<Don't look for any pot of gold at the end of this rainbow. >
Yes, the pot of gold. I've seen my investment in PCTV go up about 20 times from its recent low. I agree with what you say, but appreciate your confirming it.
It looks to me like the vast infrastructure build out in cable TV systems is a better area for investment. Many companies developing HFC systems have seen very lean times over the last two or three years. Enthusiasm has only just started for these companies.
If you read the following article, they identify establishing a cable network that can handle Voice over IP as the key to success, especially for AT&T. They also identify this as a huge risk proposition.
For years I've followed Harmonic Lightwaves, Antec, and Ortel. Each these companies has an interesting product line, but I find the first two seem best positioned to win contracts for infrastructure build out.
But, if you look for a company that can provide the "missing link", which seems to be voiced over IP, where do you turn? Does Antec have this capability through its collaboration with Nortel Networks? Or, will AT&T look to a more traditional telephone equipment supplier such as Lucent or Tellabs?
So, my question to you is, where will we find the "missing link" and do you think that Mr. Armstrongs gamble will pay out in a timely manner?
Regards, Mark
AT&T's grand voice-over-cable plan
By TIM GREENE
Network World, 05/03/99
BOSTON - After coughing up more than $100 billion, AT&T says its cable TV buying binge is over.
From now on, AT&T will simply pursue joint ventures with cable operators to access their high-capacity local loops, says company CEO C. Michael Armstrong.
In fact, AT&T is already nego-tiating with cable giant Time-Warner on such a joint venture, Armstrong said last week at a forum of the Massachusetts Telecom Council.
AT&T's cable strategy moves the telecom firm away from its well-established circuit-switched roots. Armstrong is betting AT&T's future on IP voice and data over cable networks - technology that is unproven in large-scale rollouts.
"It's a bold move, but fortune favors the bold," says Howard Anderson, president of The Yankee Group in Boston.
AT&T hopes to wrap up its proposed $58 billion purchase of MediaOne later this year and launch a five-year rollout of local voice and data services over cable infrastructure, Armstrong says (NW, April 19, page 7) .
Microsoft, America Online and Comcast are now also interested in MediaOne (see News Briefs, page 4).
Using networks AT&T owns outright, the company can reach only 27% of all U.S. customers. That is why joint ventures with other cable operators will be key, Ander-son says.
As part of such ventures, AT&T is offering to upgrade cable operator's networks so they can carry voice and data. AT&T then plans to share the profits that come in from those new services, according to Anderson.
In a joint ventures, companies create a separate business entity, with each partner owning a portion. Majority ownership in such ventures - not simple alliances - is important to Armstrong.
"Owning facilities is the only way to control your own destiny," Armstrong says. "You can't rely on competitors for your network architecture, ordering and facilities."
AT&T has already acquired cable operator Tele-Communications, Inc. ($48 billion) and Teleport Communications Group ($11.3 billion), a local access firm whose network is based on cable. The addition of MediaOne will give AT&T the size to successfully negotiate the joint ventures and to compete against regional Bell operating companies.
"[Our size will] allow us to go on the offense after the local exchange carriers," Armstrong says.
While cable networks cater mainly to residential customers, Armstrong is eyeing business customers. He says AT&T is investing in gear that can deliver IP, frame relay, ATM and other services that businesses typically want over these new networks.
The AT&T plan to run IP voice over cable depends on equipment still being developed, Armstrong acknowledges.
Once the equipment is ready to deploy sometime late next year, IP voice over cable will cut the cost of gear from $750 per customer for circuit-switched connections to $300 to $500 per customer. The lower cost to set up the voice services will let AT&T offer additional phone lines with distinctive rings at a few dollars each, undercutting RBOC rates of $15 to $20 per month.
Because the IP voice gear isn't ready yet, AT&T is trialing voice-over-cable service in Freemont, Calif., using circuit-switched equipment. The trial is designed to iron out kinks in the ordering, provisioning, maintenance and billing of local voice services before extending the trial to paying customers in the third quarter.
The paying trials will be expanded to seven or eight other cities by year-end and then extended gradually through 2000 and 2001, Armstrong says. AT&T can't try a local services sales blitz right away because the company doesn't have enough people to handle the flood of new customers it might get.
Short term, AT&T will rely on reselling phone service from RBOCs to reach the customers it cannot reach directly on its cable networks or via AT&T's fixed PCS wireless network. The PCS network can provide up to four phone lines and a personal T-1 per customer.
In shifting focus to the local market, Armstrong is facing a new reality: long-distance competition is only getting stiffer.
Each year 25% of long-distance customers switch their long-distance carrier. And profits from long distance will decline as prices drop.
With cable networks in its pocket, AT&T can offer more than just cheaper and cheaper phone service. The company can offer entertainment, Internet access and phone service to hang onto residential customers. "AT&T is saying, 'I need three options to get into that home,' " Anderson says.
Armstrong says AT&T will continue to push RBOCs to streamline ordering systems so customers can easily switch their local services. |
