Deal Would Put SBC Further Behind

SBC Communications Inc., already late to the Internet party, will be even later as it remains preoccupied with completing the acquisition of Ameritech Corp. and integrating the companies’ operations, analysts said.

SBC and Ameritech, while aggressive in other areas, have lagged in providing services such as Internet access and data delivery to businesses and consumers, said Abhi Chaki, an analyst with Jupiter Communications. It’s a serious deficiency, because the Internet access market will grow to $38 billion in 2002, from $6 billion in 1997, according to Forrester Research, a technology market data researcher.

As a result, Ameritech and other big local-phone-service companies have let newer companies such as WorldCom Inc. gain the upper hand in the Internet market, analysts said.

“They should have been focusing on it yesterday,” said David Cooperstein, a senior analyst at Forrester. “SBC has been absent” in talking about providing high-speed Internet data delivery, he said.

Chaki said the regional Bell companies dominate in their local phone markets, “so they have the distribution, but they don’t have the drive to follow up” and get their customers to subscribe to Internet service.

The Baby Bell companies have only a fraction of the consumer market for Internet service, Chaki said. Ameritech began offering high-speed Internet access in December in a few Midwestern cities. SBC’s Internet business is primarily through its Pacific Bell and Southwestern Bell units, in California and Texas.

SBC said it’s too early to say how the acquisition will affect its Internet plans.

In addition to providing Internet service through its local phone networks, SBC will also need regulatory approval to own a national Internet access network because of concerns it would transmit long-distance calls, analysts said.

Federal telecommunications law restricts the Baby Bells from offering long-distance service to customers in their regions until they prove to the Federal Communications Commission that they’ve opened their local phone markets to competitors.

Cooperstein said SBC could buy an Internet access company outside its region, such as RCN Corp. in the Northeast or Tampa, Fla.-based Intermedia Communications Inc.

But Chaki said that’s not a realistic possibility: “Ameritech is a big morsel to digest for SBC. The last thing they want to do is acquire another company.”