Global: not in a fix with fixed, argues AT & T

Fixed-line telecom services do not offer easy revenue pickings, but AT & T is confident that it can make a living in the segment--by functioning as a "network integrator". "We begin with our competency around networking. We solve problems where a business is deploying, say, new tools and help to devise solutions for network design that integrate all the necessary elements and guarantee a level of performance and efficiency," says Bill Archer, president of AT & T, EMEA.

Archer sees the greatest opportunity for AT & T in providing networking for around 5,000-10,000 multinationals around the world. "These are, typically, large companies in their industries. They value providers with presence, scale and depth of service portfolio and expertise that is well matched to theirs, both in terms of where we are located and where we have sizeable infrastructure in terms of people, facilities and so forth," says Archer of the niche.

Though it might be expected that companies would always look very hard at price, Archer does not see this in practice. "Customers have an ROI equation in their minds when they assemble a global network that is becoming increasingly complex. They see the function of these networks as driving lower total cost or greater top line performance or both. They think about the networking solution in terms of its total value to the company, then in terms of unit price from point A to point B," says Archer. He argues that AT & T can have a "substantial impact" on the economics of its customers by "extending their boundaries". AT & T is expanding its current 21 data centres to 24 by the end of this year and offers management of services and applications--business continuity--rather than just storage.

"Expanding boundaries" also includes making network access feasible almost anywhere. "You can be assured that we are looking at our options in wireless. We are thinking about the opportunities in a global sense. The most obvious option is wireless access to data networks. That is on the mind of our CIO clients. We will have a solution in that area. How far our wireless solutions extend and how deep they go remains to be seen," says Archer. Cutting access costs via wireless also appears to be of interest to AT & T. "We're looking at a raft of options in access. In the US, our single biggest expense is access fees to regional bells," says Archer.

Getting voice or data onto and across a network is not a fat-margin business, as Archer readily concedes, and he stresses that AT & T aims to do much more than that. "The challenge is also about extending the boundary of the network so that it can integrate into applications and provide better end-to-end performance. We can integrate storage with website deployment. We can help with emerging solutions like VoIP, integrating all elements for high performance," says Archer. AT & T believes that its addressable network integration market will have reached nearly US$50 bn by 2007. Archer did not say what share of this market AT & T is aiming for, but the company does see itself as the "global networking leader".

AT & T Business had revenues of US$25 bn in 2003, of which 44 per cent was generated by long-distance voice and 56 per cent by other services including data and IP. AT & T has publicly stated that it expects full-year revenue for 2004 to fall by between 7-10 per cent and the effect of this price pressure has already been seen in the first quarter. Revenues in the business unit were US$7.9 bn, down 11 per cent year-on-year. However, data and IP & E services income suffered less, down by just over seven per cent year-on-year, at US$2.2 bn for the quarter. Overall net income at AT & T was down by 47 per cent, at US$304 m.

AT & T is, it appears, not the only fixed-line operator under pressure. Archer reports that it is still more economical to buy capacity, rather than acquire networks, even at knockdown prices. "We have looked at options to buy assets and we haven't found it economically or operationally feasible," he says. "The core of the network is in large part owned, engineered and operated by us--that's where we get distinction with our customers. What we acquire from others is generic."

COPYRIGHT 2004 Horizon House Publications, Inc.
COPYRIGHT 2004 Gale Group