Sprint's Application

Sprint is a Delaware limited partnership authorized to provide competitive local and interexchange services in California. ¹

Sprint has provided ION service, which it describes as bundled offerings including local, long distance and high-speed data, to residence and business customers since 2000. It now wishes to withdraw them. The specific offerings Sprint would withdraw are provided out of its current Cal. P.U.C. Tariff No. 2-T: Residential Sprint ION xt⁴, Residential Sprint ION xt², Residential Sprint ION xt¹, Sprint ION Business Service Option A; and Sprint ION Business Service Option B. At the time the application was filed, Sprint had less than 1,000 residential and 75 business ION customers in California.

Sprint cites at least four reasons for its decision to withdraw for now from the integrated local, long distance, voice and data service market: capital constraints, network limitations, increased high-speed competition, and continuing problems with obtaining unbundled network elements. First, full deployment of ION to a broad consumer market would require not only that Sprint make significant, ongoing capital investments, but also that it bear continuing financial losses for several years during that deployment. With the industry's current revenue and earnings pressure, a faltering national economy, and intense competition in its traditional market segments, Sprint has limited financial ability to do so. Second, in order to offer ION to the mass market, Sprint needs high-speed capable network access to end user locations. Pacific Bell Telephone (Pacific Bell) and Verizon California Inc. (Verizon) are the underlying incumbent local exchange carriers (ILEC) in the areas where Sprint offers ION service. The incumbent local exchange companies' DSL-capable copper loop facilities that Sprint depends on do not reach a majority of Sprint's potential ION customers, thus it lacks market scope to reach much of the public. Third, customer acquisition costs and market penetration have proven to be significant problems limiting ION's profitability. Sprint's new customer acquisition costs are very high compared with the ILECs'. Sprint has found building a customer base further complicated by the dramatic changes in the marketplace since it first envisioned ION service. While once very few consumers enjoyed access to high-speed Internet services, the cable companies and the ILECs have now captured many of those customers Sprint was targeting for its ION service offerings. Fourth, Sprint decries continuing problems with obtaining unbundled network elements from the ILECs:

Finally, in addition to the already formidable business risks associated with local voice entry, there remains a fundamental uncertainty as to the ground rules for competitive entry. Although Sprint once believed that the Telecommunications Act of 1996 ("Act") spelled out those ground rules for local competitive entry, litigation and court appeals have kept Sprint and all other potential competitors in a constant state of uncertainty as to the rates, terms and conditions, and even the availability of unbundled network elements critical to Sprint's business plan. Even now, over five years after the passage of the Act, important elements of the Federal Communications Commission's rules implementing the Act (e.g., combination of elements by the ILECs) are before the U.S. Supreme Court.

Sprint's last point regarding the ILECs' business practices struck a chord that resonated with two of the three protesting parties, as explained later.

Sprint has developed a comprehensive customer notice and local exchange transfer plan intended to provide ION customers with clear information about its withdrawal. A copy of each notice was included in the application and is further described below.

Although Sprint wishes to withdraw its ION service, it plans to continue offering its core interLATA and intraLATA long distances services. It is still exploring product strategies for competing in the local market, and therefore requests its certificate not be modified.

By its letter of December 19, 2001, Sprint informed the assigned Administrative Law Judge and the protestants that its Application for Authority to Withdraw ION services was granted by operation of rule by the Federal Communications Commission on December 17, 2001, despite the FCC's having received three consumer protest filings.