Monday, June 14, 2004

Kevin Werbach: the first 21st-century phone company

Not Vonage or Skype?


"I think we're watching the birth of the the first 21st-century phone company. A telco that virtualizes and outsources everything, except for a core IP backbone and a set of valuable business relationships and expertise. A company built for an all-VOIP, converged, wired/wireless telecom industry.

Not Vonage or Skype. I'll give you a hint: it was also the first great 20th century phone company. It's AT&T.

AT&T is hollowing itself out -- and that's a good thing. Under Dave Dorman, AT&T has invested heavily in building a true all-IP backbone and deploying VOIP offerings. Following the sale of AT&T Wireless to Cingular and AT&T's subsequent deal with Sprint PCS, AT&T is poised to offer a full suite of wireless offerings without the cost of owning a cellular network. And it is still the biggest player in the lucrative business services market, with a national brand second to none.

Not that there aren't challenges. AT&T's consumer long-distance business is dying. Its efforts to preserve government-mandated wholesale discounts are collapsing. The FCC shot down its attempt to treat VOIP backbone traffic an information service, exempt from paying access charges. It faces big competitors like Verizon, SBC, and Comcast, who control the last-mile pipes into the home. It still has plenty of fat and legacy infrastructure. And the company has more than its share of self-inflicted wounds. There is no guarantee AT&T will survive the next five years as an independent company.

Nonetheless, the AT&T of today comes closer than any of its rivals to my vision of the phone company of tomorrow. "

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