MediaOnes Order Points to Telephony Rollout

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MediaOne Group Inc.'s new $250 million equipment deal
with Lucent Technologies presages a massive acceleration of the cable operator's
telephony deployment next year.

Englewood, Colo.-based MediaOne's pending merger with
AT&T Corp. was aimed partly at creating a competitive local telephony giant. The MSO
said last week that it awarded Lucent a new five-year contract for switching and
optical-networking systems, as well as software for network management and performance
monitoring.

MediaOne already uses five of Lucent's 5ESS digital
switches with its hybrid fiber-coaxial networks, providing digital and analog video,
high-speed Internet access and telephony service over cable.

With its acquisition by AT&T expected to close within
months, MediaOne said it wanted to lock in a key element of its ambitious telephony plans,
instead of waiting to deal along with its new parent.

"We see this as an interim agreement prior to going to
AT&T," said Jerry Wolfer, MediaOne's senior vice president of engineering
and technology and a key architect of the company's phone strategy. "It assures
us availability and pricing for the products we get from Lucent, particularly the 5ESS
switch, switch ports and SONET [synchronous optical network] equipment."

The new contract will support the addition of more switches
and network capacity to handle the call traffic that will result next year, when MediaOne
embarks on a planned significant expansion of its digital-telephone-service offering.

As of June 30, the MSO had about 36,000 lines in service
and some 26,000 telephony customers, out of around 8.5 million homes passed.

The operator primarily focused this year on completing the
infrastructure necessary to support its expected growth: back-office systems, as well as
automated customer-provisioning and customer-care systems that will help to prevent choke
points in the planned ramp-up, Wolfer said.

Service deployment next year will be systemwide, leveraging
the rebuilding of MediaOne's cable plant to 750-megahertz, two-way capacity, which
could be 70 percent complete by the end of 1999.

MediaOne also uses network-interface units from ADC
Telecommunications Inc. and Tellabs Operations Inc., but it doesn't anticipate having
to expand its contracts for the customer-premises equipment.

Wolfer also said he did not expect any major equipment
changes once MediaOne was folded under the umbrella of AT&T. "We think we're
real compatible as far as all of AT&T's planning," he added.

Lucent's end of the deal makes it even more firmly
entrenched in the cable side of the telecommunications business. Vice president for cable
communications Tim Gropp called the MediaOne contract Lucent's first of such
magnitude with a pure cable provider.

Lucent has supplied infrastructure to Time Warner Telecom
for about five years, but Gropp noted that Time Warner Telecom is a separate operating
entity from Time Warner Cable, while MediaOne is a unified provider of voice, video and
high-speed data.

Lucent, which exited its HFC and digital set-top businesses
several years ago, is also making a big push for cable business through a new
Internet-protocol telephony-over-cable venture with Motorola Inc.

While major MSOs including MediaOne have deployed
circuit-switched phone platforms first because of their availability, the 5ESS platform
provides a migration path to packet-switched service as Lucent begins introducing those
products, Gropp said.

The MediaOne contract is a blanket deal covering switching
and optical-networking gear, which would encompass the 7R/E packet-switching equipment
that is central to Lucent's "CableConnect" IP-telephony product lineup.

"We see cable as a significant growth market segment,
where we think we have a lot to bring in terms of technology," Gropp said. "And
we see this as a first step. We're excited about working with MediaOne because of
their stature in the industry."

Wolfer said he did not think MediaOne would need to begin
migrating to packet-based networks before 2001 to realize cost and capacity benefits
significant enough to make the change.

He noted that by implementing the TR303-standard
concentration of calling ports on its switches, MediaOne currently used only 1 percent of
its cable plant for telephony, even though it has 25 percent telephony penetration in its
markets.

"When we contracted with Lucent here in the United
States, this was some of their very first implementations of TR303," Wolfer said

"I will not have a capacity issue for a hell of a long
time," he added, declining to say whether MediaOne might test Lucent's
IP-over-cable solution. "We've done a lot of lab work on IP platforms. The
'when' is: When can it be extremely cost-efficient? And it's got to be more
cost-efficient for me because I've already taken half a step in that direction."

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