As Seen In Feb. 4-10, 2005 For whom the bells toll

By KEN SCHACHTER

When Anthony Leteri started indus- trial coating company USA Polycoat Inc. in 1981, life was simple. Americans could use any phone serv- ice they wanted – as long as it was AT&T. The same held true for service, equipment and listings in the Yellow Pages. That was almost a quarter century and, for USA Polycoat, about six phone companies ago. “You had one call to make when your phone broke,” Leteri said. “Those were the good times, I guess.” Nostalgia notwithstanding, analysts say, the old Ma Bell is dead. The newly announced $16 billion merger of AT&T and Baby Bell SBC Communications Inc. is not a step toward reconstituting the telecom monolith, they say. Rather, it is a stride toward a future dominated by a hand- ful of communications giants that will offer the Full Monty of services – tele- CHANGING WITH THE TIMES: Anthony Leteri of USA Polycoat Inc. has gone through a series of vision, high-speed Internet, landline phone providers as more services have become available. voice and wireless voice – to businesses and homes. provider to market the coveted “quadru- like Dish Network and DirecTV. “We’re moving to these companies ple play.” Though the modern world may count that have a full array of services,” said Clausen said cable providers have a the telecom revolution from 1984, when Craig Clausen, senior vice president at leg up on their telecom rivals because federal regulators broke up AT&T, the New Paradigm Resources Group, a their coaxial cables can deliver more underpinnings of even the most modern Chicago-based telecom researcher. “It’s bandwidth than the copper wires of the offerings can be traced back to Ma Bell sliced vertically.” phone companies. That has allowed Alexander Graham Bell. Instead of reconstituting Ma Bell cable companies to push ahead with As portrayed in a 1939 Hollywood into one Humpty Dumpty, Clausen said, broadband Internet and Internet biopic, Bell (portrayed by Don Ameche) there will be “a slew of Humpties com- telephony offerings that aim directly at teaches the deaf as he seeks a means peting with each other.” the telecoms’ traditional markets. of transmitting the human voice. He What will the “Humpties” look like? While AT&T progeny SBC, Verizon falls in love with deaf Mabel Hubbard Some will be today’s telecom companies Communications, BellSouth and Qwest (played by Loretta Young). On March and others will be the cable providers. all provide landline voice, high-speed 10, 1876, Bell is about to test a new Within three years, he said, cable com- data and wireless service, video, a cen- transmitter that won a patent three panies will be offering customers wire- terpiece of any bundle, has been a miss- days earlier. He spills acid on his less service through alliances like the ing piece of the puzzle. clothing and calls out: “Mr. Watson, one between Time Warner Cable and “It’s a little more elusive for them to come here. I want you.” Watson hears Sprint now being tested in the Kansas deploy video services,” Clausen said. the call, they celebrate and a year City area. Under that partnership, Until now, telecoms that wanted to later Bell forms the Bell Telephone Time Warner is selling Sprint cellular package video did so through a partner- Company, which later became AT&T. service, making it the first cable ship with satellite television companies Needless to say, Bell and Mabel marry. As Seen In Feb. 4-10, 2005

Bell’s company gets a big boost after he Arden, principal analyst at ABI Research es also will usher in an era of consolida- shows Queen Victoria his new inven- in Oyster Bay. “They’ve been commodi- tion, said Jeffrey Kagan, an independent tion and she orders phones for tized. Business telecom services still telecom analyst based in Marietta, Ga. Buckingham Palace. have some good value, but the residential “There are going to be a lot of merg- But Bell did not stop with the tele- chunk is hurting these companies.” ers,” he said. “The next one is going to phone. In 1881, Bell and assistant The key, he said, is video and be MCI. That’s going to happen quickly.” Charles Sumner Tainter developed a advanced data services. Possible suitors, he said, include photophone that carried voice on a “By bundling and getting scale, Verizon, which will fall to become the beam of light. In one test, they sent a they’ll be able to revive their revenues,” No. 2 telecom company in the wake of message over 200 yards. The photo- he said. “You can have this whole end- the SBC-AT&T merger. phone, Bell said, eclipsed the telephone to-end communication package.” Analysts also say that Cablevision as his greatest invention. Systems, the largest Taking a cue from their provider in the New York spiritual forefather, the Baby metropolitan area, may be Bells are placing one of the ripe for the picking. biggest bets in history that What of regulatory light, carried by fiber optic approval? In this new age cables instead of through the of consolidation, the SBC- air, will allow them to beat AT&T combination, blasted back the cable companies that as “unthinkable” in 1997 by threaten to eat their lunch. Federal Communications Much as coaxial cable Commission Chairman offered a bigger conduit than Reed Hundt, is expected to copper wire, telecom compa- glide by regulators. nies are betting that fiber The new communications optics – which have far high- companies already are giv- er capacity than even cable – ing businesses and con- will be the pipe of choice as sumers a taste of the new consumers and businesses NEXT IN LINE? Following the planned merger between SBC and age, not the least of which, demand bandwidth-intensive AT&T, analysts say Verizon could be the next firm on the acqui- Clausen noted, is the ability high-definition television plus sition trail. to buy a soda from a vending new data and voice services. machine with your cell Verizon is making the phone, a service already in biggest splash by beginning work to There is little doubt that bundling is place in Japan and Europe. build fiber-to-the-premises networks in popular with consumers, weary of deal- For Leteri’s USA Polycoat, the tele- parts of California, Delaware, Florida, ing with separate local, long distance com revolution has meant more than New Hampshire, Maryland, and wireless phone providers along hopping from one phone company to Massachusetts, New York, Pennsylvania, with Internet and video companies. the next. Texas and Vir-ginia and announcing Bethpage-based Cablevision Systems “We’ve been progressively changing plans to build its network in parts of scored a marketing coup when it bun- because of cost and service,” he said. Rhode Island and Indiana. dled a “triple play” of Internet telepho- A wireless data networks in two of the How much will it cost to build such a ny, television and broadband Internet company’s offices lets workers stay con- network cost? Verizon CEO Ivan service for an aggressive price of about nected while moving about with laptop Seidenberg gave a hint when he told $90 per month for the first year. computers and cellular phones from investors that the company planned to For the telecom companies, the chal- Nextel (which has agreed to merge with increase its capital budget to $14 billion lenges of adding video to the mix will be Sprint) that have a walkie-talkie feature. in 2005. compounded as they wade through a For Leteri, corporate mergers are “If you look back the last couple of morass of legal, franchising and regula- less important than dividends for users. years, [telecom companies] have been los- tory issues, Arden said. “Hopefully the telephone service will ing money on local voice,” said Mike The rush to offer a full menu of servic- improve,” he said.