SBC Spars with AT&T in Fremont
cableworld.com
By Karen Brown
SBC Communications Inc. has launched a preemptive strike against AT&T Broadband and Internet Services' fledgling cable telephony offering by choosing Fremont, Calif., as one of two initial rollout markets for bundled telephone, DirecTV and Internet services.
With everyone from Paul Allen's Vulcan Ventures, the Baby Bells, RCN Corp., and AT&T Corp. looking to get into the bundled service market, SBC's announcement came as little surprise. However, San Antonio, Texas-based SBC's choice of Fremont and Dallas spices up things a bit, industry watchers, analysts and the players themselves agreed last week.
Analysts said SBC clearly is taking off the gloves and targeting AT&T, which has invested heavily in cable properties such as Tele-Communications Inc. and MediaOne Group as it seeks to compete with companies like Pacific Bell and Southwestern Bell, which are owned by SBC.
In particular, Fremont has developed into somewhat of a petri dish for the telecommunications industries. While Ma Bell is not bundling in Fremont, it did choose the town for its first telephony-over-cable service, currently underway. "It makes good sense to be in Fremont because it will be interesting to see how the competition plays out," said Robert Boyanovsky, director of offerings management for SBC. "We had to pick a launch city and there is competition there, so why not meet the threat directly in the market?"
And while AT&T has begun testing local phone service using fixed wireless antennas in Dallas, its long-time sparring partner, SBC, last week launched five configurations of bundled services in the city.
In Fremont, the SBC package, dubbed "Simple Solutions," will include local phone service, local toll service, wireless, dial-up Internet or high-speed DSL Internet access, a second phone line and DirecTV programming with 210 channels. The same package is being offered in SBC's Dallas market.
Packages start at $34.95 a month for local phone, voice mail and caller ID service, as well as three other services such as call waiting and call forwarding. An $83.95 bundle includes DirecTV, a digital subscriber line, caller ID and a choice of three other phone services, a 31% discount over buying standalone service. Local phone service alone is $11.25 a month.
Boyanovsky points out that unlike the limited trial AT&T is conducting in Fremont, SBC's move is a full-scale rollout. By the end of the year, SBC hopes to expand the Simple Solutions packaging to 10 markets.
AT&T spokesman Andrew Johnson downplayed SBC's action, saying it will have little effect on AT&T's strategy for cable telephony rollouts. AT&T does offer video, Excite @Home cable modem service and long-distance telephone services separately in Fremont, with no offerings yet bundled.
"We have a lot of field left to be plowed in Fremont and we will continue with our course of action," he said. AT&T plans to continue with cable telephony tests in 10 cities within a year.
One critical hole for the SBC package is long-distance telephone service. SBC is prohibited from offering long distance service by federal law until it has taken steps to open its own local markets to competitors.
Boyanovsky said the absence of long-distance service is an important piece of the puzzle. The telco is hoping to get approval for long distance in one of its seven operating states by late this year or early 2000.
As for whether customers will buy into a bundle of services, Boyanovsky pointed to recent Forrester Research Inc. studies that put the customer interest number at about 33%. But internal SBC studies put that number closer to 70%, he noted.
Even if the number proves closer to 30%, that's a big market given SBC's combined phone lines at about 23 million.
"That is a big piece of the pie - 30% of 23 million access lines is a lot and they tend to be high-quality customers," Boyanovsky said.
Still, the key to bundling will be quality of service, said Bruce Kasrel, senior analyst for Forrester. Contrary to Paul Allen's vision of a wired world with companies providing all services, Kasrel predicts some companies will have to specialize in their stronger product offerings and forge sell-through agreements with other companies that specialize in other services.
"I think that's what's going to have to happen," he said. "If you have really good television service and really crappy wireless service, that's really going to limit you," he said.
SBC's bundling efforts have been under way since 1996, company officials said. It spent millions to upgrade computers so it can handle the aggregated billing. AT&T also has spent three years and millions of dollars implementing its bundled-service program.
Meanwhile, in Fremont, the idea of being a telecommunications battleground is somewhat amusing but not mysterious for Mayor Gus Morrison.
"We're pretty easy because we are new," he said. "Much of our utilities are already underground. We're only 40 years old and we're in the Silicon Valley, so people understand the value of technology."
(August 30, 1999)
|
