American Telephone & Telegraph Co., in its first major unregulated business venture, announced plans yesterday to set up a separate subsidiary for its mass marketing of computer processing services.
With initial assets of $59 million, the new firm would be an instant giant in its field. It plans to offer its first service--an innovative communications network to enable incompatible computers to talk with one another--as early as next June.
This Advanced Communications Service (ACS) was revealed in a long-awaited filing before the Federal Communications Commission in which AT&T formally announced its intentions to set up a fully separate subsidiary--known as "Baby Bell" in communications circles--to market ACS and other unregulated services.
However, AT&T said it planned to begin the subsidiary's operations no later than June 1, 1982, several months earlier than many communications experts and government officials had expected. AT&T Vice President James R. Billingsley asked the FCC to speed up its 180-day approval process for setting up the new subsidiary "to make (ACS) available as soon as possible."
AT&T said the subsidiary is in direct response to an earlier FCC order that directed AT&T to set up a completely separate affiliate to market data processing services, computer terminals, telephone equipment and other telecommunication services now being offered by a growing number of AT&T's competitors.
Under the FCC order, known as Computer II, that subsidiary was not required until Jan. 1, 1983. And even though Comupter II is being challenged in the U.S. Court of Appeals here, AT&T decided to go ahead and set up the subsidiary to begin offering its first data-processing service.
"Competition is rapidly growing, and if we are to share in this competitive market, we simply have to get moving," AT&T's spokesman Pic Wagner said. Wagner also noted that as presently drawn, the subsidiary and its ACS service does not conflict with legislation recently passed by the Senate to restructure AT&T.
The ACS service, which would not be subject to any FCC scrutiny, will facilitate the transmission of computerized data by allowing otherwise incompatible terminals to speak with one another. Customers will call a special service point within the Bell System network to obtain access to this network, which, among other things, will store and transport data as well as manage data communications networks.
Under the innovative scheme, travel agents may be able to make reservations for their customers for airline tickets, car rentals and hotel reservations all by computer--even though their terminals may not exactly correspond with those used by the large companies.
AT&T officials said the system will make it easier for companies to expand their existing data-communications networks because companies will no longer have to replace entire systems either to expand or to take account of new technology.
Several communications firms, including General Telephone & Electronics Corp., already offer similar services. But AT&T's entrance, with its relatively easy access to capital and its large network, could dwarf the services now being offered.
To set up ACS and the subsidiary, AT&T estimates it will spend $134 million--all to be borne by the shareholder, not the ratepayer. At the outset, the assets on the affiliate's balance sheet will include a $3 million short-term loan from the parent AT&T plus $56 million in physical assets that will be transferred from AT&T and its affiliates, such as processing equipment, leasehold equipment, furniture and fixtures, computers and laboratory equipment. In exchange for these assets, the subsidiary will issue shares of common stock, all of which ultimately will be owned by AT&T.
After the subsidiary is formed, AT&T estimates an additional $434 million in financing will be required. Ultimately, the subsidiary is expected to have assets of several billion dollars as AT&T transfers its telephone equipment to the subsidiary.
At the outset, the new firm will have about 850 employes, many of whom have been involved with the development of the new ACS service. The exact location of the subsidiary has not been determined, but AT&T is exploring several sites in New Jersey, where many other company offices are located.
The office space -- as well as the personnel -- will be completely separate from AT&T and its affiliates.