News

Somers Defends Position, AT&T's Push for Digital Telephony

6/17/2001 8:00 PM Eastern

Chicago — AT&T Broadband CEO Dan Somers was on the defensive at the National Cable TV Center academic seminar June 10, trying to quash speculation that he would be leaving the company and doubts concerning AT&T Broadband's digital telephony initiative.

"It's been relentless — 'Is he here, is he not? Is he coming, is he going?'" Somers said of press speculation that he will be ousted from AT&T Broadband. "There was an article written in the fall of last year that said I was gone within 60 days, and I'm here in Chicago."

Somers also defended AT&T's plans to split into four separate units — consumer, wireless, broadband and business service — adding that given the company's stock slide over the past few years, it was the best thing to do.

"Our responsibility as managers is to increase value, to bring what in my mind is the maximum value to our collective shareholders," Somers said. "It was clear the market seeks to go to the lowest common denominator for valuations, in our case the lowest common denominator was the biggest business, which was long-distance voice, which is in a sector that is having a negative downturn both in terms of revenue growth and its profitability. As a result, all of the good things we have been accomplishing were sort of lost in that valuation. The best view was to let the companies be set free."

Somers spent most of his speech trying to convince the audience about the success of AT&T's digital telephony rollout to some 700,000 subscribers.

"We led with our chin sometimes," Somers said. "We led with our chin on telephony. No one ever thought we would do it. But we hit the targets we established, going from zero to 500,000 customers in one year.

"If I and the team do anything this week, I hope we dispel all the views that constant bit rate HFC telephony — circuit-switched telephony — is A, not profitable — that's dead wrong — and B, is not a growth product — that's absolutely dead wrong. We're adding 150,000 customers a quarter, and we did 153,000 in the first quarter."

Somers added that digital telephony brings in about $50 per month in incremental revenue right now, a response to critics that have said AT&T should have waited until Internet-protocol technology — which should be much cheaper than circuit-switched — became available.

The theory that we should wait until Voice-over IP comes just doesn't fly," Somers said. We will migrate [to VOIP] when the technology is available to deliver the same suite of services. More work needs to be done to analyze what voice telephony is all about."

Somers added that circuit-switched telephony offers a host of services that most customers take for granted — like voice mail, call forwarding, multiple lines and more.

"When you jump to the IP world, if you're going to provide just the straight forward voice line, then you're going to get a very narrow piece of the market," Somers said. "This is an $80 billion-a-year business."

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