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AT&T Boss Expects Net
Access Victory
Chairman believes policy
should be set at the
national level
Deborah Solomon, Chronicle Staff Writer
Monday, July 19, 1999
On a recent visit to San Francisco, C.
Michael Armstrong, the chairman of
AT&T, seemed remarkably calm about
a controversial issue that's pitted his
company against America Online in a
nasty and public fight.
Last month, a federal judge in Portland,
Ore., ordered AT&T to open its cable
lines to competitors in that city so
others could offer high-speed Internet
access over AT&T's lines. AOL, along
with other Internet service providers, is
a vocal proponent of ''open access''
which would allow the giant service to
give its customers a superfast on-ramp
to AOL's content and the Internet.
But Armstrong, the visionary leader of
what will soon be the nation's largest
cable operator, is unfazed.
''I'm not concerned this ruling will
stand,'' Armstrong said. ''It's against the
law, it's against any rational behavior
and it's against the contract we have
with the city of Portland.''
In an interview with The Chronicle,
Armstrong said individual cities should
not be allowed to impose ''open
access'' because it will lead to chaos
across the country.
AT&T has appealed the federal judge's
decision, which allows Portland to
force AT&T to share its cable lines
with other companies that want to offer
high-speed Internet access to
consumers. Various communities,
including San Francisco, are
considering mirroring Portland and
adopting an open access clause. On
Tuesday, Florida's Broward County
became the second community in the
United States to impose open access on
AT&T.
Armstrong, whose company is fighting
open access in San Francisco and
across the nation, said any policy
should be set on a national, not local,
level.
''If cable policy is defined at the
munici-
pal level, the result of that would be
chaos in this country,'' Armstrong said.
Maintaining exclusive ownership of the
cable lines AT&T got when it bought
Tele-Communications last year is
important to Armstrong, who is trying
to build a complete communications
company. With TCI, AT&T serves 17
million cable customers. The
company's recent purchase of
MediaOne, which has 8 million
customers, will give AT&T potential
control of about 35 to 40 percent of the
U.S. cable TV market.
While AT&T is best known for
long-distance service, the company is
moving into a variety of
telecommunications arenas, such as
local phone, high-speed Internet access
and digital TV.
Having sole ownership of those cable
pipes will help AT&T in its plans to
offer packages of telecommunications
services at discounted prices. So far,
AT&T is the only major player that's
able to offer local phone,
long-distance, cable TV, Internet and
wireless service to customers. That
gives it a competitive edge -- one that
AT&T is not willing to let go of easily.
The company is currently conducting
trials of local phone service in
Fremont, using TCI's cable TV lines
instead of traditional phone wires to
transmit calls. And it already offers
ExciteAtHome cable Internet service in
dozens of communities across the
country.
The cable telephone trial will expand
to about 10 communities over the next
two years and should be rolled out on a
wider scale by 2001.
Getting local phone service to
customers through cable is one of the
primary reasons AT&T bought TCI for
$48 billion last year. So far, Armstrong
said, response to the cable telephone
service in Fremont has been positive.
''Our response rate, where we call up a
consumer and they say 'yes' to a
service, is three to five times the
telemarketing rate we've ever
experienced anywhere else,''
Armstrong said.
But in addition to voice, AT&T wants
to use TCI's pipes for services like
high-speed Internet access and
interactive TV.
''God did not say to AT&T, 'Voice is
your destiny,' '' Armstrong said. In fact,
Armstrong predicts that voice will
decline as AT&T's main area of
operations. While voice service
accounts for 75 percent of AT&T's
business now, Armstrong said that
amount will fall to less than one-third
of the company's business within five
years.
But this change will not come quickly
or cheaply.
In addition to the money AT&T spent
on TCI, it is also paying $58 billion for
the MediaOne cable company.
Armstrong said AT&T will also spend
billions upgrading the cable networks
across the country.
That should bode well for the Bay
Area, especially San Francisco, which
has an older TCI system.
By the end of this year, Armstrong said,
60 percent of TCI's plants will be
upgraded, and 80 to 85 percent will be
upgraded by the end of 2000.
''I believe both people here in San
Francisco and other AT&T territories
are going to see an appreciable
improvement in service,'' he said.
But he admits there will be a lag time
between perception and reality. TCI's
reputation for inferior service will take
time to repair, he said.
''We still have a ways to go with the
perception of the old TCI television
service,'' Armstrong said.
Still, Armstrong remains convinced that
AT&T customers will soon be
clamoring for all the company's
services -- especially high- speed
Internet access.
''Cable permits consumers to go faster
and pay less and be online all the time.
I don't believe it's going to be that tough
a sell once we get the infrastructure in
place,'' Armstrong said.
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07/05/1999 - Debate
Swirls Over How
Consumers Access
Internet.
06/13/1999 - Cable on
front line of broadband
war .
03/05/1999 - S.F.
Attorney in D.C. Pushing
Net Access.
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