AT&T Exec Sees Huge Savings From Net2Phone Deal
By PETER LOFTUS
LOS ANGELES -- AT&T Corp. (T) can save billions of dollars each year by using Net2Phone Inc.'s (NTOP) Internet-based phone technology, said Kathleen Earley, president of AT&T's Data & Internet Services unit.
In a keynote speech at the Internet World conference here Friday, Earley said AT&T can avoid paying access fees to local phone service providers by using Net2Phone's technology. Last week, a consortium led by AT&T acquired a controlling stake in Net2Phone from IDT Corp. (IDTC).
"We don't like paying the bad guys for settlement costs," Earley said. "We don't like that, we'd rather keep that $10 billion a year." She also expects the emergence of Internet phone service to present new revenue opportunities.
Still, AT&T is a few years away from deploying Web-based phone service, known as voice-over-IP, on the public Internet, she said. The quality of such service is too shaky for such widespread deployment. But AT&T is already using voice-over-IP for its internal communications system, Earley said.
The investment in Net2Phone is just one example of how AT&T is tapping into the Internet, Earley said. On Thursday, the long-distance giant and British Telecommunications PLC (BTY) said they would invest $2 billion in linking 44 Internet data centers in 16 countries. These centers will host Web sites and provide other Internet services.
As more and more companies move in-house computer functions to servers based in data centers, these centers will effectively become distribution warehouses, Earley said.
For all the investment and innovations in the Internet over the last five years, there's still a long way to go before the Internet's potential is realized, Earley said. She cited a recent Zona Research report, which said that companies lost a total of $4.4 billion in potential revenue last year because their Web sites couldn't be downloaded to personal computers quickly enough.
One way companies can improve the speeds of their Web sites is to move content closer to the "edge" of the network, Earley said.
"You don't necessarily have to trade off the richness of your site in order to get the reach," she said.
Companies should also spend more time improving the customer experience on their Web sites, and spend less on advertising gimmicks to draw new customers. Earley cited a study which found that every dollar invested in Web site user experience would yield $60 in revenue, while each advertising dollar yields only $5 in revenue.
Despite her advice, Earley admitted she doesn't have all the answers about which direction the evolution of the Internet will take. "I wake up every morning saying, 'What announcement's coming today? Is someone going to destroy my lead in technology?"' she said.
-Peter Loftus, Dow Jones Newswires; 201-938-5099; peter.loftus@dowjones.com
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