SBC Will Spend $6 Billion to Add, Improve Services
SBC Communications Inc., the largest U.S. local phone company, said it plans to spend $6 billion over the next three years to offer high-speed Internet access and other new services to customers in 13 states.
“Project Pronto,” as the initiative will be known, will generate annual savings of $1.5 billion in operating costs and capital investment by 2004, SBC said in an investor briefing posted late Friday on its Internet site. It also will generate $3.5 billion in new revenue by 2004, the company said.
SBC, parent company of Pacific Bell, and other local phone companies are racing to sell high-speed Internet access and other services to consumers and businesses as demand soars. SBC also is preparing to compete against AT&T; Corp., the largest U.S. long-distance company, which has spent more than $100 billion to buy cable-TV systems that it wants to use to offer local phone, Internet and other services.
San Antonio-based SBC completed its $80.6-billion acquisition of local phone company Ameritech Corp. last week. The Federal Communications Commission approved the SBC-Ameritech union with conditions aimed at increasing competition in both companies’ regions, including the stipulation that SBC enter 30 new markets in the next 30 months.
The companies agreed to pay more than $1.2 billion in penalties if they fail to meet the conditions. With the 30 additional markets, SBC will serve two-thirds of the U.S. population.
Company executives declined to comment further on the Web site announcement. Analysts said they had been notified that SBC plans a briefing on its broadband strategy Monday in New York City.
SBC shares fell $2.69 to $48.69 Friday on the New York Stock Exchange.
SBC said it will invest the $6 billion in fiber-optic cable, electronics and “asynchronous transfer mode” equipment, all of which allow data to travel across communications networks faster. They also make networks more efficient, reducing SBC’s costs.
Three-fourths of the $6 billion will be invested in the “local loop,” the copper and fiber-optic lines that bring phone and data service to customers’ homes and offices. The remaining 25% will pay for improvements in the network that links together SBC’s own central offices, which house switching and other equipment.
“These investments will make broadband the standard for SBC’s network, fundamentally changing the way the company operates,” SBC said in its briefing. Project Pronto will let SBC deliver new services in its local markets and in the 30 new markets that it agreed to enter, the company said.
The new network will let SBC move voice calls from circuit-switched technology to cheaper, more efficient packet-switched technology. Breaking voice conversations into packets allows a network to carry more traffic. Circuit-switched conversations monopolize a communications channel.
Project Pronto also will let SBC offer services such as desktop videoconferencing and television transmissions over its own network, the company said. And it will let at least 60% of SBC customers get Internet access more than 100 times faster than today’s fastest telephone modems.
