internet connections to share the same telephone line and lay the foundation for delivery of future services like desktop video conferencing and video caller I.D.

The change from Sprint's old digital circuit switch system to a packet switch system will include combining three separate overlay networks into a single converged network for voice, data and private line services.

Analysts say this is the direction in which the telecommunications industry is moving.

"This is the first time any local (phone) carrier has made an announcement to do this. We're all going to be watching," said Lisa Pierce, an analyst for research firm Giga Information Group.

"This will allow Sprint to rollout new features, like unified messaging and video conferencing, on a flexible, fast and cost-efficient basis," she said.

Sprint's network transformation is expected to take eight years. The Nortel Network contract covers the first four years.

The initial rollout is scheduled for January 2003.

Sprint spokeswoman Detra Page said the company has yet to determine how much of the $1.1 billion in Nortel equipment and services will be invested in the Las Vegas market.

The move to this technology is not expected to lead to higher consumer rates, she said.

No time frame has been determined for the services to be available in Las Vegas, Page said.

"(Sprint) will likely trial it ... and as soon as Sprint is comfortable with it, Las Vegas will be next because it's a high-end, high-growth market. That's a safe bet," Giga's Pierce said.

In Las Vegas, the local phone division of Sprint competes with XO Communications and Mpower Communications in the business market.

XO Communications' network is built on an all-digital fiber optic system, which already provides the foundation for many of the packet switch technology advancements, said Clark Peterson, an XO vice president whose area covers California and Nevada.

Mpower officials could not be reached for comment.

Cox Communications, the area's cable TV provider, is exploring technology that would provide phone service through its cable lines. Cox already offers high-speed Internet access in Las Vegas.

Cox officials could not be reached for comment on the Sprint announcement.

Sprint's nationwide network includes 8.3 million phone lines. The first phase will include replacing 3.6 million phone lines with the packet-switch technology.

Nortel beat out San Diego-based Lucent Technologies, which dropped out of the bidding in August, for the Sprint first-phase contract.

Pierce said it was never disclosed how much Lucent was willing to pay for the contract, but Nortel had been the odds-on favorite for a while because the Brampton, Ontario-based company provides the existing network for Sprint.

"We selected Nortel Networks... because of a simple fundamental Nortel Networks strength -- the ability to build large, reliable networks effectively designed for the delivery of new services," said Mike Fuller, president of the Sprint Local Telecommunications Division.

With the new network, voice calls will be transmitted in "packets," resembling how data is moved on the Internet.

The conversion will move 3.6 million of Sprint's 8.3 million local lines from hard-wired circuits to a more flexible packet network, while cutting the number of Sprint's main network switches from 125 to 32, said Mark Chall, Sprint's vice president for packet networks.

"Packetization" technology enables voice and data traffic to be broken into digital pieces, or packets, that are sent separately across the network and reassembled upon arrival.

The technology upgrade will allow multiple phone calls and Internet connections to share the same line.

On today's telephone networks, "once you open a connection between point A and B, it's locked. You can't use it," said Frank Plastina, president of Nortel's Metro Networks division. "In the packet world, those packets don't have to be run on the same routes. They can be disassembled and reassembled at the end."

The upgrade will also allow 90 percent of Sprint's local customers to receive high bandwidth Internet digital subscriber line, or DSL, service, Chall said.

The Associated Press contributed to this report.