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AT&T outlines post-TCI vision

The telco giant is ready to wire the world, or at least 17 million new households after its merger with TCI.

    AT&T is ready to wire the world, or at least the 17 million households it will add to its customer base when its merger with cable giant Tele-Communications Incorporated is complete.

    AT&T and TCI executives laid out their plans to upgrade TCI's cable infrastructure to a high-speed integrated telephony system capable of handling telephone, video, and data on a single line. The service will fall under the wing of AT&T's new Consumer Services unit.

    "Our goal is to provide a full menu of packaged communication services that customers already are paying for today," said Lew Chakrin, vice president of business development at AT&T. "We want to go as quickly as possible to a world of fully integrated packet communications."

    But AT&T's vision of the world won't come without a price. The Basking Ridge, New Jersey-based telecommunications giant will have to toss in roughly $1.3 billion to help TCI finish an existing upgrade project. It then will need to spend another $1.3 billion on maintenance and line extensions between the years 1999 and 2002, before chipping in another $1.8 billion for digital devices that will make the vision complete.

    Questions remain, however, as to whether the public is ready for the Jetson lifestyle AT&T is envisioning.

    "Consumers have not jumped on the new interactive appliances," said Sean Kaldor, an International Data Corporation analyst. "AT&T will need to come forward with a value proposition and tell the consumer, 'Don't subscribe to telephone, cable, and Internet services. Just subscribe to our one communication service.' That is an easy thing to sell."

    Chakrin, along with AT&T chief technology officer Dave Nagel, said it is AT&T's job to do exactly that, and to make sure the technology doesn't scare the public away.

    "This is not the stuff of normal dining room conversation in most households," Nagel said. "We are focusing on technical issues today, but it is really important for us to talk about the benefits to the customers. Something as simple as getting a single bill that has all of your communication services, those are the things we need to be focusing on."

    Nagel said he is confident that, as Internet connections become as pervasive as cable connections, people will be driven to services like those AT&T is building.

    "People are buying high-speed Internet access today," he said. "Some 25 percent of U.S households are online. As soon as they feel and touch high-speed access, they don't want to go back to the other stuff. But we need to be careful not to roll out this stuff at a pace [at which] people think they have to be scientists to understand their communication systems."

    But Kaldor warned that, unless AT&T can keep the price of the integrated service at the same level or cheaper than what consumers now pay for the services individually, it won't fly.

    Also an issue for AT&T will be development of a back office infrastructure to handle the integrated service. Currently, TCI and each division of AT&T--long distance services, wireless services, and Internet services--use different billing companies spread out across the country .

    "Before you can offer integrated services, you need the back-office infrastructure where billing systems can coordinate with each other," said Jim Wahl, analyst at Boston's Yankee Group. "Setting that up is a huge cost and a difficult task to undertake. I don't think they have thought it through."

    On the technical side, the project requires AT&T and TCI to first finish upgrading the existing cable lines to a two-way system, which opens the door to using cable for interactive services and to receive some 300 or more channels. The companies expect 59 percent of TCI customers to be upgraded by the end of 1999 and 90 percent to be on board by the end of 2000.

    The next step is to hook households up to the advanced telecommunication systems. The technology for doing so already is available. The idea is that a cable modem connects the consumer's PC to the coax cable in the home, which then connects to a network interface unit (NIU) on the side of the house or in the basement, which then connects to existing telephone wiring.

    Nagel said the advanced systems will give users a single source for telephone service, access to @Home--in which TCI owns a majority stake--as well as to the Internet--at "speeds of 300 times the traditional telephone lines." About 10,000 people nationwide already use this type of service, including about 5,000 TCI customers in Hartford, Connecticut.

    The new service is only an interim step in the eventual plan of wiring up TCI and AT&T customers to an advanced packet communications system, Nagel added. Such a plan would require consumers to purchase digital set-top boxes that integrate video, telephone, and high-speed data without a separate cable modem or telephone interface. The rollout is expected by the end of 2000.