Sprint PCS Launches Faster Wireless Network

Byline: Yuki Noguchi

Sprint PCS Group, the nation's fourth-largest wireless carrier, announced yesterday that it will start offering a faster nationwide wireless Internet network to customers who buy its new products, in a move that could rekindle consumer interest and competition among wireless carriers.

Sprint PCS, which has about 15 million customers, said the network upgrade will make it possible to take and send pictures with a cell phone and connect other digital devices at an average rate slightly faster than a regular dial-up connection, but significantly faster than current cell-phone connections. Verizon Wireless Inc., the largest U.S. carrier, offers a comparable service that covers 65 percent of the country; Cingular Wireless and AT&T Wireless Services Inc. offer slightly slower services covering 36 percent and 60 percent of the country, respectively.

Only customers who opt to buy Sprint's new devices, which will cost from about $100 to $500, will be able to take advantage of the new high-speed data rates. Sprint plans to start selling those devices Sunday. Existing Sprint PCS customers who do not buy the new products will not benefit from the new network.

"This is the biggest launch Sprint has had since the launch of PCS," Sprint Corp.'s wireless service, Sprint PCS President Charles E. Levine said in an interview yesterday, noting that the upgrade has cost Sprint $1.4 billion to date.

Competitors didn't let the announcement pass unnoticed. Verizon announced earlier this week that it will roll out a similar service in more than 300 communities. All carriers are using different data packages to try to attract new customers, based on the speed of each network and the breadth of the coverage area.

Although the industry has been touting the promise of new, faster data speeds to wireless phones, market watchers increasingly greet those developments with skepticism. The reasons are basic: It's hard to type using a cell phone's small buttons, and other popular technologies such as WiFi (short for wireless fidelity) are leapfrogging the connection speeds that wireless phone carriers can offer.

Only 12 million of the 139 million cell-phone users in the United States now use their phones to get data, such as stock quotes, or to send short text messages, said Philip Marshall, an analyst with market research firm Yankee Group.

To date, the U.S. wireless industry has collectively spent or committed to spending about $10 billion on similar projects to make their networks run faster, according to Yankee Group. The high cost of that investment -- coupled with a dramatic downturn in the economy -- has made industry analysts even more skeptical about the payoff from those networks.

"The new services will not be as profitable as they had hoped" because the cost of upgrading the network can be very high, said Herschel Shosteck, founder of the Shosteck Group, a Wheaton-based telecommunications consultancy. "There is a difference between high-speed data and data that pays."

Between 2.5 million and 2.7 million, or about 17 percent to 18 percent, of Sprint PCS's customers use data service, but the revenue from those services now account for about 2 percent of its revenue from data services, Levine said.

The real advantage of the new program for Sprint PCS has less to do with technology than it does with marketing, said Jonathan Atkin, an analyst with RBC Capital Markets, a firm that has had no investment banking business with the four largest wireless carriers in the past year.

"They haven't had a lot of new products recently, and they're kind of getting a face lift," Atkin said. "I don't think the data offerings are all that compelling; I think the near-term impact is new [cell-phone] handsets with bigger color screens, and new price plans -- that seems to be what drives people into stores."

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