Life with the new AT&T
Alphabet soup not withstanding, what customers can expect from telephony
May 6, 1999: 10:33 p.m. ET
NEW YORK (CNNfn) - So it's a little confusing. AT&T, TCI, MSFT, TV, ISP, Windows CE. But skim through the alphabet soup and it seems like one letter sticks to the tongue. What do I get out of all of this? That's right, what's in it for me?
For nearly everyone, the answer is not much, at least not overnight. But over the next three to five years, AT&T Corp. (T) plans to revamp how up to 26.5 million U.S. households get television, phone and computer service. That's around one in four households -- assuming AT&T's deal to divvy up MediaOne Group Inc. with Comcast Corp. (CMCSA) goes through.
If the deal closes, AT&T's cable service will reach 18 of the 20-largest markets in the country. AT&T also announced Thursday that Microsoft Corp. (MSFT) will develop software for up to 10 million TV-set devices running its services.
With the software giant's inclusion, AT&T hopes the long-awaited idea of one-stop shopping for basically whatever kind of communication you can imagine is, if not around the corner, then at least at the end of the next street.
"Ultimately we want to provide people with as complete a communications and home entertainment and information system as they want," bragged AT&T spokesman Mark Siegel, "with one bill if they want, one number to call for customer service, and one price per month if they want it that way."
Not that New York-based AT&T is the only company offering a combination of communications services. Cox Communications out of Atlanta already offers similar phone-and-data service in five markets. To date AT&T has actually only rolled out any of what it promises in one test market, Freemont, Calif., and then only to a small run of "friendlies," mostly employees.
And not that consumer groups are happy about the prospect of AT&T lumbering into local cable markets. Consumers Union, the nonprofit organization that publishes Consumer Reports magazine, says it believes the MediaOne merger violates antitrust laws and will try to block it in the courts and at the Federal Communications Commission.
"This kind of merger concentrates too much power in too few hands," maintained Carri Ziegler, spokeswoman for the group. "And a lack of competition only spells higher rates and fewer choices for consumers."
But faster "bundled" telecommunications at cable's broadband services will blend interactive computer technology with the ease of television. With one-stop shopping, AT&T hopes it can offer enough rapid services to appeal to the technology aristocracy while making it easy enough for the newly wired to use.
What it will do
Cable access is important because it is so local, running wires right to customers' doors, like AT&T's competitors, the local phone companies. But cable's wires are coaxial, providing much more carrying capacity than copper wires.
AT&T wants to use that "pipe" to ship both local and long-distance phone service. Back in 1996 when AT&T first tried getting into local telephone service, it tried it without building its own network.
But that left it reselling the local phone companies' service and was a false start for the company, "It wasn't economically viable," Siegel, the spokesman, said. Though it still offers resold local service in some parts of the country, it no longer promotes it.
Now by buying TCI earlier this year and getting access to much of MediaOne's network, AT&T will ship local service through its own lines to millions of cable customers. It will combine that with high-speed Internet access, through @Home (ATHM), of which it is majority owner. Instead of dial-up modems, @Home uses cable modems with televisionlike, turn-on-and-it's-there service.
The Microsoft deal will provide computerlike service for television through a set-top box. Microsoft's operating software, Windows CE, will couple cable television service, movies-on-demand and digital TV with hundreds of channels with Internet-style interactive information and live Web pages.
The box, probably not much bigger than a regular cable box, will enhance television with high-speed information such as database services, weather, sports statistics and so on. Customers will be able to surf the information like the Internet while watching TV.
AT&T, wary of charges both it and Microsoft are looking to develop near-monopoly positions in the integrated telephony world, insists it will also offer other companies' operating systems in set-top machines.
How the hardware will look
The setup will be comparatively simple as AT&T rolls out its cable-telephony service in Freemont and then to two as-yet undecided cities this year. AT&T will also introduce its cable telephony, minus the Microsoft system, to former TCI customers in Seattle, Portland, Salt Lake City, Denver, Dallas, St. Louis, Chicago and Pittsburgh this year.
The coaxial cable will run to the outside of customers' houses and into a box about the size of a man's shirt box. The box, called a voice port, can handle voice, video and computer-data transmission and sends the signals to their separate destinations - phone, television, computer -- through the home's internal wiring.
Ultimately, the voice port outside the house could be dispensed with and the television set-top device could split the signals to the phone from the computer and television. But Arris Interactive, which makes voice ports, expects most communications companies such as AT&T to keep using boxes outside consumer homes, where they are easier to service and repair.
Why the opposition?
While bundling services is convenient, consumer groups don't like the concentration of so much communication in so few hands. Consumers at the top of the market will benefit from bundling. But the bulk of cable and phone-service consumers will see rates go up, consumer groups say.
If you're paying $250 a month for telecommunications now, AT&T may give you a deal by bundling all your services and offering them to you at $200, according to Mark Cooper, the Consumer Federation of America's Director of Research.
But 45 percent of the U.S. market only has a telephone line and cable, paying around $60 a month. Another 15 percent supplement that with cellular service. Those people will see rates rise, Cooper said.
And he expects even the technocracy at the top of the communications chain will see their choice diminish. With bundling, providers like AT&T favor @Home's Internet access over competing services such as America Online.
AT&T makes the point that consumers will still be able to reach AOL. The question, consumer advocates say, is why would they want to, since that would involve paying a fee to AOL as well?
-- by staff writer Alex Frew McMillan
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