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Under the five-year agreement, announced Monday, USA Companies will offer voice over Internet Protocol (VoIP) telephone services to some 62,000 customers in California, Montana and Nebraska. Executives at Kearney, Neb.-based USA Companies lauded the deal as giving it the ability to introduce VoIP without being forced to construct its own infrastructure. Financial terms of the agreement were not immediately disclosed.
The deal marks Sprint's latest win in the race to provide VoIP services to local communications companies, as smaller businesses look to offer Web-based phone calls. But analysts say the quality of service for Sprint's more than 20 million subscribers could be diminished by the carrier selling wholesale access to its wired and wireless phone networks.
Sprint, along with MCI, supplies Time Warner Cable with the necessary technology to help the cable company's Digital Phone subscribers reach traditional telephone customers in 27 markets, according to a Time Warner Cable representative. Sprint's cell phone network provides the backbone for Virgin Mobile USA, which buys and resells millions of voice minutes a month on Sprint PCS' network.
Sprint is hoping the USA Companies deal will increase its strength in the industry as its largest rivals including AT&T and Verizon Communications launch similar services and look to add Internet phone customers.
After years of hype and technological development, VoIP is generating significant interest, particularly among cable companies that want to challenge traditional long-distance and local phone service providers.
VoIP calls tend to be cheaper than regular phone calls because they use the Internet rather than traditional networks, which are heavily regulated and taxed. However, there remain some downsides to the technology including spotty voice quality, problems with the routing of 911 calls, and the service's reliance on electricity.
CNET News.com's Ben Charny contributed to this report.
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