Tuesday, November 01, 2005

SBC & BellSouth: Will the new 'Ma Bell' eat its young?

USAToday has an excellent article on what appears to be the looming demise of BellSouth and — surprise! — it doesn't have anything to do with the LUS fiber project!

No, the likely source of BellSouth's disappearance will be its current partner in Cingular, SBC (which will, upon completion of its buyout of AT&T, assume the name AT&T).

Seems like SBC has had its eye on BellSouth for a while and there was even talk of a merger last year. When BellSouth CEO Duane Ackerman balked at a merger, SBC moved on AT&T. With completion of that merger nothing but a matter of making some meaningless promises to the FCC, SBC has announced that it will take AT&T as its corporate name.

The, according to the article, have to deal with the issue of what to do with BellSouth. The need to focus on this relationship grows directly out of the Cingular partnership. SBC has already made it clear that it believes unified ownership of Cingular would make for better management of the company. Uh, that means BellSouth (which depends on Cingular for 40 percent of its revenue!) will either take a back seat, sellout or get bought up.

The article also makes clear that BellSouth's corporate mindset is leaving it in the dust of its now largesiblingsgs:
BellSouth's larger problem, analysts say, is its think-small strategy.

Based in Atlanta, BellSouth sat out the merger dance of the 1990s. As a result, it still serves the same nine states that it did in 1984 when the AT&T phone monopoly was broken up by court decree. Back then, BellSouth was the largest of the Bells. Today it is among the smallest, with about $28 billion in revenue in 2004.

By year's end, SBC — an amalgam of Southwestern Bell, Pacific Telesis and Ameritech — will dominate the western USA. Verizon — a combination of Bell Atlantic, Nynex and GTE — will dominate the East. Once the AT&T deal closes, SBC will become the USA's largest telecom, with about $110 billion in annual revenue. Verizon, with $90 billion in annual revenue, will become No. 2.

With AT&T and MCI in their pockets, SBC and Verizon will instantly gain the ability to reach all 50 states. They'll also be able to court business customers, touting global services that BellSouth can't easily offer and aggressive prices it may not be able to match profitably. Over time, they are likely to go after residential customers as well.

Cable companies also are taking aim. Comcast, