• Business Week, Thursday, December 28, 2006 10:45 AM

Sprint Nextel Corp. aims to become the first major cellular carrier to use the latest in wireless Internet technology to cut the cost of rerouting cell-phone calls through "backhaul" networks. The new measure will cut the cost of switching calls by more than two-thirds.

Each year, Sprint has to pay other network operators, called "backhaul carriers," to connect cell-phone calls over parts of a network that it doesn't control. As cell calls move from the nearest cell tower to a switching station, they zip along a fiber optic cable, then to the nearest tower. Those last few miles, sent along several T-1 lines, are the single most expensive network operating cost for wireless carriers, says one analyst.

Backhaul can account for as much as 30% of wireless network operating costs. At Sprint, this number was $20.1 billion last year. Sprint's new WiMAX network, which will be ready early next year, will help the company greatly reduce these costs. WiMAX will also likely provide the carrier with a new technology to use in offering high-speed wireless Internet access to their customers.

The backhaul business is booming as more cellular providers run more bandwidth-consuming content, like video and music over their networks. Cutting delivery costs is key to the future success of mobile content.

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