It has been more than a century since the president of Western Union foolishly rejected a chance to buy the patents for a novel new invention called the telephone. The decision was one of the worst corporate mistakes ever, but a valuable lesson was learned – to succeed in telecommunications, you have to stay ahead of the curve.
In 2006, Nevada’s major telecommunications companies are putting that old philosophy to the test once again. The major corporations offering phone, Internet, wireless and other telecom-related services in the Silver State say they are investing millions to make sure they are offering the latest in telecom technology to both commercial and residential customers.
“It is a constantly changing landscape, and in order to be successful, you have to change,” said Steve Schorr, vice president of public and government affairs for Cox Communications. “What happens today is not necessarily a forecast of tomorrow. The advances in the industry continue to grow by the day.”
Staying on top of the new technology is a must in a world where there are now more wireless subscribers than traditional wired telephone lines. But technology alone is not enough. It used to be that Ma Bell was the only horse in the race, but then came deregulation in the form of the Telecommunications Deregulation Act in 1996. Telecom saw a flood of providers of high-speed Internet, wireless and digital communications, and now telecom companies in Nevada find themselves reaching into each others’ markets in the race to lay claim to customers in the fast-growing state.
Perhaps one of the best examples of this is Cox Communications’ recent broadening of its business model, branching out into services such as digital telephone service in Las Vegas, thereby venturing into a phone business traditionally dominated by Sprint in Southern Nevada.
On the national level, consolidation of large companies has meant changes for Nevada. SBC bought AT&T and will market itself under the better-known AT&T brand. The cellular division of Sprint merged with Nextel and is advertising itself as “Sprint together with Nextel.” Sprint is spinning off its local phone service to a new company called Embarq. Smaller companies, such as Verde Communications, are finding market niches by betting on broadband services reliant on wireless connections for commercial customers.
“We welcome the competition,” said Richard Twilley, regional vice president for Sprint. “We are increasing the level of service, there are better products coming to the marketplace, companies are spending more on research and development and the customer will have an economic opportunity.”
Recently, Nevada Business Journal interviewed the leaders of some of Nevada’s telecom companies to get their assessments of current market conditions and see what they expect for the future of the industry.
Cox Communications, which is best known for providing cable television service and high-speed Internet access, has taken a number of big steps recently. In November 2005, it launched Cox Digital Telephone to residential and commercial customers in Southern Nevada. “We are a telephone company now,” Leo Brennan, regional vice president and general manager of Cox Communications Las Vegas, said in a press release announcing the launch.
The phone service is carried over Cox’s video, voice and data network, and was kicked off with initial service in the northwest Las Vegas Valley. Cox hopes to have full service in the Las Vegas Valley by early to mid-2007. Schorr said this move allows the company to capitalize on its massive broadband network.
“Those decades of putting the money in the ground to build the broadband networks have helped a great deal,” Schorr said. “They (the customers) want their services bigger, better, faster, cheaper.”
Bundling is big, and Schorr said Cox is in a strong position to offer multiple high-tech services to the customer in one package. In addition to traditional analog cable, the company provides digital video, including digital video recording, high-definition television, video-on-demand, high speed Internet and home networking.
“Customers are evolving and they really want the bundled package of products,” Schorr said. Cox is tweaking its packages, too, trying to give the customer some added benefits such as free anti-virus protection, free parental controls, free pop-up blockers and free spam walls.
“We are now partnering with Sprint wireless, so that in some places by the end of this year, you will be able to call your video recorder at home using your wireless phone, tape a TV show, then sit with your wireless telephone, pick up the show and view it while you are sitting in the airport,” Schorr said.
Being the big boy on the block in Southern Nevada’s telecommunications world for years, one would think Sprint might be getting a little nervous about all the competition. Simply not so.
Twilley noted that Sprint has been ahead of the technological curve for years. The company was the first in Las Vegas to offer digital networking in 1983, and it has made major capital investments, upgrading its network to offer all the digital and high-speed Internet services modern customers have come to expect.
“We have continued to spend the dollars locally and on research and development to make the most cutting-edge technology available,” he said.
The recent merger of Sprint and Nextel, finalized in late 2005, allows the company to offer a diverse portfolio of both wireless and wireline products. The company will now be able to offer both national wireless and global IP networks, and the merger will allow it to serve a combined 35 million wireless subscribers, making the company a true powerhouse in the industry.
Twilley said Sprint is working on some breakthrough technologies for commercial customers. One is IP Centrex, which offers commercial customers a campus-style, high-tech phone service complete with four-digit dialing – minus the traditional infrastructure investments.
“The beauty of it is, the client doesn’t have to expend his capital (on infrastructure),” Twilley said. “It is a hosted network, so we’ve already purchased equipment such as switching routers. For anyone with multiple offices, it is a wonderful technology.”
But perhaps the biggest news for Sprint Nextel in recent months is the decision to spin off its local phone exchange to a new company called EMBARQ. Upon its separation from Sprint, EMBARQ is expected to be a public company with approximately $6 billion in annual revenues, making it the fifth-largest local communications company in the United States.
According to Sprint Vice President and General Manager Lou Emmert, who has headed up the Southern Nevada division for many years, “The new company will provide a suite of communications services, consisting of local and long distance voice and data services, including high-speed Internet access, as well as wireless and video services. We will have approximately 20,000 employees, including 1,300 here in Southern Nevada.”
“Nothing really changes, except we are decentralizing our business and putting the business closer to the customers,” Twilley said.
SBC has been the local service provider in Reno for many years, but its recent acquisition of AT&T has transformed it into a global corporate competitor with a vast arsenal of technological and financial resources.
Loretta Walker, vice president and general manager for the company’s greater Sacramento market – which includes Northern and Central California and Nevada – said it is an exciting time for the company.
“I don’t know of any other industry that has transformed as much as telecom, and I have 24 years with AT&T,” she said. “I’ve seen a lot, and that is why I know this merger was so perfect. These are two companies which came together with complementary strengths – SBC with its strong footprint in residential, and AT&T with its large global business. We are now very strong.”
The offerings include AT&T Yahoo DSL/Internet broadband, Internet high speed and dial. There is also the AT&T dish package, traditional voice long distance, wireless under the Cingular brand and a focus on Internet protocol systems. The technology is in the pipeline for a dual phone technology which offers a seamless handoff between traditional voice wire line phones and wireless.
With all the major national and global telecom corporations doing business in Southern Nevada, Verde believes it has found a market niche in broadband services for commercial customers via wireless technology. The company’s president, Jason Mendenhall, and Chief Executive Officer Ben Brimhall said there is a growing demand for wireless broadband at businesses.
“There are limitations (Cox and Sprint) have in order to get services out,” said Mendenhall. “They have to build infrastructure – laying cable, all kinds of regulatory easement and access.”
“We chose to leverage the wireless infrastructure so we could provide a wireless network with the same type of services Cox and Sprint provide, but with better service levels and up-time,” Brimhall said.
Brimhall and Mendenhall said the wireless technology translates into quicker service – 24 to 48 hours to establish commercial networks, while wired connections might take weeks or months. Mendenhall pointed out another reliability factor: “You don’t have to worry about somebody digging up your wireless connection with a backhoe.”