AT&T gives wings to Project Angel

In a speech to financial analysts yesterday, AT&T chief executive C. Michael Armstrong touted the revitalization of "Project Angel," a fixed wireless local phone system he said would help fill in gaps in the company's cable network.

"We are taking Project Angel out of the development world and into the deployment world," Armstrong said. He stressed that the company is committed to reaching 100 percent coverage for its bundle of local phone and data services--regardless of the technology used to do so.

The announcement came as AT&T continues to negotiate with a string of cable firms to fill out its national cable telephony footprint.

The company's merger with Tele-Communications Incorporated was completed last week, and joint telephony ventures with Time Warner cable and five TCI affiliates are underway.

But these deals will allow AT&T to offer cable-based services in just 40 percent to 50 percent of the nation, while Armstrong has said he wants 60 percent to 65 percent national cable coverage.

Cablevision has said it may enter into a telephony deal with AT&T; however, a deal would not be a surprise, as TCI owns about one-third of that company.

AT&T is also negotiating with a group of other large cable companies like MediaOne, Cox Communications, and Comcast, to create new joint ventures with the aim to expand the company's cable footprint.

Little to no news has come out of these talks; however, members of this cable triumvirate have since begun making their own new announcements about independent telephone service rollouts.

AT&T has made it clear that it is committed to the Project Angel wireless system--but analysts said the project's timely revitalization was likely planned to turn up the heat in negotiations with cable companies.

"Cable is their first choice," said Elliott Hamilton, director of U.S. telecommunications consulting for the Strategis Group. "They're using [Angel] for leverage. It's obvious they don't want to have to go that way."

Angel finally takes flight
Project Angel has been in the works at AT&T since 1994. The company made a splashy set of rollout announcements early in 1997, but pulled back after the project proved to be more expensive and less practical than first thought.

Armstrong said yesterday that the company has managed to pull costs down far enough to make Angel a viable alternative to cable and traditional phone networks, however. The service is scheduled to be tested in at least one metropolitan area this year, and rolled out to other selected cities in 2000, he said.

Initial startup costs for the system, which requires a radio antenna to be installed on the outside of a users' home, would run about $750, the CEO said. The service will provide up to four telephone lines, and high-speed Internet service at download speeds of about 128 Kbps--about the speed of ISDN.

But even at that price--down from an estimated $1,149 the first time around--the system is expensive and untested, analysts said.

"It's an unproven technology," said Brian Adamik, senior telecommunications analyst for the Yankee Group. "I can't point to any deployment and say yeah, this technology works."

High risk?
The first time AT&T announced Angel's planned deployment, it appeared to be used as a bargaining chip to win more favorable deals reselling local service from the Baby Bells, Adamik said. Even if the company is committed to rolling the service out on a wider scale this time around, the tactics may still be the same.

"I still consider this a scare tactic," Adamik said. "I don't think it's ready for prime time."

For their part, several of the cable companies AT&T is currently negotiating with have made it clear that they can offer telephone service without Ma Bell's imprimatur if necessary.

Cox, for example, launched a new international calling plan Monday dubbed the "Cox International Savings Plan." The cable operator, with 3.8 million TV subscribers, is touting its new plan's rates as between 75 percent and 90 percent lower than AT&T's standard international rates, offering consumers a better value on local and long distance voice calls.

MediaOne also has said it will continue its own rollouts of broadband and telephone service.

"There have been some discussions with AT&T and the other [cable operators] but nothing conclusive," said MediaOne spokesman Dave Wood. "In the meanwhile, we're progressing with our rollouts and we'll certainly be doing more rollouts this year."

Analysts say Cox, MediaOne, and Comcast know that their own bargaining power lies in playing hard-to-get.

"You're not going to wait to see if that deal goes through. They've got to run their business," Bruce Leichtman, director of media and entertainment strategies for the Yankee Group. "[But], let's face it, it could be a bit of a leveraging deal. Fear is a great motivator and Cox could be a competitor to AT&T."

Reuters contributed to this report.