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AT&T Wheels More IP Deals
By Joshua Cho
AT&T Corp. last week continued to chip away at its long-term strategy for the Internet and local telephony, with an announcement that it would pony up $5 billion for IBM's global data-networking business.
At the same time, more MSOs last week hinted that they were in talks with the telco to create ventures and partnerships that would allow cable operators to offer local telephony as part of a bundled package of services.
Indeed, AT&T's stock jumped 6% to $71 Dec. 9 on reports that it was nearing completion of a joint venture deal with Time Warner Inc. The deal reportedly would give AT&T 75% of the venture and Time Warner 25%.
Both companies declined comment. "We don't usually permit our temperature to be taken on a daily basis," a Time Warner Cable spokesman said, after reconfirming that the MSO was in telephony talks with AT&T, as first stated by Time Warner chairman Gerald Levin in October at a quarterly earnings luncheon with analysts. "It's really inappropriate for us to be giving daily or weekly updates."
And an AT&T spokesman said, "Normally as a matter of policy we don't comment on rumor."
Meanwhile at last week's PaineWebber media conference in New York, Cox Communications, Inc.'s SVP-finance and CFO Jimmy Hayes said, "We would entertain discussions with AT&T. We would listen to what they have to say."
At the same conference, Century Communications Corp. said that it was in discussions with AT&T regarding bundling of products in the Los Angeles market, in which Century plans to offer digital cable and high-speed data service, the latter of which will be launched in late February.
"Bringing that name (AT&T) into the business brings a quick upside for getting into the (telephone) business," said Scott Schneider Century's SVP, CFO and treasurer.
As part of a joint venture that Century entered into with Tele-Communications Inc., the two MSOs will be combining their operations in Southern California. Century will own 75% of that partnership, according to Schneider. And with the impending merger of TCI with AT&T, the deal "introduces AT&T as a partner in the cable operations," Schneider said. "This market (Los Angeles) will be consolidated. And it cannot be consolidated without Century as a participant."
Comcast Corp. vice chairman Julian Brodsky, who also spoke at the PaineWebber conference, did not say his company was speaking with AT&T. However, he said, "It's no secret in the press that AT&T has been in almost continuous discussions, as have others, with all the major players in the cable industry."
Alchin alluded to renting out Comcast's pipes as a wholesaler as an option. Comcast currently does not have any significant telephony strategy other than a telephone system it will inherit when it completes the acquisition of Jones Intercable early next year. However, Brodsky said that when the company does get into telephony it will be through IP technology.
"Folks such as AT&T have come to the same conclusion," Brodsky said, regarding the choice of IP.
AT&T said that it plans to initially roll out circuit switched telephony over TCI's cable systems in the San Francisco Bay area and possibly other markets and then migrate over to an IP-based delivery system in any new markets it enters. It will then go back and determine whether it makes sense to convert those early markets from circuit switched to IP or just continue to use the older technology, according to Marty Davidson, AT&T technical business development engineering and lab manager.
A consumer launch date of telephony over cable systems has not yet been released. However, industry analysts expect limited roll outs of circuit switched telephony to begin throughout next year. IP telephony, on the other hand, is not expected to become a fully viable until two years from now, industry experts believe.
(December 14, 1998)
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