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AT&T networks almost ready for advanced services

Amid strong competition from satellite operators and lingering legal battles over cable network access, AT&T's executives address questions about its newly found leadership in the cable industry.

C. Michael Armstrong LOS ANGELES--Amid strong competition from satellite operators and lingering legal battles over cable network access, AT&T's executives today addressed questions about its newly found leadership in the cable industry.

During a panel discussion at the cable industry's Western Cable Show here, AT&T chief executive C. Michael Armstrong said that his company soon will be capable of delivering on its promise of offering video, phone and data services over high-speed cable networks.

"There shouldn't be any doubt that the infrastructure for interactive, digital services will be present in AT&T's network," Armstrong said today.

AT&T's cable acquisition binge has quickly established it as one of the largest cable operators in the nation. Yet the network it acquired through its purchase of Tele-Communications Inc. (TCI) is badly in need of upgrades so the telecommunications giant can move ahead with plans for advanced services.

Armstrong defended the acquisition today and said the network would be 85 percent upgraded by the end of next year. The network AT&T acquired through its purchase of MediaOne--a deal that is still pending--will be 90 percent upgraded in the same timeframe, he added.

The issue is critical. Without the proper infrastructure, AT&T will not be able to offer local telephone service--a long-term plan that inspired it to acquire TCI in 1998. With the issue of network upgrades nearly resolved, Armstrong and AT&T broadband and Internet services unit president Dan Somers said the company will pursue deals to offer telephony services with other cable companies.

In the same vein, Armstrong said negotiations to offer cable telephone service with Time Warner cable are progressing and should be completed around the first quarter of 2000, or about the same time the MediaOne deal closes.

Although some in the cable industry have said that AT&T could use its wireless assets to distribute video programming in markets where it doesn't have its own cable network, Armstrong flatly denied that the company had any such plans.

He said instead that the company would offer local telephone service through fixed wireless operations, especially in areas where cable has yet to be built out. "The economics of [wireless] deployment has gotten to be so much better, it gives us a [wider] range of options," Armstrong said. "I'm not getting into [other cable company's] video business this way."

AT&T's interest in fixed wireless and other broadband technologies is primarily geared so the firm can compete against local exchange carriers, like the Baby Bells. As prices for long-distance services drop, phone carriers like AT&T need to find other sources of revenue; offering advanced services or expanding into the local markets is one way of achieving this.

"There is no longer a market segment called long distance that can be preserved…Long distance is a commodity," Armstrong said.

Questions about how quickly AT&T can introduce interactive TV services over its high-speed networks continue to linger, in part due to the shifting nature of the technologies and alliances that make up the business. The developing alliance between Microsoft and Excite@Home for interactive TV services underlines a growing interest in the space.

One of the big questions looming for Excite@Home is the role it will play in the introduction of AT&T's interactive offerings.

"We're looking at interactivity as a business in its nascent stages today," but the company plans to develop the services over the next four or five years, Somers said. As the market develops, AT&T plans to tap multiple suppliers for hardware and software.

Unlike Excite@Home's current contracts with cable providers, the company has no exclusive rights to do interactive TV services for AT&T.

The issue isn't immediate, Somers noted, as set-top hardware from General Instrument hasn't yet been released. New York-based AT&T expects to introduce its interactive services in select cities by mid-2000.