AT&T to start cable telephony trials

The city is the first step on AT&T's planned route to creating a one-stop-shop for local and long distance, high-speed Internet, and cable TV service over cable wires. Consumers in the small Bay Area suburb will help AT&T learn how best to market its new telephony services to the rest of the country.

Although high-speed Internet service through the @Home Network will be a critical piece of the consumer bundles, AT&T will focus on its voice services in the initial trials, said spokesman Mark Siegel.

"The center of the bulls-eye here is local and long distance service over cable," Siegel said.

But if AT&T's bundled service deal marks a potentially seismic change in the communications business market, the physical switch to cable phones will be fairly painless for most consumers.

The service will not require any kind of new phone, wiring, or electrical work inside the house, according to the company and cable analysts. Traditional phones will work normally, plugging into the same familiar wall socket and using the same phone cord.

The difference between cable and traditional telephone systems largely exists outside the house, where a local cable operator will install equipment that directs voice, cable, and Internet traffic to the appropriate lines inside the house.

Dubbed the "network interface unit," the device is about the size of a traditional department store shirt box, and will sit on the wall of homes next to the existing telephone box.

The speed and ease of installation will depend on the demand for technicians' services--the more people want the service, the longer they'll have to wait for the technician to show up. Since the box will require on-site installation, as compared to the remote-switching capability of ordinary telephone lines, service will take longer to turn on that would ordinary telephone line service, the company said.

In some cases, the company may also have to dig a temporary trench to install upgraded underground wiring systems, analysts added.

But once installed, the cable system should be virtually invisible to users. Customers will be able to keep the same phone number, but will pay AT&T for the bundled package of services instead of splitting their phone bills, analysts said.

Playing catch-up
AT&T's ambitious plans to offer near-nationwide cable telephone and Internet service will eventually make it the largest cable telephone service in the world.

But at this point, it trails well behind several of the smaller cable operators, which have already launched large rollouts of the service in markets around the country.

Cox Communications is well ahead of its rivals, with about 42,000 subscribers already receiving telephone service over its cable lines. Cablevision and MediaOne trail with close to 17,000 each, according to cable analyst firm Kinetic Strategies.

These services have proved fairly successful in pulling the local telephone company's subscribers into the cable fold, said Michael Harris, president of Kinetic. Cox has reached penetration rates of nearly 20 percent in some areas, he noted.

AT&T's local phone offer will likely be similar to these other companies, which have consistently offered prices that are between 20 percent and 25 percent lower than ordinary local phone service, Harris added.

But AT&T, which can also bundle discounted long distance pricing with its local phone and high-speed Internet service, will have an advantage that Cox and the others currently lack, he said.

"The real issue is what the AT&T brand brings to the service," Harris said. "I think getting 25 percent penetration rates or higher in the next year would not seem unlikely."

An AT&T spokesman said the specific pricing plan and rollout date for the Fremont market trial was not yet available, in part because the company is still evaluating results from a smaller trial using AT&T employees. The company has said it will begin offering the service over the next 30 to 45 days.

The company has similar market trials for cable telephone service planned for ten cities over the next year, but has not yet released rollout dates for the additional markets.