Cautious on Convergence

The proposed AT&T Inc. (NYSE: T)/BellSouth Corp. (NYSE: BLS) merger announced yesterday has already been denounced by consumer groups saying it will return the telecommunications industry to the bad old days of Ma Bell and further decrease competition in a re-consolidating business.

Enterprise users faced with multiple wireless companies supplying services on multiple platforms aren't so sure, however. The prospect of a reconstituted AT&T that includes Cingular Wireless could hasten the progress toward fixed-mobile convergence (FMC) -- and simplify life for managers at thousands of small and medium-sized businesses across the U.S. (See Cingular's Converged Future.)

"I didn't learn to be an IT guy in law school," comments an exasperated Whit Light, partner in the Little Rock law firm of Nixon and Light, which currently uses Alltel as its wireless provider. "If any of these telecom giants ever truly want to serve the customer, they will figure out something simple that doesn't require me to read 55 pages of fine print, with 55 different plans to choose from. Whoever does that will crush all the other communications providers."

That's the advantage being touted today by AT&T and BellSouth executives, who say that the unified company will better be able to provide "true" convergence -- landlines, mobile telephony, Blackberry-style mobile email, and conventional fixed Internet access -- from one provider, with one bill and one point of support.

To some, though, that remains a pipe dream.

"I think it's going to be a nightmare," says Manny Singh, director of IT for Bedford Park, Ill.-based Prairie Packaging, Inc., which has about 35 users on Blackberry-equipped Cingular handheld devices. "I just know the problems we're going through today. For example, we've got some salespeople on the old AT&T accounts and some on Cingular -- they're sending me two different invoices, and when I call billing they go, 'Oh well we don't know anything about that, that's AT&T.' I'm just imagining what the back-end nightmare is going to be."

One of the largest corporate mergers in U.S. history, the AT&T/BellSouth deal is driven largely by the effort to consolidate services and reduce the overhead required to operate them. Indeed, some analysts maintain that the $67 billion price tag to AT&T is largely based on the value of full control of Cingular Wireless.

Cingular owns one of the deepest spectrum portfolios of any U.S. wireless company and, as reported on Unstrung, has been trialing fixed/mobile services, based on unlicensed mobile access technology. The company has reportedly been working with Kineto Wireless Inc. to develop converged handsets; both companies declined to comment today on such trials. (See Cingular's Got Big FMC Plans.)

"Certainly this merger is viewed as a good thing" for the progress of enterprise convergence, says Kineto spokesman Steve Shaw. "AT&T and BellSouth have had this kind of tug-of-war over Cingular, and having one umbrella should make the decision-making process smoother and more streamlined."

Wireless services are growing faster than any other form of telecommunications, and wireless networks will form the backbone of many advanced services, such as broadband wireless or WiMax. While some view a unified AT&T/BellSouth as a major step toward true convergence, others are more dubious.

"It'll take several years before we see a cohesive enterprise fixed/mobile convergence offer from AT&T incorporating the wireless network that we now call Cingular," states Daniel Taylor, managing director of the Mobile Enterprise Alliance. For one thing, he points out, "fixed/mobile convergence services would cannibalize the very same local business that AT&T and BellSouth already have."

In addition, the new Ma Bell must contend with innovative competition that didn't exist just two years ago, when SBC (which renamed itself AT&T this year) acquired AT&T Wireless. For one thing, municipal WiFi networks are springing up across the country, even as voice-over-wireless-LAN providers make inroads with enterprise customers seeking cheaper phone service. The availability of many different hybrid services, allowing enterprise IT managers to choose from a buffet rather than a prix fixe menu, as it were, will make the road to fixed/mobile convergence longer than it would be otherwise.

"Until there's a compelling piece of integration and a serious price point associated with FMC," remarks Taylor, "users and telecom managers will remain ambivalent."

Ambivalent, if not downright skeptical.

"If they can create a one-stop shop, to cover everything, yes, that'd be something we'd look at seriously," says Singh, whose employees enjoy an array of services from providers including Cingular, Verizon Communications Inc. (NYSE: VZ), and Sprint Nextel Corp. (NYSE: S). "That's the utopia that everyone talks about but never gets to."

— Richard Martin, Senior Editor, Unstrung