SBC: VoIP a threat

Voice over IP presents a threat to SBC's ability to retain customers and their access lines, a company executive told investors Tuesday at a conference in New York.

Two to three years out and over the long term, VoIP alternatives from competitors will make it tougher for SBC, and perhaps other RBOCs, to hold on to primary and second-line telephony customers, said Randall Stephenson, senior vice president and CFO of SBC. Stephenson made his remarks at the UBS Warburg Global Communications conference.

"On the long term, obviously it's a threat," Stephenson said. Cable modems, at roughly twice the penetration of DSL, are already providing broadband pipes to the home.

Access lines are the "foundation of revenue" for SBC and other RBOCs, Stephenson said. RBOCs, however, have been losing access lines to technology substitution, such as wireless and cable telephony, and to competitors reselling the RBOC facilities as mandated by the FCC's Unbundled Network Element-Platform regulations.

VoIP presents another such threatening technology alternative. But SBC says it can counter competitors’ alternatives with offerings of its own, Stephenson said.

"It's not rocket science," he said of VoIP. "We can do it as well, if not better than anybody."

SBC is already offering a VoIP service to enterprises, Stephenson said. The carrier's PremierSERV Total IP Communication Solution is a managed service built around Cisco AVVID gear.

SBC will gauge consumer demand before offering VoIP on a residential basis, Stephenson says.

And wireless still presents the more significant challenge.

"Wireless is the primary substitute," Stephenson said. "The main threat to wireline telephony comes from wireless."

With that, SBC is encouraged by the 80% overlap of Cingular Wireless subscribers in its wireline areas. SBC operates Cingular along with BellSouth.

Stephenson says that when wireless number portability commences on Nov. 24, SBC will embrace it as an opportunity through products that "marry" wireless with wireline -- such as SBC's FastForward, which allows subscribers to carry over wireless minutes to wireline use.

"It will be the next generation in bundling," Stephenson says of number portability and wireline/wireless integration.

Wireless number portability is expected to turn up customer churn and access line substitution as it allows subscribers to switch providers while keeping their telephone numbers. Stephenson says SBC and Cingular have been preparing for Nov. 24 by renewing contracts with subscribers -- 70% are under contract.

SBC and Cingular have also been upgrading phones and the Cingular network to handle the volume of churn.

"We expect a lot of activity when Nov. 24 hits," Stephenson says.