The following text is copyright 1998 by Network World, permission is hearby given for reproduction, as long as attribution is given and this notice is included.
Is Sprint doing it again?
By Scott Bradner
Sprint has not always been the first to market with their services but a number of times it has been the first to exploit new technology or marketing plans. Ten years ago Sprint was the first major carrier to advertise an all fiber phone network and later it was the first major carrier to offer distance insensitive long distance pricing. Now Sprint has announced Integrated On-demand Network (ION) which, if it comes to pass, will revolutionize not only the Internet Service Provider (ISP) business but also, again, the phone business.
ION is an integrated voice-data service which will involve a wide range of networking technologies from wave-division multiplexing (WDM) and ATM in the backbone to digital subscriber lines (DSL) on the local loop. ION will permit the simultaneous use of a phone and a web browser on the same phone line. Sprint does face some significant challenges on the path to deploying ION. Not the least of these challenges will be to get the local phone companies to let Sprint take over the wire between the customer and the phone company central office while getting space in the same central office locations to put its equipment. It is far from clear if Sprint will be able to actually make a go of ION which may be why the stock market reacted so tepidly to Sprint's well orchestrated announcement.
But the most important part of the announcement was not the technology. ION would for the first time move away from the model of charging voice traffic by the minute and move instead to charging all communications services, including voice and data, by the quantity of data sent and received, and not by time or distance. The more data you send, the more you pay. This is what I suggested a few weeks ago is the logical way to charge for services on the Internet.
It will not be easy for Sprint to figure out what the charge to transfer a specific amount of data should be. It would be very easy to come up with a price that is very attractive as far as voice and fax are concerned, and Sprint is predicting a 70% reduction in the costs of long distance phone calls under ION. But charging that same rate for Internet web traffic might produce quite a shock at the end of a month of surfing the web, particularly if you are checking out the latest photo spreads.
Sprint may also face regulatory barriers to any plan to move away from per-minute pricing of voice calls. For example, how are the regulators going to be able to continue to fund the universal service fund under this new pricing model, and what happens if the other end of the call goes to someone on an old-style phone company, one that still charges by the minute?
Sprint has been able to shake up the often stodgy phone business before and it is great to see them at it again, even if there may be reason to question some of the underlying technical and business assumptions.
disclaimer: We don't do stodgy at Harvard, in any case the above glee is my own.