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Filter - Cynthia L. Webb
SBC Bets $6 Billion Against Cable


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By Cynthia L. Webb Staff Writer
Wednesday, June 23, 2004; 9:37 AM

SBC Communications Inc. is raising the stakes in its battle with the cable industry, dropping as much as $6 billion into a plan to roll out a fiber-optic network to attract customers with high-definition television and souped-up Internet services.

SBC Chairman and chief executive Edward Whitacre announced the plans yesterday at the Supercomm telecom convention in Chicago. The San Antonio Express-News quoted him as saying that "it will set the stage for full competition against cable."

The company will spend $4 billion to $6 billion to replace "aging copper lines in its network with fiber optics so that it can offer digital television and other new services. Microsoft Corp. will provide the Internet protocol-based software that will allow the San Antonio-based telecommunications giant to deliver video over its lines. It's the first such deal Microsoft has struck with a phone company," the newspaper reported. It also wrote that SBC will equip neighborhoods in 13 states with fiber to "offer new, high-tech services to better combat cable firms, which are rolling out low-cost local and long-distance phone plans across the country." The services will include faster DSL service and Web-based phone calls, the Express-News said.

The San Francisco Chronicle said Microsoft for years "has unsuccessfully tried to gain control of the centerpiece of the home entertainment system -- the TV. But Microsoft's latest strategy may be gaining an audience. On Tuesday, SBC Communications became the first telecommunications firm to announce plans to test Microsoft's Internet TV platform to pipe broadcast, on-demand and high-definition video over the Internet into homes."

More from the Express: "The launch of new services like video is vital for SBC and the other regional Bell companies, analysts said. Cable providers -- which have built their own fiber networks in recent years -- may end up being the Bells' ablest competitors." The paper also quoted analyst Bill Cram of Chicago's Loop Capital markets: "It's going to be an interesting time in this business. The lines are blurring between the cable companies and the Bells."
San Antonio Express-News: SBC Teams Up With Microsoft
San Francisco Chronicle: SBC Tries Internet TV Gear

"The company's move to rewire a large chunk of its network taking fibre into neighbourhoods represents a direct assault on the TV service offered by cable operators and the next step in the upgrading of its infrastructure to deliver bandwidth-hungry services," The Financial Times reported. And from The Wall Street Journal: "SBC's move to invest in fiber reflects increased competition from cable-television companies and Internet start-up businesses that are ramping up the rollout of inexpensive phone services. The new network could allow users to get high-definition TV, super-fast Internet connections and Internet phone calls."

The Dallas Morning News reported that SBC's "move is seen as a long-awaited response to cable companies, which are moving into the telephone business. It's also meant to keep the traditional phone company relevant in an increasingly wireless world. Competition between various telecommunications sectors has grown more visible in the last year. Earlier this week, Cablevision Systems Corp. said it would bundle local and long-distance phone service into its video and data plans at little to no additional cost. On Tuesday, Sprint PCS also was set to announce upgrades to its wireless network to provide speeds about two-thirds that of traditional digital subscriber lines. And Cingular Wireless said it was soliciting proposals for a faster data network using another technology. ... SBC's move mirrors and follows a plan by Verizon Communications Inc. to bring high-speed fiber optic lines to millions of homes and use newer, cheaper Internet-based voice technology."
The Financial Times: Plans Mark Return of Project Pronto
The Wall Street Journal: SBC to Push Fiber-Optic Network (Subscription required)
The Dallas Morning News: Phone Companies Eye Faster Data, Internet Phone Transmissions

Rules of the Game

SBC's plans depend in large part on whether "regulators issue rules favorable to the phone industry," the New York Post reported. CBS Marketwatch reported that SBC "indicated that its final decision on its ambitious undertaking would be on condition that federal regulators relax rules in the local-phone market that have cost the Baby Bells about 19 million customer accounts."

The Los Angeles Times said SBC's plan "was unveiled one week after the demise of federal phone competition rules that had required SBC and several other local phone companies to lease lines and gear to competitors at regulated wholesale rates. Whitacre and other telephone company executives had long complained that the rates were below their costs and so discouraged investment in new equipment and services. Without the rules, Whitacre said he 'could feel some optimism' returning to the industry." Atlanta-based telecom analyst Jeff Kagan told the paper SBC was "sending a strong message" to the Federal Communications Commission. "They have billions of pent-up investment dollars that they are planning to release into the marketplace, assuming they consider the regulatory rules and environment to be fair."

The Wall Street Journal wrote that SBC's plans face potential snags. "SBC officials conditioned the speed of any large-scale fiber rollout on whether regulators will provide the company with favorable rules for the new network, and on the success of technology trials. Regulations issued last year held that SBC, of San Antonio, and other local-phone companies would have to share their new fiber networks with rivals, unless the networks would connect directly to homes and businesses or use Internet Protocol technology. SBC opposes the regulations and says it shouldn't be forced to share the lines. It still is uncertain whether SBC and other local-phone companies who oppose the regulations can prompt a change. 'It is not a slam dunk,' said Randall Stephenson, SBC's chief operating officer," the paper reported.

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