a take away re at&t / long distance exit
Om Malik on Broadband
7/22/04
(1) Ma Bell gets serious about VoIP
Ma Bell, a very weakened Ma Ball in all honesty, is betting that VoIP would be its white knight. Talk about an aging crone dreaming of a 20-something stud-muffin. In the quarterly conference call today, AT&T CEO Dave Dorman said that the company is selling VoIP service in 100 markets without spending anything much on marketing so far.
"Thus far what we've done is shakedown our operating systems, our provisioning, billing, care systems, so that we can be ready to scale. We feel like we are. We have plans for promotion for the VoIP product through the second half of the year, based on achieving this rollout. So, over the course of the late summer and the fall, we will be promoting the VoIP product. At this point we've not built the plan for next year with respect to what we'll spend on VOIP, or other services."
On the business side, AT&T is planning on teleworker trials during this quarter in Australia, Hong Kong, Singapore and the UK.
"If you think about Voice over IP as a sort of a garden start opportunity, we do believe that voice is going to grow as broadband penetration grows. It will help broadband penetration increase. It is an application layer service, so it exists in the same realm that e-mail does, search and other hosted applications that we're familiar with from people like Yahoo, Google and the like."
And while he was swinging the bat, Dorman decided to hit one on Vonage's knees.
"I do think it also suggests that as people think about the VoIP product, where the VoIP product started out at the consumer price point has already seen price competition emerge pretty dramatically. If you're thinking that you're going to have a Consumer VoIP product out there that's going to generate $40 per sub you're probably kidding yourself. So whether you're a cable company or you're a telephone company I think you've got to reassess what the retail price point for voice services is going to be in three years and look at your investment against that and understand very carefully whether you have an asset base that can support that kind of price point."
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(2) says Sayonara to the consumer
In what is a watershed moment in the history of telephone business, the company that literally invented and made consumer phone service decided to bow down to the regulatory pressure and said sayonara to Joe Blow. AT&T is no longer going to spend money on acquiring consumers as customers. AT&T CEO David Dorman was quite clear in putting the blame on the regulators who have basically handed his company a mortal blow.
"AT&T will now focus its full energies on the Business Services segment where we are the clear industry leader and where we have the most certainty. As a result, AT&T will no longer compete for Consumer local or stand alone long-distance customers. While we provide our existing customers with quality service, and they can continue to expect that from AT&T, we will not invest additional dollars on acquiring new customers, and we will not invest to fight legal battles that no longer make sense given the dramatic shift in the government's position on local market competition."
Well things have changed for the erstwhile monopoly which has seen its prestige and business being clawed away by upstarts and its own progeny. Unfair bias towards the Bells has only made life tough. But nothing compares to the fact that voice is a commodity and will soon become an add-on to lure dollars from other services.
"The fact is, the residential telecom market has been transformed by competition to a market of bundles with more than 40 percent of American households now taking some form of bundle service, and the numbers are growing rapidly. Obviously, this is a historical shift that has broad reaching implications not only for AT&T, but the industry at large. While nearly 75 percent of our revenue now comes from AT&T Business, the AT&T brand has been known throughout the world as a premiere consumer telecom provider. However, we determined that without the support of the regulatory environment to allow for evolution to facilities-based competition, our focus for the future needs to be the business market where we have clear and differentiated advantages versus our traditional IXC competitors and the RBOCs."
With all the competitive pressure in the business markets, it is surprising that AT&T is making the move now. I am not sure how much money they can make from that business. It is truly a muddled strategy, and there are going to be debt-related implications. Fitch has already reduced the company's debt to junk status. Imagine, the company that made up the portfolio of widows and orphans is now "junk." The company is counting on VoIP, and I am not sure that is really going to fly. It is still a long ways from proliferation of VoIP, especially when companies start selling $10 unlimited voice plans along with DSL service.
"AT&T has a solid future ahead with sharper focus on providing leading-edge networking and communication solutions to business customers domestically and around the globe."
So what is my take: by being out of the long distance, AT&T has cleared the regulatory roadblock and is now ready to be acquired. BellSouth and Verizon will not have any problems in stepping up to the plate. So as they say, goodbye Ma Bell. |
