American Telephone & Telegraph Co. announced plans yesterday to spend $6 billion in the next two years -- a 20 percent increase over previously announced plans -- to improve its long-distance telephone network and provide more efficient and clearer "digital" phone service.
The acceleration of the long-distance giant's modernization plans keeps the company competitive with MCI Communications Corp. of Washington and US Sprint, both of which are further along in the digitization of their long-distance networks. MCI's and Sprint's networks are much smaller than AT&T's, however.
Digital circuits provide high-quality telephone service by using computer technology to turn voice and data signals into numbers, which are transmitted and converted back into sound at the other end with virtually no loss of fidelity.
By the end of 1989, more than 70 percent of the calls on AT&T's network will be handled over digital circuits, up from about 35 percent today, industry sources said. Both MCI and Sprint transmit more than half their calls on digital networks.
"The investments we're making in digital technology ensure that we will keep raising ... standards to bring our customers the full benefits of the information age," AT&T Chairman James E. Olson said in announcing the investment plans yesterday at the unveiling of the company's upgraded network control center in Bedminster, N.J.
AT&T had said last January it planned to spend $2.5 billion each of the next two years on upgrading its network to digital communications. But competitive pressures apparently forced it to step up its spending, analysts said.
"AT&T spends $3 or $4 billion every year anyhow," said John S. Bain, an analyst with Shearson Lehman Bros. "It's something they must do to remain competitive."
The long-distance companies are marketing digital service to business customers in particular because it allows high-speed data transmission at low error rates.
Demand for digital business services is growing by 20 percent a year.
AT&T said its accelerated spending program will bring digital business services to 400 cities nationwide and to key points in Europe, the Caribbean, Japan and other locations in the Far East by the end of 1989.
MCI is spending $800 million this year to upgrade its network, which is the size that AT&T's was a decade ago.
Half of the company's long-distance network already has been converted to digital transmission, according to MCI spokeswoman Kathleen Keegan.
"We're really further ahead in terms of digital technology," she said.
"Overall, it's only natural that AT&T would have to make a heavier investment, because its network is older than ours.