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AT&T sees one-stop shop
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May 5, 1999: 5:47 p.m. ET
Telecom giant to offer local, long distance, Net and cable in one package
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NEW YORK (CNNfn) - The proposed buyout of the MediaOne cable company by long-distance titan AT&T is widely expected to blur the lines that still divide local and long distance service providers. It also will bring to bear the all-inclusive service offerings that long-distance companies have promised consumers for years, experts say.
"It's a bonanza," said S&P Equity Group analyst Philip Wohl, who predicts consumers will be able to purchase a low-cost package of Internet, long-distance, local and cable services from AT&T (T) in one to two years.
"You are going to have the capabilities to do multiple (communication) functions," he said. "You can be talking on the phone, playing on the Internet and (sending a fax) all at once without affecting the service."
One industry insider estimates such a package could cost about $75 to $100 a month -- a flat fee that would represent considerable savings for most consumers who today buy these services separately.
AT&T said it's still too soon to say how much it will charge. "There's no way to know yet," AT&T spokesman Mark Siegel said. "We will offer consumers a bundle of services. The idea is to provide it all at a single price on a single bill. The price you pay for the total package will ideally be better than buying the services a la carte."
He confirmed the all-in-one service packages are expected to be rolled out over the "next several years." The plan is to enable consumers to receive cable, local phone service, long distance and high-speed Internet access over a single line, he said. Those who want just one or two services still will be able to buy them separately.
Perhaps more important, though, Siegel said the acquisition of MediaOne's cable lines will enable AT&T to provide the first real alternative to local phone service.
Although the Telecommunications Act of 1996 opened the local phone service market up to competition, only a small percentage of consumers currently have a cost-competitive and reliable option available to them. The vast majority still buy service from the regional Bell operating companies, or RBOCs.
"You won't have to use the current local telephone system," Siegel said, noting AT&T chose to enter the local phone service market by buying its own cable facilities, rather than leasing existing phone lines from the RBOCs.
Dialing up change
Robert Rosenberg, president of Insight Research Corp. in Parsippany, N.J., a telecommunications market research firm, said the acquisition of MediaOne (UMG) by AT&T is nothing short of a watershed event for the industry.
"If you want to know what your cable company is going to be delivering to you in the next few years, you had better ask AT&T," he said. "I don't think it even matters which cable company you are with. The net effect of this deal is that AT&T's network will pass through roughly one in three U.S. households. They are going to have the loudest voice, and they are going to set the agenda for the cable TV industry."
That is, of course, assuming the deal goes through. Rosenberg said it's still unclear what strategy MCI (WCOM) is going to take, as it looks to the digital age of the Internet. The long-distance competitor still could throw its hat in the ring for MediaOne.
The acquisition of MediaOne by either company, however, is expected to raise the bar in what consumers demand from their telecom service provider.
"We know that AT&T is upgrading their TCI network to provide voice services, but we believe that upgrade will go beyond that, for total interactivity at very reliable rates," Rosenberg said. "Video telephone calls, downloading music videos, television broadcasts, online newspapers -- all of this would be in digital mode. I think they certainly intend to be the one-stop shop and once they do that, it will force the other multiple system operators to follow suit."
Among them: Cox Communications (COX), Adelphia Communications (ADLAC), Cablevision Systems (CVC) and Comcast (CMCSK).
The outlook
A.G. Edwards analyst Tony Ferrugia said the big question now becomes how quickly will AT&T be able to implement these services. That, in turn, will determine the timeline for delivering new services to consumers. It also will determine how profitable a deal the MediaOne acquisition will be.
"One of the biggest issues is how quickly AT&T will be able to take all of the assets it has accumulated and implement a data and voice strategy over the cable networks that begins to generate revenue and cash flows to pay for this acquisition," he said.
Ferrugia added consumers will be the prime beneficiaries of the economies of scale and new service offerings made possible by the acquisition.
"Ultimately this should mean more technology and better prices," he said. 
--by staff writer Shelly K. Schwartz
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