3 thoughts on “Ma Bell gets serious about VoIP”

  1. It may go against conventional wisdom, but I’m a big believer in ATT CEO Dave Dorman, who also just happens to be a Georgia Tech grad, and has spent lots of time in Atlanta.

    Dorman is generally recognized as the smartest guy in telecom, and if take the series of announcements over the past 3 months as a whole, we can see a clear pattern.

    Don’t discount ATT’s future, Dave is making all the smart moves and he’s making them early, another sign of leadership.

    When ATT rolls out its new bundles, it will become clear that Dave took Gary (sprint’s CEO, another former atlantan) to the cleaners.

  2. AT&T lost the local telephony battle and hence, DSL market. It doesn’t provide cable services. With no control over broadband internet market, I wonder how AT&T plans to be a viable competitor in the VoIP market against the likes of Comcast, Verizon, SBC and Vonage? As VoIP is essentially a race to provide low-cost services, I don’t think AT&T can provide any bundle of services that would be lower than what its competitors can provide.

  3. Aravind,

    1) ATT didn’t lose anything. The regulatory environment continues to evolve. ATT can’t control that and must respond appropriately, and they have.

    2) All the companies you list are basically regional monopolies at best and none have near the Brand equity of ATT. Nobody outside of telecom knows that VZ pulls down twice the revenues of ATT, and half the people in telecom don’t even know that.

    3) Telecom like computing has been a deflationary business ever since Moore’s law pushed the product and service portfolios into ‘overshoot’ mode.

    Thus one has to actually think thru this situation and environment and not jump to conventional, but false, conclusions.

    For starters, it doesn’t make financial sense to actually own the network, in deflationary conditions. Think of home ownership, if this is not obvious.

    Secondly owning a network is like being on an ever ending treadmill, that you can’t exit. Again like owning a house, the maintenance is constant. And even worse if you don’t upgrade to the next generation, then your network asset becomes obsolete in short order.

    In a couple of years after the macho intoxication of ‘owning’ assets (or do they own you?) wears off, ATT will look like geniuses.

    Now, what ATT can do is invest in things that are of actual interest to customers, like premium care, and VAS. So while VZW and PCS are going to have to blow $1B bones on an 1xEV-DO upgrade, ATT gets to ride along for nominal cost and invest in customers, not the network.

    Last point here, owning a network and having low costs, rests on a huge assumption, that being that you have achieve a profitable level of network loading. If you are short of this mark, then you have a very, very expensive network. So the pain of deflationary price cuts, works against network owners, because revenue = price * subscribers. So dropping prices is no pananeca, because it just means the marketing dept must kick it up just to stay even. Again that treadmill thing.

    So to summarize, A network owner has to make two large investments, CAPEX and CPGA (marketing), whereas a virtual operator only makes one investment, CPGA. An here is where ATT has a huge advantage due to Brand and a still very large base of LD customers.

    4) ATT will be an ass-kicking competitor and competitors that underestimate them will pay bigtime. By moving early, ATT ensures that they can maximize the value of their Brand. Plus an early entry will serve to disuade marginal players from even getting financed to compete in this area. Very smart.

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