CEO Ed Whitacre pledges 4 to 6 billion for new fiber deployment and an IP TV partnership with Microsoft

June 22, 2004

3 Min Read
SBC's $6 Billion Banquet

CHICAGO – Supercomm 2004 – SBC Communications Inc. (NYSE: SBC) will spend as much as $6 billion in the next five years on an extensive fiber-to-the-neighborhood (FTTN) project, as long as the economy holds up and industry regulators don't intefere, said CEO Ed Whitacre in this morning's opening keynote speech here at Supercomm.

Sounds great, eh? Whitacre said SBC was committed to providing greater bandwidth and more applications to its customers, and that the best way to do this was to push ahead with an FTTN program that would deliver high-speed Internet access, voice-over-IP, and video across connections of between 15 Mbit/s and 20 Mbit/s.

The news comes just a day after Cablevision Systems Corp. (NYSE: CVC) announced a series of price cuts on its packages of cable television, voice, and high-speed Internet service, perhaps signaling that the battle between multiple system operators (MSOs) and the large telecom service providers is about to enter a climactic stage. Large incumbent telcos like SBC lack the crucial video piece to compete with the cable companies, which are rapidly adding voice services. (See Video Profits on Pause?)

SBC's video service has been developed in conjunction with Microsoft Corp. (Nasdaq: MSFT), and Whitacre noted that SBC is the first carrier to be trying out the software giant's new IP TV system.

"We're working with Microsoft to provide IP TV services over the new network. This is really exciting stuff. It will deliver richer, more interactive services in a way that today's networks cannot, and this will set the stage for full competition against the cable operators."

Observers at Supercomm, where triple-play (voice, video, and data) technology has become a big theme, say that the incumbent telecom providers have no choice but to step up their technology deployments to compete with the cable companies.

"It's all about triple-play and the MSO threat, and incumbents can't deliver it over the existing infrastructure," says Jim Dondero, vice president of marketing with the wireline networks division of Nortel Networks Ltd. (NYSE/Toronto: NT). "They need to offer higher speeds to the home and the office."

SBC's numbers -- "$4 billion to $6 billion" -- are big ones, but keep in mind that's spread over 5 years, so it could add up to less than $1 billion per year. Competitor Verizon Communications Inc. (NYSE: VZ) has pledged to spend $1 billion in 2004 on fiber access (see Verizon Suppliers Get Good News). Both SBC and Verizon budget more than $10 billion per year on emerging telecom technology, and overall capital expenditure is poised to rise this year for the first time since 2000 (see Packets Key to Capex Comeback, Carrier Capex Set for 2004 Rebound, and LR Report Reveals US Capex Plans) .

Whitacre did provide a few caveats. He said that a downturn in the economy and regulatory inteference from the Federal Communications Commission (FCC) can stand in the way of the project. "With the right kind of regulatory treatment, this project can transform our business. Our new network will be the fastest and most capable network in the U.S. We need to guard against external [factors], but I'm sure we'll get there."

— Ray Le Maistre, International Editor, Boardwatch, and R. Scott Raynovich, US Editor, Light Reading

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