AT & T Wireless makes house calls
By Phil Harvey
Redherring.com, July 20, 2000
REDMOND, WASHINGTON -- AT & T Wireless (NYSE: AWE), a wholly owned subsidiary of AT & T (NYSE: T), is using fixed wireless technology to make a big push into the voice and data services market for residential and small business customers.
On Wednesday, the company announced that its AT & T Digital Broadband service -- which provides consumers with high-speed Internet access and up to four lines for voice calling -- is coming to San Diego this fall, with service to Los Angeles, Houston, and Anchorage, Alaska, following soon after. By 2002, AT & T Wireless expects to bring the service to some 15 million homes in 40 markets across the U.S., according to the company.
The bundle of services the firm plans to deliver includes local phone service, which AT & T hasn't been able to offer since its telecommunications monopoly was broken up on January 2, 1984. Legally, AT & T can do this because its new fixed wireless technology allows it to reach consumers' homes without having to yield to the regional Bell operating companies, which are the gatekeepers to all local phone service in their respective regions.
This coming multi-city rollout follows AT & T Digital Broadband's initial success in the cities of Dallas and Fort Worth, Texas. There, some 2,000 customers have signed up for the service since its introduction in March.
BUNDLING UP
What AT & T Wireless hopes to do is reach residences not currently covered by its cable business, which already offers cable TV and high-speed Net access, but not phone service.
There are several reasons why carriers such as AT & T want to get consumers to sign up quickly for bundled voice and data services. First, and perhaps most obviously, AT & T wants to pry lucrative customers from the grasp of the Baby Bells and competitive local exchange carriers.
Second, it makes it easier for carriers to continue to add e-commerce and software-based services incrementally as the consumer needs them. That line of business will be particularly enticing for home offices and small businesses.
Also, the ability to add new services increases the consumer's dependence on one firm, putting the carriers well outside the financial danger zone of offering just commodity Internet access or cheap long-distance phone service.
CASH HOLE OR CASH COW?
Naturally, other providers aren't likely to take this news lying down. "Ma Bell will need to move quickly, as MCI Worldcom (Nasdaq: WCOM) and Sprint PCS (NYSE: PCS) are joined by several other providers in broadband Internet access and bundled voice and data service trials," writes Current Analysis principal Fred McClimans in his March analysis of AT & T's fixed wireless strategy. SBC Communications (NYSE: SBC)'s Project Pronto, a $6 billion initiative to upgrade its local phone network, is also a potential competitor because SBC is "itching to put its new fiber networks to good use," Mr. McClimans writes.
It remains to be seen how strong demand for the service will be, and whether AT & T's service and technology can meet the demand when it shows up. That said, just the threat of something so easy and inexpensive for consumers should be enough to encourage local voice and data providers to do something they've yet to do: Treat residential customers as valuable assets, rather than deleterious parasites.
NUTS AND BOLTS
For each home that subscribes to its service, AT & T Wireless installs a pizza box–shaped outdoor antenna and an indoor unit that's just a bit larger than a standard VCR.
With its equipment in place, AT & T can provide consumers with up to four voice lines for their local and long-distance calling. With the proper networking cards installed, consumers could also connect up to five computers simultaneously to the Internet, at speeds of up to 512 kbps, without interrupting their voice service.
This little trick is done using technology based on the Home Phoneline Networking Alliance specification, which provides a 1-Mbps local-area network using a home's existing telephone wiring.
But, for all its promise, consumers are right to be skeptical about AT & T's being able to match all the services they currently buy from different landline providers. After all, AT & T (and its subsidiaries) is betting that fixed wireless technology, an over-hyped technology if ever there was one, will provide "always-on" voice and Internet service.
Translation: AT & T is telling consumers that its equipment and its connection to their homes will be so durable and reliable that consumers won't notice the difference between wireless and landline.
AT & T'S OFDM
That's a big claim. But at first glance, AT & T technology seems good enough to back it up. During a tour of the firm's engineering facilities at the company headquarters here, John Saw, vice president of platform engineering for AT & T Wireless, explains that AT & T Digital Broadband uses a proprietary technology called Orthogonal Frequency Division Multiplexing (OFDM).
One of the main attributes of OFDM is that it does not require a line of sight. That is, unlike some microwave and laser technologies, the area between the base-station transmitter and the receiver (at the customer's home) does not have to be free from obstructions, such as fog, mist, trees, or buildings.
AT & T is also making the service easy to try by not making consumers buy equipment or sign service contracts that lock them in for an extended period of time. On the other hand, the absence of a service agreement does free AT & T of responsibility should its voice-call quality drop or if its Internet access never reaches the 512 kbps that AT & T's network is capable of delivering.
TORTURE-TESTED GEAR
Aside from the service itself, the equipment's durability should also concern consumers. However, Harry McLean, the engineer in charge of AT & T's fixed wireless reliability testing, says there's little need for worry there.
"We really beat the living daylights out of these products before they're shipped," says Mr. McLean, who showed off a testing chamber that can simulate temperatures between -100 Celsius and +200 Celsius.
Mr. Saw also points out that the antenna that sits outside a customer's home is equipped with a battery backup. This prevents the loss of basic telephone service in the event of a power failure.
The first versions of the equipment were designed and built by the 200-plus engineers in AT & T Wireless's campus here. But as it moves into new markets, AT & T Wireless will design and test the equipment, but will let others manufacture it.
Lucent Technologies (NYSE: LU), for example, said Wednesday it received a $250 million contract to build equipment for AT & T's fixed wireless division. Executives with AT & T Wireless say that they're still in negotiations with other equipment makers.
At the present time, it costs AT & T about $750 in equipment costs per each fixed wireless service subscriber, Mr. Saw says. These costs will drop considerably, he says, as AT & T Wireless strikes deals with other equipment makers.
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