EDITORIAL. Leadership through "Fast Following" [Info on SBC spending]
bcr.com
Volume 28, Number 8
August 1998, p. 4
By Eric Krapf (ekrapf@bcr.com), managing editor of Business
Communications Review.
The followng is the full text of the printed article:
Even for an RBOC, $600 million isn't chump change, so SBC turned a few
heads with its recent announcement that it would spend that sum over the
next three years to upgrade its network to better handle high-speed data. The
announcement garnered a few headlines, even though it happened the day
AT&T confirmed it was buying TCI.
But to me, the SBC executives' most telling comments weren't about what they
plan to do, but rather about the pace at which they expect the network and its
customer base to evolve. Mike Turner, executive VP of corporate planning
and capital management, conceded that in places like California, the volume of
data traffic nearly equals that of voice. But, Turner added, "There's another
number to keep in mind, and that is the revenue generated by circuit-switched
versus IP: That number is 98 to 2 percent in favor of circuit-switched. There's
a lot of things that have to happen for that to change dramatically."
This is a point that BCR columnist Tom Nolle has made: Don't just look at
traffic, look at revenue. Telco people habitually see the issue this way, as was
clear during SBC's press conference when a journalist asked Mike Turner
when the imbalance in voice/data revenues might even out. Turner was clearly
taken aback: "Oh, God, I don't know," he said. "I'd say approaching 10 years."
Turner went on to predict that public carrier networks like SBC's will be the
last to evolve from circuit- to packet-switched voice; in the migration he
foresees, large businesses will lead the way, followed by long distance
networks and finally local providers. And yet Turner asserted that the SBC
network could be packet-based within five years, reflecting the RBOC's nature
as a "fast follower."
There's a disconnect in those statements. The network will be mostly
packet-based within five years, but revenues from packet-based services
won't equal circuit-based services for 10 years? Is SBC losing its much-touted
focus on the bottom line?
Certainly not. SBC, like other public network carriers, is speaking to several
audiences, each of whom wants to hear something different. The advantage
with SBC is that it has never pretended that any constituency was more
important than its shareholders. There's no reason that think that's changed.
So if you want to hear that we'll soon be living in an IP world, SBC will be
happy to tell you that. They'll even make some investments so as to be ready
when the day of IP's supremacy finally does arrive. Then they'll go back to
living in the real world, where circuit switching pays the bills. [Dinosaurs...]
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