DSL Prime: SBC

Do the employees of SBC know what their management is planning?

by Dave Burstein DSL Prime [March 28, 2003]

SBC's pride speaks out
Staff have earned respect
SBC is a great company, with extraordinary capabilities. Three years ago, I called them "company of the year" as their Pronto plans were the most advanced in the industry. 100 percent of their customers would have broadband soon after 2002, 80 percent in 2002. Pronto remotes would shorten loops, so that the majority of customers would have 6 Mbps service. They were ready to add 350,000 subscribers in Q4 of 2000, far ahead of anyone else.

Proud of these achievements, one staffer e-mailed "Help me here. Compared to Verizon SBC has fewer Access Lines and more DSL lines. So how is Verizon 'going strong' while SBC is '66 percent and fog'?" I had an unfair advantage—as I wrote, I knew that Verizon is going very rapidly from 62 percent to 80 percent. Later that day a press release came: in 9 months, Verizon is going to be able to reach nearly half their currently unserved customers.

Another asked "Would you refer me to the source that proves SBC is three years behind schedule?" which points to the real issue, which is not dedication of the staff but the decisions at the top. SBC spokesman Larry Meyers tells me "We are in a wait and see position pending regulatory or legislative changes in several states, and as a result it is difficult to forecast." Sounds pretty "foggy" to me.

SBC is a third of the U.S.—I can't responsibly report on DSL without covering them. So I have to go with what I've got. My primary source is Ed Whitacre, CEO. He's the one who said "80 percent DSL by 2002, 100 percent broadband a few years later." Since then, he's cut the capital spending budget in half, and two weeks ago said "We will lower it further." (That comment, to Todd Wallack of the SF Chronicle, may be premature, according to one usually well-informed analyst. Wallack's interviews lately, including one with Dorman in which AT&T called for raising local phone rates, have been remarkable. The reporters hurling softball questions in D.C. should be embarrassed.)

"Just tell us what the law is and we'll work with it," CEO Duane Ackerman of BellSouth tells me. Under present law, Verizon is going as fast as possible to 80 percent coverage, Bell Canada to 78 percent this year, and Germany and Japan are already over 90 percent. SBC instead is demanding new laws likely to cost consumers $2 to 5 billion before SBC makes a profitable investment of $200 million. That's my very rough guess, based on the some unprovable assumptions about what prices would be with and without competition over five years. An increase in the price of telephony is the equivalent of a tax on every family—this would be bad law.

Selim Bingol of SBC disagrees. "Reforming the UNE-P does not have to cost consumers a dime—it might change wholesale pricing for the two companies that are currently exploiting it—AT&T and MCI WorldCom—but that's it. Meantime, UNE-P losses are eating away at our core business revenues that are critical to funding things like broadband deployment. Despite it all, SBC still leads the nation in DSL subscribers. SBC will not lose its leadership position in DSL."

DSL Prime previously reported SBC's CFO Randall Stephenson predicted at least a million more DSL customers this year, and the word on the street is that the price drops (including a $25 trial) are pulling in customers.

Whitacre at SBC heads the only major telco in the developed world refusing to promise the build, because they all know it's profitable. I respect the people working hard at SBC; it's the people paid $92 million a year at the top that are playing politics and risking the future of the company. SBC really has no choice but to build, and will do so.

The state of Michigan just provided $8 million to Charter cable to run fiber to areas SBC is not fully serving.

I hope this story is wrong. I hope SBC will soon ask me for a correction, because in fact they will get to 80 percent before 2005, three years late.

Copyright 2003 Dave Burstein.
The DSL Prime Newsletter is reprinted with permission.

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