AT&T's big buy could mean new bundles

AT&T's acquisition of BellSouth may reshape wired and wireless telecommunications in the U.S., letting the giant carrier create new product bundles and setting the nation's two dominant providers on a collision course.

The $86 billion deal closed on Friday after a long-delayed FCC approval that came with conditions including a two-year provision forcing AT&T to treat all traffic equally on its wired broadband data service. AT&T now leads the country with 67.5 million local phone customers, serves all the Fortune 1000 companies and has full ownership of Cingular Wireless, AT&T spokesman Fletcher Cook said. The mobile operator used to be a joint venture with BellSouth.

Full ownership of Cingular -- which will be gradually taking on the AT&T name beginning with co-branded ads early this year -- means AT&T has a lot more freedom to combine wired and wireless services, Cook said. For example, it could sell a combination of mobile phone and wired broadband service, with no wireline phone plan.

Consumers want new bundles, especially if they come with significant price-cutting, according to Frank Dzubeck, president of Communications Network Architects, a consultancy in Washington, D.C.

"If bundling is aggressive enough, it may attract back many of the younger consumers who today have just a wireless phone," Dzubeck said.

AT&T is up against cable operators in its own regions that are offering TV, broadband and VoIP phone services and also edging into mobile bundles. But with its new brawn, the carrier is likely to take on its main national competitor, Verizon Communications Inc., Dzubeck said. He expects AT&T to elbow into Verizon's territory using wireless networks to deliver broadband that competes against Verizon's DSL service. Those wireless networks would use 4G (fourth-generation) technologies such as WiMAX and evolutionary versions of cellular systems, all of which can deliver more than 1Mbps, he said.

The network neutrality provision, which doesn't affect the carrier's IPTV or enterprise managed IP services, says AT&T can't prioritize or degrade any service on its wired broadband network. Dzubeck believes the FCC will be able to enforce the new rule on AT&T, but he said the acquisition itself may have started the ball rolling toward a much broader set of changes in network neutrality and other carrier regulation.

"It's now down to everyone asking what's going to happen with Qwest," Dzubeck said, referring to Qwest Communications, the only other large regional carrier. If either Verizon or AT&T buys Qwest and makes the nation's carrier market a duopoly, the FCC and Congress are likely to revisit telecommunications regulation as a whole, possibly imposing network neutrality rules more broadly, he said.

The IDG News Service is a Network World affiliate.