WAN Services /

Sprint's ION reaches end of line

By Michael Martin
Network World, 10/22/01

KANSAS CITY, MO. - Sprint's Integrated On-demand Network, introduced with a roar in the summer of 1998, went out with a whimper last week. The news was announced with the company's disappointing third-quarter financial results.

ION was supposed to revolutionize the way businesses communicated: The idea was to put an ATM access device at a customer site, then carry voice and data traffic over the same pipe into Sprint's backbone. Customers were supposed to save money under the ION scheme, because one network device and connection would be cheaper than using two or more networks.

But despite pouring between $3 billion and $5 billion into the converged service effort, Sprint was never able to get any momentum behind ION. Only about 40 large enterprises used the service, in addition to about 4,000 consumers and small businesses, which accessed ION over DSL.

ION had plenty of detractors from the start. A Qwest official was quoted in Network World's story on the original announcement in June 1998 calling ION "dead on arrival." Sprint itself showed doubts just a few months after announcing ION, when the carrier said it was scrapping plans to secure local-loop access from local telephone companies - which proved difficult - and announced plans to build its own DSL nets instead.

Meanwhile, early customers complained that Sprint failed to deliver some of ION's promised technical benefits, such as dynamic allocation of channels to voice or data based on time of day or other factors.

Rumors about ION's impending demise heated up in June, when Sprint revealed it was having technical problems with the IP voice portion of the consumer and small-business offering.

"It's been a money pit," says Rob Carlson, an analyst with Current Analysis. "I've suspected this for a long time because Sprint never really talked much about customer numbers or revenue figures for ION."

There are several reasons ION didn't appeal to potential corporate customers, says Lisa Pierce, an analyst with consulting firm Giga Information Group and a Network World columnist. For starters, it didn't offer a full range of voice features, such as ISDN primary rate interface, which many call centers require.

Moreover, ION wasn't able to offer a compelling cost savings, because the price of long-distance voice is already extremely low and frame relay is also relatively cheap, Pierce adds.

Similar offerings from AT&T and WorldCom have their supporters but have never exploded either, observers say.

By cutting ION and making other restructuring moves, Sprint expects to save $1 billion per year in operating expenses.

Much of those savings will come from reducing the Sprint workforce by 6,000 full-time and 1,500 contract employees. The cuts represent about 7% of Sprint's workforce. Most of the positions were associated with ION.

Sprint CEO William Esrey says the provider finally decided to cancel ION because the service was not going to achieve a reasonable return on investment in an acceptable time frame. The slowing economy contributed to the decision, he says.

Sprint also revealed that it will not add any more customers to its wireless multichannel multipoint distribution service (MMDS) offering until second-generation MMDS gear becomes available. Sprint's MMDS service is targeted at consumer and small-business users and offers broadband connections of up to 1.5M bit/sec. Unlike existing MMDS equipment, second-generation MMDS gear does not require subscribers to have a line of sight to a transmission tower, making the service easier and cheaper to deploy.

Sprint posted a 60% drop in third-quarter earnings compared with last year's third quarter, while revenue increased 12% over the same period.