AT&T Outlines Data Strategy

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Washington -- AT&T Corp. is preparing an aggressive
cable-, data- and voice-packaging strategy in conjunction with its planned acquisition of
Tele-Communications Inc., including free access to Web sites via the set-top box.

Dan Shulman, president of AT&T's Worldnet
data-services unit, outlined his company's thinking last week about how it will
bundle services as it moves to an ever more IP-centric (Internet protocol) paradigm that
will eventually include voice and some TV services, as well as Internet data.

"IP is absolutely mission-critical to the future of
AT&T," Shulman said at the Voice on the Net conference here. "We're
transitioning everything that we do to the IP infrastructure."

As part of basic cable, customers will be able to access
the Internet, pay bills, shop online and perform other tasks on their TV screens, using
the cable modem that will be built into their set-top boxes, Shulman said.

In addition, AT&T Consumer Services, the unit that will
run what is now TCI's cable operation, will offer a higher-speed,
128-kilobit-per-second Internet-access service at costs comparable to the $20 per month
that Internet-service providers currently charge for dial-up access, he said.

These data-service tiers will be in addition to a
higher-priced high-speed-data service like the one that @Home Network currently offers
over hybrid fiber-coaxial networks, Shulman noted.

Shulman's remarks came during the "quiet
period" preceding regulatory and shareholder action on the proposed $48 billion TCI
acquisition, which was announced June 24.

Shulman reiterated AT&T's intention to offer IP
services in markets served by other cable operators that are not affiliated with AT&T
Consumer Services.

Taken together, the pricing and alternative-access
strategies offered nonaffiliated cable operators an early glimpse of the competitive
pressures that they might feel once the new AT&T Consumer Services, which will include
TCI, enters their markets.

"We have a couple of options for deploying this
infrastructure," Shulman said. "One is fixed wireless at 1 megabit [per second]
to the home."

In addition, besides using HFC where it owns cable or where
it is affiliated with other MSOs, AT&T will tap Teleport Communications Group's
network to connect apartment buildings to broadband services, using ADSL (asymmetrical
digital subscriber line) over copper for the link to each customer's apartment,
Shulman said. AT&T acquired TCG from TCI and other MSOs earlier this year.

Shulman stressed that the new IP-centric service scenario
will offer customers "always-on, all-band" access, allowing them to carve up the
service options however they wish. Voice and other upstream communications will be
converted to IP at a gateway in the home and transmitted to hub routers for distribution
over external networks.

AT&T is committed to completing the upgrade of
TCI's networks to accomplish the integrated-data-services model over 90 percent of
the MSO's household base by the end of 2000, Shulman added.

Eventually, at least some segments of entertainment
television will be offered in the IP format, as well, Shulman said, naming "HDTV
[high-definition television] and movies-on-demand" as candidates for a shift to this
type of data stream.

There would be no such thing as compact discs in the home
if there was sufficient "bandwidth to play them from the network," he noted.

AT&T spokeswoman Janet Stone said the company had not
worked out all of the details of its Web-television service and other elements of its
packaging strategy. But she made it clear that the idea of offering Web access
free-of-charge via the TV was tied to the company's ability to highlight links
between TV programming and Web sites.

"People will be able to use their remote controls
while they're watching programs or ads to click onto icons and zap off to Web
pages," Stone said.

And the free Web access will be an incentive for consumers
to sign up for bundled services, Stone added. "If you buy all of this from AT&T,
you're going to get a price break," she said. "The customer has to get
something out of it."

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