AT&T Promises to Better Cable Experience
CEO: More Features, More Functionality At Lower Price
By Staff -- Multichannel News, 4/9/2006 6:00:00 PM MT
In this story:
FRANCHISE REFORM
NET NEUTRALITY
BELLSOUTH ACQUISITION
When the original American Telephone & Telegraph Co. — aka Ma Bell — was broken up on Jan. 1, 1984, the smallest of the Baby Bells was Southwestern Bell Corp. Its revenue in the first quarter of 1984: $1.73 billion. It was neck-and-neck for last place with U S West, which came in at $1.74 billion. In the 22 years that have passed, U S West was gobbled up by Qwest Communications International Inc., a nonconventional carrier of communications traffic. Southwestern Bell instead swallowed up three other babies: Pacific Telesis, Ameritech Corp. and, soon, BellSouth. And, along the way, its former parent, AT&T Corp.
Redubbed AT&T Inc., the former SBC’s acquisitive, aggressive chairman, Ed Whitacre, has set sights on creating a nationwide, infinite-channel television service that he says will make it difficult to raise cable rates and provide a superior viewer experience along the way.
He also believes “new entrants in the video market shouldn’t have the burden of rules meant for legacy providers.” Meaning: Cable-system operators. Here’s a transcript of his remarks at last month’s TelecomNext conference in Las Vegas.
Not much going on in telecom right now, is there — a pretty quiet industry.
There was a little flurry of excitement a couple weeks ago, but a lot can change in a couple of weeks, as you know [when AT&T announced it planned to buy BellSouth for $67 billion]. Who knows what the next couple of weeks will bring?
But whatever happens next, you can be sure that competition is the driving force behind it. Even casual observers of this industry recognize the dramatic competitive changes that have swept through our industry and have changed our landscape forever.
The telecom marketplace is hyper-competitive, offering customers more choices over more platforms, using more technologies, than ever before. We have traditional telephone companies versus cable companies versus power companies versus wireless companies versus satellite. They are also dealing with new technologies like Wi-Fi, WiMax and more. So it’s a competitive free-for-all in communications, and it has been for some time.
It’s had a big impact. Since 2000, the average price of telephone service has dropped 22%. Now, that’s very good news for consumers. It’s also good for companies that have adapted to the new realities of the marketplace.
Contrast that, if you would, with what’s happened in video. Over that same period of time, cable rates have actually increased 32%. That’s about to change. That’ll also be good for consumers and the companies that are working to make that change happen.
AT&T is leading the way by investing billions in the next generation of video technology, Internet protocol television, or IPTV.
IPTV will create new experiences for consumers. For one thing, it’ll offer better video service than today’s cable — more features, more functionality, more capability. For another, it will almost certainly result in lower prices by cable companies. That’s an experience that few people have enjoyed.
We’re going to change the game for consumers that are trapped by the lack of cable competition.
To do that, we will employ more fiber in our networks, which will provide the bandwidth needed to make IPTV a reality.
FRANCHISE REFORM
Here’s something else that IPTV needs to become a reality. IPTV needs franchise reform. Today, the local video franchise is a relic of another era. It’s a major obstacle in deploying competitive video services.
New entrants in the video market shouldn’t have the burden of rules meant for legacy providers, just as new entrants to the telecom market, like cable companies, were not.
Instead, in order to speed competition we support a statewide and national approach to franchising — one in which the local communities would still be protected. Otherwise, companies like mine must go to thousands of local governments one by one to offer a competitive service.
In AT&T’s case, that means if we receive just one new franchise agreement every business day, it would take us more than six years to offer this service to our customers. Cable companies may want that, but I can guarantee you that customers don’t want that.
Customers want more choice and they want it now, and that’s why we’re moving so quickly with our groundbreaking IPTV service. And it’s why policymakers will see the benefits of IP technology and allow this competition to grow.
That, by the way, is just one of the things that makes our merger with BellSouth so attractive. AT&T is doing groundbreaking work in bringing IPTV to market and BellSouth has already broken lots of ground deploying fiber.
So the ingredients are there to bring a competitive choice to that region of the country, and that is very appealing.
NET NEUTRALITY
Of course there are many other benefits from this merger, but I would like to address one point that some have raised.
Because AT&T and BellSouth do not compete in any meaningful way against one another today, there really are no competitive issues at stake. But that has not stopped some from trying to turn this transaction into a referendum on the concept of net neutrality. I’m not even sure what that means. You’re not either, I can tell.
I’m not even sure what net neutrality means because no one in this room is neutral about the network and support the Internet.
Not those of us who invest billions in it or those companies which count on that investment.
