AT&T / Evslin butt'n heads? AT&T 's Armstrong jumps on IP
October 12, 1998 InfoWorld Electric via NewsEdge Corporation
: NEW YORK -- Internet World here this
week seems to be the place for chief
executive officers to declare they are
betting their companies on the Internet --
and keynote speaker Michael Armstrong, CEO
and chairman of AT&T, on Thursday was no
exception.
Promoting the AT&T Global Clearinghouse for
voice calls over IP networks, Armstrong
declared that "We are making a multibillion
dollar bet on the future of IP technology."
It is a familiar refrain. On Wednesday, Oracle
CEO and Chairman Larry Ellison said he was
"betting the company" on the Internet.
But where Ellison was aiming Oracle database
efforts at businesses, AT&T's services --
even those geared for other carriers --
should have a more direct effect on a wide
range of consumers and businesses:
telephone rates should go down, according
to Armstrong.
The AT&T unit is an interexchange carrier
offering routing management and billing
services for telecommunications businesses
carrying voice-over-IP networks in 140
countries throughout the world, Armstrong
said. Interexchange operators carry and
manage the routing of calls among different
local networks. Fifteen companies are using
the service now, Armstrong said.
Thursday's launch of the business is actually
an announcement in a very public setting of
a business that quietly got under way earlier
this year. The Global Clearinghouse concept
was first discussed with industry insiders at
least as early as March, and some
Clearinghouse services were launched in July,
AT&T officials acknowledged Thursday.
"This reannouncement ... means that AT&T
is getting more serious about it," said Tom
Evslin, chairman and CEO of ITXC, an
interexchange carrier he founded last year
and a future competitor of the new AT&T
business.
The clearinghouse will act as a go-between
among ISPs and telecommunications
authorities, eliminating the need for ISPs to
sign contracts with every other carrier with
which they interconnect.
The billions of dollars AT&T is spending on
developing its IP infrastructure and related
businesses also includes the pending deal to
acquire cable giant TCI, its global virtual
private network business -- which has British
Telecommunications Plc. as a European
partner -- as well as several other initiatives
announced Thursday. These include funding
for a new Internet research center at the
University of California at Berkeley and a
hardware and software interoperability tests
lab, chartered to "form a testbed for
standards," Armstrong said.
AT&T is not the first company trying to get
into the interexchange business for ISPs, and
it has plenty of competition in the
voice-over-IP arena as well as the ISP
business itself, Armstrong acknowledged.
One future competitor is ITXC, though CEO
Evslin said he is not too worried about
AT&T's entrance into his market -- yet.
IP telephony is only 1 percent of the entire
telephone market, Evslin pointed out, and so
any company involved in IP telephony is
really competing against the public telephone
network -- not other IP telephone
businesses. Also, though AT&T is enormous,
companies such as ITXC -- as well as Delta
Three and VIP Calling -- have a jump on the
market, Evslin said.
Also, the businesses that AT&T and ITXC are
targeting are most likely to be somewhat
different.
"We supply services to prepaid calling card
companies and call-back services, which are
AT&T competitors -- for AT&T to supply
these companies would be like subsidizing
their own competition," Evslin said.
As for competing directly with AT&T, "It will
be at least a few years before we really
begin targeting each other," Evslin said.
Evslin himself is a former AT&T executive
who left last year to found ITXC, which was
started with some seed money from AT&T --
though AT&T is not an equity partner in the
company.
But even though AT&T is still behind the
curve in some aspects of Internet telephony,
Armstrong, who took over as CEO in October
1997, has made a generally favorable
impression with analysts for getting AT&T on
a more aggressive strategy.
For several years AT&T appeared to be lost
in a sea of opportunity in local telephone and
Internet markets while smaller companies
moved ahead to capture new business.
"Armstrong is showing his leadership here --
AT&T has never appeared to be so with it,"
said Sam Albert, an IT consultant and
analyst based in Scarsdale, N.Y.
In addition to pushing AT&T's Internet
message, Armstrong gave over much of his
keynote Thursday to blasting the regional
Bell operating companies (RBOCs), which he
said charge too much for giving
long-distance companies access to their
local loops.
These access charges are six times over the
RBOCs' costs, Armstrong said, forcing
long-distance companies to pass on these
charges to customers, to the tune of $55
billion per year.
Armstrong also blasted pending mergers
between local carriers Bell Atlantic and GTE,
and SBC Communications and Ameritech.
These deals will create a new "Ma Bell East
and ... Ma Bell West," Armstrong said.
In addition, moves by the RBOCs to charge
access fees to ISPs doing voice-over-IP
business will dampen Internet growth,
Armstrong said.
"The Internet has become the hottest
business location in the world, and the local
monopolies are threatening the network
economy," Armstrong said.
Armstrong called on political leadership to
eliminate access fees that are over the
RBOCs' costs. These fees amount to taxes,
he said.
"We don't need any new laws to give
Americans the tax reduction they deserve --
all we need is the political will," Armstrong
said.
Though Armstrong was appealing to the
desire of consumers and businesses to cut
telecommunications costs, his anti-RBOC
declarations failed to move some attendees
here.
"This is the same thing AT&T's been crying
about for years now," said one attendee, a
marketing executive who did not want to be
named.
"I wish he talked more in detail about cable
modems and what AT&T is going to do with
TCI," said Ronald Senchasek, an executive at
ACG Communications, a trade show producer
in New York. "It's also strange he didn't talk
about the possibility of laws on taxes and
the Internet."
But right after the keynote Thursday, New
Yorkers concerned about this issue may have
been relieved when Governor George Pataki,
visiting Internet World and accompanied by
Netscape CEO Jim Barksdale, signed into law
a bill that exempts Internet access charges
from state and local taxes.
AT&T Corp., in Basking Ridge, N.J., can be
reached at (908) 221-2000 or www.att.com.
Marc Ferranti is New York bureau chief for
the IDG News Service, an InfoWorld
affiliate.
Related articles:
"AT&T opens IP-phone exchange"
"Ellison bets farm on Net"
"GTE, Bell Atlantic agree to $52.8 billion
merger"
"AT&T to acquire TCI in $48 billion stock
swap"
"SBC to acquire Ameritech in $62 billion stock
swap"
"AT&T service acts as broker"
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