Small mammals outwit dinosaurs
The shift in strategy comes none too soon. The incumbent telcos have already been facing competition from upstarts taking advantage of cheaper IP technology.
Three years after launching, Vonage is the largest US VoIP provider. for a flat fee, the company lets users make phone calls over the Internet using their existing broadband connections. Skype, which offers free software for Internet calling, has signed up 28 million users -- and counting.
Cable companies are planning to roll out their own Internet phone services. Time Warner Cable and Cablevision have begun selling voice calling over the Internet, and Comcast plans to join the crowd later this year. The old-model phone providers can't keep up.
"In an IP world, voice is easy and cheap," says Scott Cleland, chair and chief executive of the Precursor Group, an independent research company. "The traditional telecom companies are an anachronism."
Yeah, MCI, he's talking to you
Cleland says AT&T is only the first casualty in the changing telecommunications climate. He says he expects MCI, another traditional long-distance phone carrier, to follow a similar path toward acquisition. Sprint, which has a strong wireless business, may also be an acquisition target.
The consolidation is not likely to end there, he adds. Since IP shifts the value from inside the network, where switches once controlled services, to the edge, where a handset or PC controls the service, it's easier for competitors to offer advanced services over networks they don't own.
"In the IP world, you don't have to own the facilities to do business," Cleland says "Look at how Internet companies like eBay and Amazon operate... We see the decline happening rapidly on the long-distance side to AT&T and MCI. But it will eventually happen to the Baby Bells, albeit much more slowly."
Some analysts say that, though the phone giants' current business models might have to change to accommodate new services, there's no reason to start writing eulogies.
"I wouldn't give up on the local phone companies just yet," says Eli Noam, director of the Columbia Institute for Tele-Information. "They own one of the two major pipes into people's homes. But the days of a communications company only selling wireline voice is over. If they turn into bit transporters and offer more valuable services on top of those connections, they can grow strong."
Talkback
Your article is so misleading that
it isn’t even funny.
To describe AT&T as a circuit switched
phone business, is insulting to every
IP network in the world.
To say AT&T was humbled by modern
internet technology, is so wrong that it is
almost obscene
To say that AT&T finally switched to VOIP
earlier this year, Is a clear indication of a
complete lack of understanding of the
monumental changes in technology that
AT&T pioneered.
As many industry annalist have said.
AT&T has the largest, most reliable highest
capacity, and most intelligent IP network on
the face of the earth, bar none
They have had the best network on the face
of the earth for many years now.
It’s capacity is leaps and bounds above any
other IP service provider in existence.
It is a fully integrated network that carries
every type of traffic known.
It utilizes protocols an traffic management
system that most other network owners can
only talk about yet.
It has been years since AT&T has carried a
call over circuit switched lines.
They perfected voice over IP!
That was one of the primary points in the
largest IP network on earth!
All calls that go through AT&T go over the
global IP network.
It carries Voice data video and any media
stream on a unified global IP backbone.
If anything, AT&T is so far ahead of
everyone else, that they have left
the world behind.
Some times, the old saying,
“if you build it, they will come”
doesn’t hold true.
They built something so advanced that the world can not grasp the power of it..
It’s like giving a car to a cave man.
He may figure out how to get the
door open and get into the car,
But the capability to drive the car,
is beyond his grasp.
So he abandons the car
and never comes back.
AT&T’s network is like a car surrounded
by a bunch of cavemen,
It’s so under utilized
that it is almost disgraceful.
Hopefully SBC sees the gem that
is right in front of them.
What SBC’s CEO said, gives me hope.
He said that he is excited to get the chance
to put some real traffic on AT&T’s network.
He just may grasp the power of the system they built.
If he does, and utilizes AT&T’s IP network to
it’s fullest capabilities,
It will change the face of the modern world
just as much as Bell’s telephone did.