SBC pushes toward converged net

SAN ANTONIO, TEXAS - Most customers can expect IP voice and data to be delivered over a single line once SBC Communications finishes an ambitious three-year, $6 billion build-out of optical fiber in its network.

Announced last week, the overhaul features fiber to the curb that will enable broadband access to 80% of SBC's customers via digital subscriber line (DSL). The network backbone will be converted to ATM, making it possible for the company to run voice and data over a single infrastructure and ensure quality of service.

Dubbed Project Pronto, the plan will make it possible for 80% of SBC customers to get 1.5M bit/sec DSL downloads over regular copper phone lines, while 60% will be able to get 7M bit/sec downloads. The same circuits will support multiple packet-voice channels simultaneously. In addition, 100,000 T-1 lines that require expensive repeaters will be replaced with fiber, making the lines less expensive to maintain. The move will also make it easier to turn up more bandwidth for SBC's customers.

Project Pronto will cut SBC operating expenses to such a degree that the $6 billion build-out cost will be offset, SBC says. But the company has made no commitment to pass along those savings to customers.

Some users think the upgrade will mean better data services down the road, after SBC gets permission to sell long-distance services in its region, which includes SBC's original territory plus Pacific Bell's and Ameritech's areas. The company also owns Southern New England Telephone in Connecticut.

"The SBC-Ameritech area is huge now," says Mort Rahimi, vice president of IT at Northwestern University in Chicago. "If they build very high-speed networks to provide connections in-region and they have holdings on the East and West Coasts, that will make them one of the top companies to work with."

SBC has the potential to be a top-tier carrier among the ranks of AT&T and WorldCom, but it will have to develop compelling products and pricing to keep from losing customers, he says.

"Their No. 1 issue is tying down customers," Rahimi says. "Once you lose them, it's very hard to get them back. The hassle of changing is too much to make me change unless there is a huge difference."

SBC's strategy parallels that of AT&T, which is committed to offering widespread broadband services and voice. The difference is that AT&T will use cable networks rather than DSL.

Voice over DSL is a daring move because it will directly compete with SBC's existing voice services. But in areas where copper phone lines are running out - such as parts of California - voice over DSL could be a less expensive way to set up additional phone lines, says Claudia Bacco, an analyst at TeleChoice, a telecom market research firm in Boston.

Meanwhile, SBC needs help to extend its local network beyond its current home area, SBC Chairman Edward Whitacre says. The company agreed to sell local service in 30 cities outside its home territory as part of a deal to win Federal Communications Commission permission to buy Ameritech. Whitacre says that SBC will likely acquire another company to help it meet that obligation.

The company also needs to clean up its hodgepodge of wireless holdings and settle on a single wireless technology so its customers can roam without losing service. SBC's many acquisitions have given it traditional analog cellular, digital cellular, global system for mobile communications (GSM) and Code Division Multiple Access personal communications service (PCS) wireless networks.

That means a customer in California who signs up for PacBell's GSM-based PCS service cannot roam to SBC's analog cellular networks, says Michael King, research analyst at Meta Group, a consulting firm in Stamford, Conn.

It would make sense for SBC to acquire VoiceStream Wireless, a GSM provider, says Bob Egan, research director at the Gartner Group, a Stamford, Conn., consulting firm.

VoiceStream is in the process of acquiring OmniPoint Communications, another GSM wireless service provider, which could provide SBC with GSM coverage throughout the Midwest and in key markets such as New York and Seattle, Egan says. The company would presumably get rid of its non-GSM holdings.