There’s been a lot of talk about this in order to scare people into thinking that access to the Internet is somehow at risk, or that the Internet as we know it could not be a thing of the past.
It reminds me of Mark Twain’s comment. He said that a lie can travel halfway around the world while the truth is putting on its shoes. That was back when telegraph was the technology.
When you get behind the rhetoric, though, you can see that there are two facets to the net neutrality discussion. One is about access, the other is about customer choice.
The first one is a no-brainer. Any provider who blocks access to the Internet would be inviting its customers to find another provider. It’s just bad business, you just wouldn’t do that.
Let me be clear — AT&T will not block anyone’s access to the public Internet, nor will we degrade anyone’s quality of service, period. End of story.
That’s not going to change, no matter how much sky-is-falling rhetoric you hear.
But we can create a sky’s-the-limit Internet in the future if we take a reasoned approach to the second aspect of the net neutrality issue. Markets work best when consumers are able to make choices that fit their needs.
But the net neutrality proponents would actually limit those choices and options for Internet users. They say it is unfair for Internet users and content providers to pay different prices for different levels of speed, reliability and security.
It’s like saying that if we should add no more lanes to a highway, that is increasing congestion.
But in reality, what net neutrality supporters are saying is this: Sure, go ahead and build more lanes. But let’s have the construction crew pay for it.
Last year we at AT&T invested $11½ billion in capital spending, including our portion of Cingular [Wireless], to keep today’s networks humming and to build tomorrow’s networks. That’s a lot of money. It’s a lot of our shareholders’ money. They have a right to expect a return on that, a fair return.
So we are exploring creative ways to deal with those costs by offering new and attractive services to companies who rely on the Internet to reach their customers. We believe in finding a commercial solution to this issue. The market is fully capable of sorting this out.
Otherwise, it would mean that consumers would increasingly bear the huge cost it takes to build these advanced networks, regardless of whether they use the Internet to download movies or check e-mails from your grandkids. I don’t think anyone wants to see that. I sure don’t.
At the end of the day, the interest of both network providers and content providers are intertwined. Content providers want their customers to have the best experience possible. We want more people to use our networks to realize new possibilities. More broadband deployed as quickly as possible is good news for everyone.
That’s why we spent billions of dollars to accelerate the deployment of DSL [digital subscriber line], starting in the 1990s. Now with Project Lightspeed, we’re taking that to the next level so we can bring a whole new TV experience to millions more.
Another good example of what it takes to be a network provider can be seen in the Bayside Room of this hotel. That’s where we’ve set up a demonstration of AT&T’s network disaster-recovery program. You might want to stop by because it is pretty amazing.
AT&T has the only mobile full-readiness NDR team in the industry. We’ve invested more than $300 million to maintain this capability. This is essentially a central office on wheels, and it has the capability to restore service and cut response time to a matter of hours.
This national recovery team has been dispatched 21 times in the last 16 years. You saw them during [the Sept. 11, 2001, terrorist attacks] and we saw it again last year when Hurricanes Katrina and Rita ravaged the Gulf Coast.
In fact, if you were in Louisiana or Mississippi after the storms, you saw hundreds, maybe thousands of phone company trucks and workers scrambling to get phone service restored. That’s the kind of investment it takes to keep today’s networks humming and to make tomorrow’s networks the envy of the world.
BELLSOUTH ACQUISITION
Speaking of being the best, our desire to be the best competitor we can be is driving our merger with BellSouth.
It’s a logical step for both companies to make. While it will bring many changes and many benefits, some things will stay the same after the merger of these two big companies. We both share a strong commitment to our customers, our employees and our stockholders. That will remain. We both have built outstanding networks and have a great record in terms of customer service. We both are leaders in the communities we serve. None of that will change.
BellSouth and AT&T share a commitment to meeting the challenge of new and formidable competition. That will not change. In the end, becoming a more efficient, effective and innovative competitor is what this merger is all about.
This merger will create a strong national and global competitor, better positioned to innovate and deliver new services to both businesses and consumers. It will also put us head of the pack of the next generation of services that integrate wireless and wireline.
Bringing these companies together is good news for customers, for competition and for choice. I should add that it’s good for this industry and the companies that U.S. Telecom represents.
Our industry has been through a lot of change over the last few years. We’ve struggled through some very wrenching changes — in technology, in regulation and in competition.
It’s forced many of us to make tough calls in order to be the kind of company our customers and investors want us to be. Those days are behind us and this industry is now poised to lead the way into a new era of communications.
The energy and excitement surrounding TelecomNext is proof of just how limitless the future can be and I’m proud to be part of it. I again want to thank USTelecom for inviting me to be here this morning and to be with you. I hope all of you have a great time at TelecomNext.
Thank you very much.
