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AT&T hails the "broadband millennium"

The CEO of the long distance and cable giant outlines his strategy for broadband and interactive services at the cable industry's largest show.

CHICAGO--AT&T president and CEO C. Michael Armstrong is really just a cable guy.

At the National Cable Television Association convention keynote today in Chicago, the head of the largest U.S. long distance firm and now the largest cable company set out to define his vision of the role the industry will play as voice, video, and data services converge on high-speed networks.

Once a small coterie of family-owned businesses that focused mainly on offering television programming, the cable industry is now focusing on delivering interactive TV services as well as broadband Internet and telephony to some 67 million homes that are passed by cable pipes.

"I'm proud to be a cable guy," Armstrong told attendees in his first industry address since having made his initial foray in the cable world with the acquisition of Tele-Communications Incorporated, and more recently, Media One.

A newcomer to the tight-knit clan of cable operators, Armstrong nevertheless set out to allay concerns that his only real interest in cable was to offer telephony service. To do so, he outlined his vision of where cable fits into what is being termed here the "broadband millennium."

"Where we're going is interactivity, a future where television breaks off the passive mode forever, and adds a dimension of consumer choice and control that, until, now, has been just talk," Armstrong said.

Armstrong, like many other industry executives, is pushing for bundled services like movies on demand, email, e-commerce, and telephony services. He said that those cable-based services will be a major source of AT&T's revenue by 2006.

This vision depends on making the TV a "virtual communications center," he said. Eventually, he said, AT&T will offer communications services through home network appliances that can offer weather information, video calls, even a child's homework assignment from school. Most importantly, the cable industry is the best suited to provide that connection into the home, he said.

While acknowledging that the promise of enhanced television services has gone largely unfulfilled to date, he insisted that "this future will happen, and it will happen in the next five years."

"Rhetoric exceeded capital," he added. Armstrong expressed confidence that things would be different this time around, but many issues remain, including upgrading TCI's cable network to handle all of the interactive services that the company is planning.

Having already swallowed TCI, AT&T will be the No. 1 cable operator when its merger with MediaOne Group is completed.

"He really wants to be welcomed as member of the club," to prove that he takes cable seriously, and not simply as a means to bypass the Bell telephone companies for local telephony offerings, said Cynthia Brumfield, principal of Broadband Intelligence consulting firm.

Leo Hindery, head of AT&T's cable operations, indicated that AT&T is not looking to acquire other systems right now, but is looking at exchanges and swaps with other cable operators this summer to consolidate the company's holdings into more concentrated geographic regions.

Armstrong was also busy denying rumors that AT&T was in discussions with AOL for any sort of business partnership that would allow them access to his company's network.

"There are no current discussions with AOL," Armstrong said, noting that any deal "has to be on business terms where we both make money."

In his keynote speech, Armstrong reiterated claims that AT&T will be open in terms of content, and will offer consumers a range of programming and services, citing later the example that consumers can get AOL content over the Internet.

However, Hindery noted during the press conference that "what we're suggesting here is that we do own some proprietary screens." Companies need to negotiate for space on those portals, be they on the TV or on the Excite@Home service.

"We'd be delighted to have those discussions," Hindery said.