The promise of broadband was apparently not enough to save Sprint Corp.'s
struggling ION high-speed Internet unit.
Amid a dismal third-quarter financial report, Kansas City-based Sprint
announced that it would shutter the ION unit, which offered customers
digital-subscriber-line and voice service over the same telephone line. The unit
had been scaled back earlier this year as Sprint tried to work through
voice-quality problems.
In a prepared statement, Sprint chairman and CEO William Esrey said there
were several factors in the decision to shut down ION, including the expense to
fund the high-speed-data and voice service, as well as the deepening economic
slump.
'We believe our vision that customers will desire integrated communications
services still holds true,' he said. 'However, it is clear that with our current
efforts, an appropriate return on investment cannot be achieved in an acceptable
time frame, and we are adjusting our plans accordingly.'
He added that ION technology would still be used to deliver multiple services
over Sprint's backbone network. Sprint will transition ION customers to
alternate service providers where possible, according to the company.
The long-distance carrier has dropped more than $3 billion into ION since its
debut in 1998.
In exiting the business, it will spend $600 million for severance packages,
layoff costs and termination of supplier agreements, office leases and other
contractual obligations. Sprint will also take a whopping $2 billion writoff in
the fourth quarter.
ION wasn't the only casualty. The carrier will also cut approximately 6,000
jobs, totaling 7 percent of its work force, and eliminate 1,500 contract-worker
positions.
It will also stop marketing its broadband
multichannel-multipoint-distribution-service fixed wireless services until it
can make progress on a second-generation MMDS technology.
The company estimated that the measures will save it about $1 billion in
2002.
