Not Your Father's AT&T

By Colin C. Haley

February 25, 2004

With its traditional businesses sagging, AT&T recasts itself as an enterprise managed services and VoIP player.

This isn't your father's AT&T . That's the message Ma Bell executives hammered home at the carrier's annual analyst day in New York today.

With its traditional long-distance business still being squeezed by pricing pressures and new technologies, AT&T is leaning on its Internet protocol backbone and existing customer relationships to sell enterprise network services.

The Bedminster, N.J., company said the push into hosting, security, storage and virtual private networks will boost its market opportunity by $50 billion.

In addition, AT&T plans to more than double the number of Wi-Fi hotspots and continue to roll out new Voice over Internet Protocol services, both for consumers and businesses.

"We're moving into areas where you might not traditionally think of AT&T," Eric Shepacaro, vice president of emerging services said. "These are sticky services, many of these contracts . . . are five-year commitments."

Recent examples of multi-year, multi-million dollar networking customer wins, include automotive group JM Family Enterprises and retail chain Bombay. Previously, Bombay used AT&T rival MCI for most of its telecom services.

Typically, these deals include updating, integrating and managing voice and data networks, as well as outsourcing of data center services. AT&T said it won't be shy about partnering with networking specialists to land new business.

Security is also a strong selling point for enterprises, AT&T CTO Hossein Eslambolchi said. Because of AT&T's ability to analyze network traffic, the company can quickly detect threats like the Slammer worm and ensure that customers network performance doesn't suffer.

"AT&T's network is not, and never will be, the same as our competitors -- it is better," Eslambolchi said.

Even though the company is making a strong push for IP telephony, its investment in its legacy phone system will continue to pay dividends because the two systems will work in parallel as the transition takes place. Eslambolchi estimates the transition will take at least 10 years.

On the consumer side, AT&T is pushing its bundle strategy and working with key distributors such as Wal-Mart and Sam's Club. The company's base of 35 million customers proves that "reports of AT&T's consumer demise are greatly exaggerated."

AT&T is gearing up for the rollout of VoIP service in 100 U.S. markets this year. The residential VoIP offering will be called "AT&T CallVantage." The service includes unlimited local and long-distance calling and a number of unique features, AT&T said.

Applications will be accessible from any PC or Web-enabled PDA or phone keypad and include: call logs that store information for months and let users forward voicemail to anyone on the Web; scheduling of "do not disturb" periods, sending calls right to voicemail; and a "locate me" service to forward calls to any phone or all of their phones at once.

CallVantage, which becomes available to some customers next month, will compete with offerings from other large service providers such as Time Warner Cable, as well as startups such as Vonage. Again, AT&T will stress the quality of its network and use its brand recognition to sign-up early adopters.

AT&T also said it was shoring up its balance sheet to help with the push into new areas. With cost cuts offsetting lower revenues, CFO Thomas Horton said AT&T will generate $4.5 billion in free cash flow this year. The carrier is also cutting its debt load.

Originally published on .

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