While telephone conversations make up the vast majority of today's communications revenue, International Business Machines Corp. and American Telephone & Telegraph Co. are betting millions of dollars that data-transmission services will be the hottest communications commodity of the future.
The merging of computers and communications isn't just a technological phenomenon -- it creates a variety of strategic new ways that businesses can compete more effectively in their markets.
"Organizations are starting to say 'let's use computers instead of as administrative support . . . as a competitive, strategic weapon,' " said MCI Communications Corp. Chairman William G. McGowan.
The computer, coupled with a telecommunications network, gives businesses lightning-fast distribution of information, greater efficiencies and, ultimately, the ability to pare down the work force, McGowan said. "You find you don't need an enormous level of management. Knowledge is power . . . if the knowledge is disseminated to those who should have it."
For example, lawyers on the appropriate network could discuss and edit legal documents simultanously even while they are a continent apart. An electrical engineer in Boston could compare schematics over the phone lines with his San Jose counterpart, using their engineering work stations linked over the phone lines. A salesman could use a touchtone pay phone to place orders and hear a computer-generated voice confirm the time, date and size of the transaction.
Just as the use of the telephone to transmit voice conversations has revolutionized day-to-day business transactions between customers and suppliers, the prospect of computer-to-computer communications occurring simultaneously with voice communications potentially creates even richer opportunities.
The new technologies enable companies to create their own cost-efficient voice and data networks. "BYOB -- Be your own Bell," said Howard Anderson, president of the Yankee Group.
IBM and MCI want to take advantage of the new innovations technology affords to offer large businesses improved economic efficiencies and lower communications costs and, eventually, to bring banking and shopping services to the home.
Although data-transmission services represent only $2 billion to $4 billion of the $60-billion-a-year communications pie, analysts estimate the market share is growing by 15 to 20 percent a year. IBM, the largest computer company in the world, aggressively staked out the data-services market last week in a deal under which it can acquire up to a 30 percent share in MCI, the second-largest long-distance company.
Last week's action now squarely pits IBM against AT&T, the long-distance giant and corporate telephone networking wizard, in competing for large corporatations' telecommunications accounts by providing end-to-end data and voice transportation systems.
According to an MCI survey of 1,558 organizations, the mix of voice and data traveling over telephone lines was 58 percent voice and 42 percent data in 1985 compared with 38 percent data and 62 percent voice in 1983.
"Data communications have been growing and are the fastest-growing segment of the market. It is probably growing at two to three times the rate that voice communications are growing at," said Robert E. LaBlanc, a telecommunications consultant.
While AT&T has had its own vertical integration of telecommunications-equipment-manufacturing and telephone-networking capabilities, IBM has needed a pipeline like MCI for transmitting the data it is so good at processing, analysts say. The company had hoped its Satellite Business Systems venture (which MCI purchased) would provide that capability.
AT&T is starting to catch up -- it just won a $946 million computer contract with the Department of Defense to supply as many as 250 minicomputers to the National Security Agency in intense competition with IBM.
IBM's new telecommunications partner, MCI, and its recently acquired Rolm telecommunications switching company put it in a better position to offer large clients what is called a "single-vendor solution" to their telecommunications and processing problems. And Satellite Business Systems and IBM give MCI a badly needed entre into securing large corporations' telecommunications accounts.
"Sure, it threatens AT&T," said LaBlanc. "IBM has come farther, faster in the telecommunications environment than AT&T has in the computer environment" by acquiring a slice of MCI.
AT&T has responded in kind with more than 70 new computer and software products as well as new data communications networks. "My feeling is this will be a win/win situation . . . having these two giants setting the standards is going to be very good for the economy," he said.
Both companies are likely to compete head to head in electronic publishing services such as videotex, a home information service that can deliver home banking and shopping to homes through personal computers or terminal-like devices, said Douglas F. Whitman, an analyst with Hambrecht & Quist, a San Francisco investment banking firm.
IBM has teamed up with CBS Inc. and Sears, Roebuck & Co. to offer a videotex service called Trintex. The connection to MCI "clearly gives a way for IBM to offer data services into the home," Whitman said. "MCI is a much more powerful force in the residential market than SBS was; it is an efficient way to provide videotex." The service also offers a way to market computers, he said.
AT&T is more hampered in that field by a seven-year-spell cast by Judge Harold H. Greene, who presided over the Bell system breakup, that prohibits AT&T from using its telephone lines to transmit data services.
Nevertheless, "They will definitely compete," said Martin Lane, director of videotex services for Link Resources, a consulting firm. AT&T just recently announced a joint venture of Chemical Bank, Time Inc. and Bank of America to provide home banking and shopping services to homes. AT&T will market its terminals to users through the venture.
Currently, Dow Jones stock market videotex service remains the most profitable, said Lane, who added that more than 500,000 people now use the services. Out of 10 million computers in homes, 15 percent also have access to the service. The service is not yet profitable for most companies offering it, however.
Much of the acceptance of such technologies depends on a psychological acceptance among end users and a lessening of confusion among managers that until now have limited "one-stop shopping" for complete systems, analysts say.
While that transition occurs, "Data communications . . . is, in fact, a driver of what most telecommunications concerns are planning," said Dick Snowden, director of service concepts for AT&T Communications Corp.
AT&T and MCI are working on devising a software concept that will set an industry standard by transmitting voice and data simultanously and allowing different computer makes to communicate with each other over an eventually global digital network. The standard for this global network is generally called ISDN. Importantly, MCI recently won the right to hook into various European and Asian public telephone networks. MCI thus slowly is becoming a multinational telecommunications company -- just what IBM needs to complement its global efforts in computer marketing.
Until that day comes, IBM and AT&T are using their arsenals to provide complete packages of communications services to large corporate users and are striving to bring the costs down.
Large users that increasingly will buy voice and data services include banks, insurance companies, brokerage houses, car manufacturers, airlines, financial services companies and large manufacturers or communications companies like IBM or AT&T themselves. The trick will be in being "a single source provider" of all computer equipment, transmission facilities and telecommunications equipment to companies, one MCI official said.