AT&T-British Telecom Venture Faces Dogfight For Network Contracts
July 28, 1998 11:27 AM
By Gautam Naik, Staff Reporter of The Wall Street
Journal
LONDON -(Dow Jones)- When Xerox Corp. (XRX)
wanted to build a high-speed telecommunications
network to link its document technology centers around
the world, two giant telecom alliances, Global One and
Concert, competed for the contract. Who won? Equant
NV.
Expect more of the same in the months to come. While
big-name phone carriers such as AT&T Corp. and
British Telecommunications PLC are seeking to lure
multinational customers by piecing together
globe-girdling alliances, companies such as Xerox are
instead handing their lucrative accounts to Equant (ENT)
and other newcomers to the telecom business.
By choosing little-known Equant, whose service runs on
an airline flight-reservation network, Xerox (XRX) was
sending a clear message: It wanted a system that
worked, and didn't care who provided it.
"Equant has a uniform network across the world, and
their prices were 30% cheaper than Global One or
Concert," said Arnold Palmer, chief engineer for
networking at Xerox. "Also, their ability to provide a
connection in an offbeat place was phenomenal."
There is no question that the planned $11 billion alliance
between AT&T (T) and BT (BTY), unveiled Sunday,
will up the ante for underperforming alliances such as
Global One, a partnership between Sprint Corp.,
Deutsche Telekom AG and France Telecom SA. But
like Global One, the mammoth BT-AT&T venture faces
a number of rivals, including non-telecom players such
as Electronic Data Systems Corp. and International
Business Machines Corp.
"We're profitable and gaining market share" at the
expense of Global One and others, said Chris Taylor,
business-development manager for IBM's global
network. IBM's system, which grew out of the internal
phone network linking Big Blue's vast empire, today
snakes into 30,000 customer facilities in 900 cities
world-wide.
IBM (IBM), Equant and other nontraditional companies
say their biggest advantage is that they own their
networks, which ensures clients hassle-free, seamless
transmissions. Traditional alliances, by contrast, have put
their faith in flimsy "distributorship" agreements with
partners that use incompatible phone switches and billing
systems.
Consider Reuters PLC. About two years ago, the
British news-gathering giant asked Global One to
provide a high-speed data link between Paris and
Frankfurt so its reporters could file their articles
electronically. When installed - two weeks late - the link
didn't work, said Don Overton, an executive who
oversees aspects of Reuters's data network. The
problem: Certain equipment at the Deutsche Telekom
end was incompatible with the same gear at the French
end. Reuters canceled the link in a year's time.
"We don't want to get involved with Global One
anymore," Overton said. A Global One spokesman
acknowledged the venture had encountered difficulties in
providing certain high-speed connections, "but we're
implementing a new network that will take care of the
problem," he said.
Alliances are also notoriously fickle. After Cable &
Wireless PLC recently teamed up with Telecom Italia
SpA, key parts of the deal collapsed within weeks.
Spain's Telefonica de Espana SA has joined and then
left three separate partnerships.
"We're more stable than these alliances," said IBM's
Taylor. "One minute BT is talking to MCI, the next it's in
bed with AT&T," he adds. "If you were a multinational,
you wouldn't know which peg to hang your hat on."
IBM and others may also be better placed to exploit
changes in how multinationals want to be served.
Increasingly, they no longer want phone carriers to
simply provide bare-bones phone links for voice or data
calls. Instead, they see telecommunications as a
"solution" to boost productivity. Unfortunately, most
telecom alliances aren't geared up for this approach;
they still see themselves as utilities providing a pipeline.
The BT-AT&T venture will also battle with more
conventional challengers such as WorldCom Inc.
(WCOM), which last week unveiled a roughly
2,000-mile network linking several European cities.
Access to its own network means that WorldCom won't
have to pay hefty fees to various distributors - savings it
can pass on to multinationals.
BT and AT&T have a similar plan. "What didn't work in
the other alliances, we've corrected that," said BT's
CEO Sir Peter Bonfield. John Zeglis, president of
AT&T, added: The AT&T-BT alliance "has more scope
and ambition than either of us had in our previous
alliances. The bar has been raised permanently."
Copyright (c) 1998 Dow Jones & Company, Inc.
All Rights Reserved.
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