AT&T Deal Cheers Street on Vendors
By LESLIE ELLIS
New York -- Cable's technology suppliers were walking on air last week, when their stock prices received an unanticipated boost from AT&T Corp.'s announced merger with Tele-Communications Inc. Wednesday morning.
Across the board, from transmission-equipment suppliers to set-top and cable-modem manufacturers, hardware stocks soared, with some vendors enjoying lifts of more than 10 percent at press time last Thursday.
Fueling the hardware-stock lift was market sentiment that TCI -- admittedly a laggard in its network-upgrade plans, when compared with other MSOs -- now finally has the cash that it needs to shift upgrades into high gear.
"This certainly takes the brakes off the buying momentum," said Steve Necessary, president of Scientific-Atlanta Inc.'s digital-video group. "It takes away a lot of the uncertainty and the ambivalence as to whether or not these advanced networks and services are really going to happen ... It's a great affirmation for broadband."
David Robinson, vice president and general manager of General Instrument Corp.'s digital-video-business unit, said, "This is great for our transmission business, and it really puts an exclamation point on our digital set-top product -- especially the one with the built-in cable modem."
Notably, TCI, and now AT&T, will own up to 18 percent of GI, contingent on shipments and the sale of a part of TCI's National Digital Television Center.
That's because AT&T chairman Michael Armstrong repeatedly expressed his interest in IP (Internet-protocol) telephony -- which, by its very nature, runs on data platforms, like cable modems -- as the anchor product in AT&T's consumer-product mix.
"Now I understand why TCI was grilling us so hard about IP-telephony products," said William Markey, director of marketing and business development for 3Com Corp.
Markey said 3Com is involved in separate IP-phone projects with TCI and AT&T, the latter involving an IP-phone-technology "bake-off."
"It's all coming together," Markey said. "This is an astoundingly big vote for cable as the best method of broadband access.
"When you look at the new company, and you tally up the services, AT&T can get to you over your TV, with long distance, with local phone, cellular phone, with high-speed data -- everything short of a foot massage," he cracked.
John Malone, chairman and CEO of TCI, said during the AT&T/TCI press briefing here that commercially practical IP-phone services are probably 18 months away.
In the meantime, analysts and vendors expect TCI's network-upgrade spending to accelerate by as much as 10 percent to 20 percent.
"All of our rebuilds are over by the end of the year 2000. It's increasingly front-weighted," said Leo J. Hindery Jr., TCI's president and chief operating officer. "There will be some limitations in how realistically we can accelerate it, just because there is a lot of physical work to accomplish, but I can see a 10 percent to 20 percent acceleration over those time frames."
Malone noted that TCI has currently outfitted about 60 percent of its plant with fiber-to-the-node gear, and that it will end the year with 30 percent of its systems capable of two-way services, like high-speed data and IP phone.
TCI put some turbo into its network upgrades when it decided to install reverse amplifiers in plant serving 3.9 million homes.
Before that, TCI's upgrade plans were spotty, at best, and they clearly lagged behind those of other MSOs, like Time Warner Cable, Cox Communications Inc. and Comcast Corp. -- all of which are at least three years into aggressive bandwidth expansion of two-way upgrades.
But now, with AT&T's deeply lined pockets, coupled with a market pull for two-way services, TCI's network picture is about to change.
"When you do that [upgrade plant], you hook your phone line to the back of the converter, and it becomes a dual line -- you essentially have full connectivity into the telephone system within the household," Malone said, describing how IP services will come to play in homes.
Before homes are truly marketable for a "whole-house" communications approach, however, IP-telephony gateways and adapters have to be built, and intelligent devices in the home, like TVs and VCRs, have to be networked together with "fire wire" so that data can pass among them.
In-home wiring issues picked up momentum outside of the cable industry last week, when one-dozen computing and communications companies -- including AT&T Wireless -- aligned under the "Home Phoneline Networking Alliance" (HomePNA).
Other participants included 3Com, Compaq Computer Corp., Hewlett-Packard Co., IBM Corp., Intel Corp. and Lucent Technologies. The group aims to work on high-speed home-networking solutions over existing home telephone wires. The first item on the HomePNA to-do list: the development of a specification for "industrywide standards" that allow home networks to operate over common telephone wires at speeds of 1 megabit per second, involved executives said in a prepared statement.
Industry executives involved with PacketCable -- the industry's approach to getting packetlike services based on IP into their customers' homes -- have said that the IP future is really more of a 1999 or 2000 play.
But AT&T president John Zeglis, who will become chairman and CEO of AT&T Consumer Services, emphasized that IP is AT&T's technological choice for phone service, and not circuit-switched techniques, like HFC (hybrid-fiber coaxial) phone products.
"There's no question that we want to get to IP telephony and the packet world as soon as we can," Zeglis said. |
