In its first move to capitalize on its purchase of Ameritech Corp., SBC Communications, Inc. opened its checkbook today for a $6 billion (US$) expansion into the high speed Internet service provider business.
Lining up to become SBC’s first Internet guinea pigs are IBM Corp. and E*Trade, who will use the new, faster Internet service to help employees and customers, respectively.
SBC dubbed the effort “Project Pronto,” stressing the focus on increasing speed for Internet users. Over the next three years, the company plans to remodel and add onto its current telephone network to become the largest provider of advanced broadband services in the country.
SBC pledged to start providing constant high-speed Internet connections via digital subscriber line services to 77 million customers by 2003. 80 percent of those customers are served through Southwestern Bell, Ameritech, Nevada Bell, Pacific Bell and SNET.
The company plans to further extend access to its remaining customers in subsequent years. SBC and Ameritech, regional Bell operating companies serving the southwest and the midwest, respectively, merged this year to create a company serving approximately 100 million people — about one-third of the nation’s access lines.
High Profile Customers
Kicking off Project Pronto are IBM and E*Trade, two companies that will help bring notoriety to SBC’s effort. The company agreed to provide DSL service to 15,000 IBM employees to enable them to telecommute by accessing IBM’s corporate network in some areas.
The IBM project will be the largest high-speed remote network application of its kind anywhere, SBC says. The company has a similar agreement to connect thousands of PeopleSoft’s employees to that corporate network. For E*Trade, SBC will act as an Internet service provider to the online broker’s highest-paying customers. E*Trade said it plans to start offering its high trade volume clients high-speed Internet access through SBC over the next three months.
In addition to starting DSL service, SBC plans to redesign its network to increase its reach and refocus upon a variety of Internet services it will be able to provide through the wider pipeline of fiber optic lines. SBC hopes to eventually deliver entertainment quality video voice-over-ADSL, personal videoconferencing, interactive online games and home networking services.
While SBC is predicting a big bill for its network renovations, the company says increased efficiency will make up for it. “Expense and capital savings alone are expected to offset the cost of the entire initiative,” SBC said.
The company said it expects the transformation of its network to ultimately decrease future capital requirements, reduce network operating expenses, and generate $3.5 billion in new revenues by 2004. “Driven by the strong top-line revenue growth from our broadband and national markets growth initiatives, we are targeting 15 percent earnings growth in 2001 and beyond,” the company said.
No More “World Wide Wait”
SBC’s DSL service can increase Internet connectivity speeds to 1.5 megabits per second, which the company claims is about 200 times faster than access via traditional phone service. More than 60 percent of SBC customers will be able to subscribe to Internet access at guaranteed speeds of 6.0 megabits per second, the company added.
SBC is in the process of deploying DSL service in more than 500 of its central offices and is on track to complete that stage of the upgrade early next month for 10 million customer sites in Texas, California, Nevada, Missouri and Arkansas.