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Telecommunications industry

Sprint and Cable-TV Partners Invest $4.4 Billion to Challenge Baby Bells and GTE

Strategic Insights

— 1 min read

In a bid to break the monopoly of the Baby Bells on the $90-billion-a-year local phone market, the Sprint Corporation and its cable-television partners have announced a $4.4 billion investment to launch a nationwide wireless, local, and long-distance phone service. This massive investment, spread over three years, is aimed at creating a full-service, coast-to-coast telecommunications company, marking an industry first. The venture will cover markets with a total population of 182 million and leverage the cable companies' vast networks, which could serve about one-third of United States homes.

Key Takeaways:

  • The investment of $4.4 billion will be spread over three years, representing a significant challenge to the Baby Bells' monopoly on the local phone market.
  • The joint venture will be led by Ronald LeMay, a top Sprint executive, and will use the investment to build wireless networks and upgrade the cable companies' networks.
  • The cable companies, including Tele-Communications, Comcast, and Cox Communications, will contribute 50% of the investment, with Sprint owning 40% and Teleport Communications Group expected to join the venture.
  • The alliance aims to increase traffic on Sprint's long-distance network and reduce the $2.5 billion a year it pays the Baby Bells to complete long-distance calls.
  • Legislation must be passed to open local phone markets to competition before the nationwide service can be launched.

Statistics:

  • The investment of $4.4 billion is more than double the amount the MCI Communications Corporation said it would pay to build its own local phone network.
  • The cable companies' networks could serve about one-third of United States homes.
  • The joint venture will cover markets with a total population of 182 million.
  • Sprint pays the Baby Bells $2.5 billion a year to complete long-distance calls.
  • The Baby Bells dominate the $90-billion-a-year local phone market.

Sources:

  • The Sprint Corporation and its cable-television partners
  • The Comcast Corporation
  • Cox Communications Inc.
  • The MCI Communications Corporation
  • Tele-Communications Inc.

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