"There is no question video is a very important product for us going forward," SBC Chairman and CEO Edward E. Whitacre Jr., speaking at the Goldman Sachs Communacopia XIII Conference in New York. Earlier this year, Whitacre outlined plans to invest up to $6 billion over the coming five years to push fiber deeper into neighborhoods and fully compete with cable network operators. He confirmed these plans, saying "we've got the shovel in the ground, but we just haven't lifted the dirt. We are ready to go. This is a big deal for us." By the end of October, SBC hopes to get a key assurance from the FCC that such network upgrades will not be subject to any unbundling rules.
Whitacre argued that fiber-to-the-node makes much more strategic sense for SBC than FTTH or other alternatives. He estimates that it will cost about $300 per customer to upgrade the access network to deliver 25 Mbps to the premise, while it would cost $1,300 for pulling fiber-to-the-home. In his view, 25 Mbps is enough to deliver four simultaneous channels of live video
Pending the FCC clarification, Whitacre said the DSL upgrade could be accomplished in maybe two or three years - rather than the five years initially outlined -- because the company is so intent on moving forward with video services. Initially, SBC will upgrade the neighborhood networks of its best customers with the highest ARPU.
Meanwhile, Whitacre said satellite video sales through its Echostar partnership are going well, although they could be even higher if not for constraints in the sales channel. He believes consumers are showing strong preference for bundled services. He also noted that the deal with Echostar gives SBC control over the customer. Over time, SBC expects to migrate the best customers from the satellite dish to its terrestrial network. Over time, SBC will also seek out new content partners.
Regarding VoIP, Whitacre said SBC is already very active in the business market. On the consumer side, SBC has one softswitch installed already and is preparing to launch a residential VoIP service "at the right time." However, Whittaker said VoIP is "over hyped at this point in time" and he does not believe it is a serious threat to SBC's phone business.
Overall, Whitacre said there is growing momentum across the company. After a dip in Q2, broadband sales for Q3 are looking good. He is expecting approval for the Cingular / AT&T Wireless merger in October or soon there after. Regarding a possible acquisition of MCI or AT&T, Whitacre said more consolidation would be helpful for the industry, but that SBC had no plans for such a deal at this time.
The Webcast presentation is archived online. http://www.sbc.com
- In June 2004, Ed Whitacre, chairman and CEO of SBC Communications, outlined plans to invest up to $6 billion over the coming five years to push fiber deeper into neighborhoods and fully compete with cable network operators. SBC expects that a FTTN (fiber-to-the-node) architecture will enable it to deliver 15 to 20 Mbps DSL downstream to every home. Under its previous Project Pronto initiative launched in the late 1990s, SBC extended fiber into remote terminals located 12,000 ft from customers. The new plan would push fiber into remote terminals located with 5,000ft of the customer. SBC will also start using FTTP for all new builds in its territory.
- SBC is working with Microsoft on IPTV services that would include standard and high-definition programming, customizable channel line-ups, video-on-demand, digital video recording and other advanced features. Field trials are slated for later this year. So far, SBC's partnership with EchoStar is going very well, said Whitacre, indicating "lots of pent-up demand" for cable competition.
- In March 2004, SBC Communications and EchoStar Communications launched SBC/ DISH Network satellite TV service across SBC's 13-state service area. SBC's residential service bundles now include a "quadruple play" or TV, wireless, broadband and local/long distance service on a single, monthly bill.
