02-08-99
AT&T Signs Telephony Deal with Time Warner & other MSOs
MediaOne to Introduce Telephony in Detroit; Expands Mass. Service Area
Telegate Adds Integrated Data/Cordless Voice Support to Network
AT&T Signs Telephony Deal with Time Warner & other MSOs
AT&T has announced partnerships with several MSOs including Time Warner
that will enable the telecom giant to offer local telephony services on a
wide-scale throughout the U.S.
Early last month, AT&T reported that it had reached agreements with
Bresnan, Falcon, Insight, Intermedia and Peak Cablevision, in separate
deals that would give AT&T a 51% - 65% stake in the series of joint
ventures. The deals provide revenue-sharing opportunities for the
operators and one-time payments for meeting system performance criteria
established by AT&T. AT&T expects the one-shot payments to be in the tens
of millions of dollars. One uncomfirmed report suggests that AT&T will pay
$10-$15 to operators for each home passed by two-way capable plant.
Commercial operations from the ventures are scheduled for Y2K.
Early this month, AT&T reported that it had formed a similar joint venture
with Time Warner. In the deal, AT&T will own more than 75% of the venture.
Time Warner will get monthly fees ranging from $1.50 to $6 per home.
Reports did not clearly define the scope of the agreement in relation to
video and data services. If the marriage for voice services goes well, it
certainly improves the likelihood of an @Home/ServiceCo
(RoadRunner/MediaOne Express) merger.
As part of the AT&T/TW announcement, the companies reported that local and
long distance phone services would be offeblack at at least 20 percent less
than rates charged by competitiors, with exact rates determined on a market
by market basis. Pilot testing will begin this year pending final approval
of the AT&T/TCI merger by the FCC. Commercial roll-outs are expected in
Y2K. The venture is targeting a 25% penetration rate within the next 6
years and annual sales of $4 billion after three years.
For its TCI markets, AT&T expects a 30% telephony take-rate by 2002, which,
according to a Merril Lynch analyst, would generate $100 million in cash
flow on $400 million in annual revenues. Another analyst, Tom Wolzien of
Sanford C. Bernstein & Co., projects that TCI subscribers could generate
$250 million in EBITDA by 2002 on nearly $1.1 billion in total phone
revenues.
AT&T has projected that its costs in offering telephony services over cable
will be $300-$500 per home passed by its voice services. The company
estimates that it will spend $600 million over the next two years on the
Time Warner venture alone. In a separate announcement, AT&T indicated that
another $600 million has been added to its budget for upgrading TCI's
systems, lifting the provider's total commitment to $2.5 billion by Y2K.
The combined ventures will give AT&T access to a potential 42.7 million
households or 42% of U.S. households. This data is destined to change
continously as MSOs buy and sell systems over the next few years.
According to Leo Hindrey, TCI's president and top-dog for all of AT&T's
cable telephony interests, the AT&T campaign is targeting 60% of U.S. homes
passed by late spring.
Within five years, analysts project that AT&T's revenues will be split in
such a way that 21% is derived from telephony services, 20% from data
services, and 7%-10% from cable video services.
With the intial agreements with Bresnan, Falcon, Insight, Intermedia, and
Peak Cablevision, AT&T picks up 5 million homes passed.
After planned acquisitions, Bresnan is expected to have 900,000 homes
passed in Michigan, Minnesota, Wisconsin and Nebraska. Falcon passes 1.6
million homes in 26 states. Insight passes 800,000 homes in 7 states.
InterMedia passes nearly 1.6 million homes in Tennessee, Kentucky, Georgia
and South Carolina and Peak Cablevision passes 180,000 homes primarily in
Utah and Oklahoma.
Time Warner operates in 33 states.
AT&T plans to introduce services utilizing circuit-switched HFC telephony
technology with intentions to migrate to IP telephony in Y2K. With the
technological challenges in offering toll-quality VoIP, the still
unconfirmed status of the AT&T/TCI merger, the state of the cable plant,
and the time needed to develop and tweak a telephony business, the targets
seems very unrealistic. At best, AT&T should be able to move to packet
delivery in three years.
Until then, the short list of circuit-switched HFC telephony vendors should
benefit greatly by AT&T's efforts. Arris Interactive, a joint venture of
Antec and Nortel, has already received a commitment for $50 million in
telephony networking equipment from AT&T. The other big players, Tellabs,
Motorola and ADC are expected to take a share of the provider's budget.
Each of the vendors are building in VoIP support within their networks,
hoping to gain and retain under AT&T's game-plan.
Cisco and General Instrument are chasing the same account, with the
co-development of a telephony system (that also integrates video and data)
built around a broadband telecom interface that would convert analog to
packet data. The unit would work in cooperation with either a cable modem
or a set-top box armed with a RJ-11 jack. Expect other vendors to partner
and team together to build solutions aimed at capturing the AT&T account.
The AT&T campaign presents MSOs with a loaded proposal. The MSOs can take
the 35% venture share and the value-added goodies that come with AT&T's
offer or approach telephony services on their own, which would promise to
be a grand challenge considering the capital intense nature of the
business, the MSOs lack of experience in offering voice services, and the
consumer attitude towards cable providers. While the AT&T offer must seem
attractive, a fear surely exists that AT&T will make a calculated effort to
expand partnerships into video and data, decreasing the operators' control
over their services and access to the lion's share of their systems'
revenues.
AT&T
http://www.att.com
TCI
http://www.tci.com
Time Warner
http://www.timewarner.com
MediaOne to Introduce Telephony in Detroit; Expands Mass. Service Area
MediaOne has announced that it will introduce local telephony services in
Detroit this year. The provider will utilize networking equipment from ADC
to offer the service.
In a separate announcement, MediaOne reported that it had expanded its
telephony services in Massachusetts to include Arlington. Services will be
offeblack at up to 47% less than rates charged by competitors. MediaOne's
telephony services pass 240,000 homes in the Massachusetts' communities of
Arlington, Andover, Beverly, Billerica, Boxford, Burlington, Chelmsford,
Dracut, Hamilton, Lowell, Marblehead, Methuen, Middleton, Nahant, North
Andover, North Reading, Reading, Reverse, Saugus, Stoneham, Tewksbury,
Topsfield, Waltham, Wenham, Wilmington, Winchester and Woburn.
Outside of the state, MediaOne offers telephony services in Atlanta,
Jacksonville, Los Angeles, Pompano Beach and Richmond.
MediaOne
http://www.mediaone.com
ADC
http://www.adc.com
Telegate Adds Integrated Data/Cordless Voice Support to Network
Telegate, an Israel based broadband technology and access systems provider,
has introduced Multigate DECT, a network that supports integrated data and
cordless voice transport over HFC networks.
The telephony technology, which is not circuit-switched nor VoIP, requires
no in-house wiring. The DECT subscriber units support two cordless lines,
and up to 6 handsets within a range of 300 meters.
Telegate
http://www.telegate.co.il
© Copyright 2000 Gecko Research & Publishing
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