SBC to scramble for customers after summer lull
The company will have to scramble to meet its target goals after a summertime setback slowed installations of its high-speed Internet service.
The local phone giant recently revealed that the creation of a new data subsidiary has tapered installations of digital subscriber lines (DSL) but said the declines won't derail its year-end goal of 1 million high-speed Internet subscribers.
SBC, under a plan called Project Pronto, is spending $6 billion to offer high-speed, or "broadband," Internet service via DSL technology. But as of mid-August the company had only 435,000 customers, far fewer than the 1 million people it expects to have signed up by the end of December.
The challenge of meeting broadband subscriber goals is not solely SBC's. Dozens of high-speed Internet access providers are racing to sign up customers quickly. But costly and difficult network upgrades, cumbersome installation processes and modem shortages have affected many providers.
Excite@Home and Road Runner, the two largest cable-modem services, both topped significant milestones last week. But Excite@Home, having promised Wall Street 3 million subscribers by year's end, also has plenty of work left to accomplish this fall.
SBC, in a recent letter updating investors, said the creation of a subsidiary contributed to the installation slowdown. Forming the subsidiary was required as a result of SBC's takeover of Ameritech.
"In the third quarter, SBC reduced its installation rate as it transitioned its DSL activities to its newly established data subsidiary, SBC Advanced Solutions. Equipment shortages, which have been resolved, also slowed deployment," the company said in the letter.
SBC serves local phone, wireless, long-distance and Internet access via its Pacific Bell, Southwestern Bell, Nevada Bell and Ameritech units in 13 states. More than 16 million homes and businesses have access to the company's DSL services, and it plans to be capable of reaching 18 million homes by the end of the year.
According to a recent research report from investment bank Goldman Sachs, SBC reduced its installation rate to slightly more than 1,000 customers per day, down from a peak of about 4,000 installations per day in May.
Still, Goldman is confident that SBC will meet its goal of 1 million by the end of the year.
"We doubt the company will miss it by much, if it misses it at all," Goldman analyst Frank Governali wrote.
A representative from SBC said the company has made great efforts to quickly launch DSL and continues to believe it will reach 1 million customers because of a variety of marketing and promotional plans.
The company has increased its marketing efforts in the mid-Western Ameritech region, has a free PC promotion with Compaq when customers sign up for a two-year DSL commitment, and is bundling DSL with long-distance service in Texas.
The company last week also announced plans to install technology that will allow it to circumvent DSL's limitation of serving customers more than three miles from the phone company switching office. In addition, SBC has tripled its number of installation technicians this year, a spokesman said.
"A small percentage of our central offices needed to add more capacity. That's pretty much behind us now," said SBC spokesman Shawn Dainas. "There's been strong demand. Everyone is facing that. That being said, we're working with our vendors to get the service to customers as quickly as possible and to add capacity when necessary."