JEM, here's an excerpt from a CED Magazine article that speaks to the double-sided implications of the ATT-TCI Deal, and brings in the prospect of a VoIP offering to users of value added services. In this case, @Work.
The excerpt touches on the subtle means by which VoIP may be leveraged, possibly used as a "differentiator" among providers of otherwise like service,sand how @Work and others may come to deploy it over time, in ways that circumvent the traditional means of product rollouts, namely by integrators and Data Clecs, as opposed to the ILECs themselves.
It's also interesting to see how a startup DSL service provider like NorthPoint can crop up out of nowhere, it seems, and have a peripheral impact on some of the factors in such a large deal as T/TCOMA's.
Regards, Frank C.
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C E D M A G A Z I N E
By Fred Dawson, Contributing Editor
excerpt begins:
"Our optimum transport medium is HFC," said Eric van Miltenburg, director of business operations for @Work. "But, while @Home has more than a dozen affiliates on the consumer side, we only have three on the commercial services side." He cited New York, Boston, Washington, D.C. and Los Angeles as cities, among many others not named, where SDSL will make widescale commercial access possible for @Work. "We don't have an opportunity to leverage HFC in these areas," he said.
NorthPoint, now operating in the Bay Area and Los Angeles with plans to launch in seven to 10 more Tier One markets before the year is out, also offers @Work reach it lacks in its affiliation with Teleport Communications Group, the nation's largest competitive local exchange carrier which is soon to become a unit of AT&T.
"We're using TCG largely to deliver services over traditional T-1 and fractional T-3 connections, but, as TCG's management has acknowledged, TCG hasn't had a sharp DSL focus, and so doesn't give us the reach we need to get to the smaller businesses," van Miltenburg noted. While the plans to purchase access transport over NorthPoint's SDSL facilities were formulated prior to announcement of AT&T's agreement to acquire TCI, @Work worked closely with TCG and "gave them a heads up" on the move, he added.
Like HFC, DSL connections open a means of delivering packetized voice services, which is something @Work is likely to do along with most other high-speed data suppliers sometime over the next two years or so, said Don Hutchison, senior vice president and general manager of @Work. NorthPoint President and CEO Michael Malaga noted that by optimizing its regional network architecture for delivery of IP (Internet Protocol) services, the company has made its facilities "IP voice ready," leaving it up to @Work and other data service providers to decide when they'll get into the voice services business.
Officials stressed the deal, which includes a small equity stake in the San Francisco-based startup, was undertaken not to compete with cable but to give @Work the broad-based access it needs to the business community. Nonetheless, with cable companies of every description moving to target businesses with high-speed data capabilities, there was little reason to doubt that @Work would find itself competing with non-affiliated cable companies for commercial accounts as NorthPoint deploys its SDSL facilities across the country.
In this sense, @Home, in which AT&T will be the largest shareholder with a 39 percent stake if the TCI deal goes through, offers a glimpse at the new dynamics that might prevail in the aftermath of the acquisition.
@Home, now holding affiliate agreements with MSOs representing 50 percent of homes passed in North America, could become a major force in AT&T's efforts to bring cable partners into its IP telephony fold, or it could become a threat to those companies who choose not to extend the affiliation in this direction.
One bellwether as to future directions might be the outcome of ongoing discussions between @Home and the other leading cable data entity, the Road Runner joint venture between Time Warner and MediaOne Group. Hindery said he would like to see merger discussions renewed, which were called off in the spring in favor of simply pursuing technical integration. "I'd strongly encourage (such a merger)," he said. "I just haven't had time to pursue it."
Integration However it is done, tight integration of cable's backbone networks and regional data centers has been a high-profile goal of industry strategists since last summer, when the Cable Television Laboratories executive board created a task force to achieve the goal under the leadership of Time Warner Cable CEO Joseph Collins. Such linkage, going beyond simple packet exchanges or "peering," would ensure compatibility across multiple protocol layers, affecting how services are provisioned, managed and billed, as well as the way traffic is handled.
Interests on the Road Runner side did not react warmly to Hindery's enthusiasm for a full merger. An executive close to the Time Warner/MediaOne Road Runner affiliation suggested a deal, if feasible at all, would be hard wrought and certainly no easier to achieve than it was when the earlier talks were terminated.
"Obviously, there would have to be a lot of heavy lifting to get a deal done at this point," the official said, noting that Road Runner has gained significant strength in the wake of $212.5-million investments from Microsoft Corp. and Compaq Computer Corp. "Leo should have learned by now that the worst thing you can do is talk about dealmaking in public before there's an agreement."
But data network integration, whether by merger or affiliation, now appears to represent the industry's best shot at preventing a splintering into competing forces on the all-important data side of the business, where network support for IP telephony represents an opening into a vast range of advanced services over the broadband platform. With @Work moving into Road Runner territory via NorthPoint's DSL facilities, it's hard to imagine Road Runner strategists will confine themselves to their affiliated HFC markets as pursuit of advanced service opportunities becomes top priority, unless there's an integration agreement between the two forces that sets de facto boundaries on each others' turfs.
"Time Warner is a content company, which gives us a somewhat different perspective on where the opportunities lie than might be the case for a more facilities-based service company like AT&T," said a Time Warner executive, speaking on background.
"We're very happy with the position we're in."
Telco alliances
With Armstrong affirming intentions to proceed with deployment of other facilities-based strategies in markets where it doesn't have cable access, cable companies not willing to cut a deal may well go looking for their own big telco alliances, said Merrill Lynch First Vice President Jessica Reif Cohen in a report issued after the AT&T/TCI announcement.
"Rapid consolidation is a likely outcome over the next year or so as MSOs will seek to dramatically increase their scale in hopes of attracting a major suitor," Cohen said. Some MSOs, such as MediaOne, are already large enough to attract such players, she added.
Armstrong and Malone readily attested to feeling such urgencies in agreeing to do their deal.
"Time was closing in on us," Armstrong said, in reference to his company's need to achieve broadband facilities-based access to the local marketplace.
"It was clear that, to implement (TCI's full service) strategy, we were going to need a powerful company to help us do this," said Malone.
A comparable sense of urgency was hard to discern in the taciturn to non-existent comments of MSO executives outside the AT&T/TCI camp. But it could quickly prove to be catching.
AT&T/TCI: Taking a close look (Will the deal be a force for creation or destruction in the cable industry?)
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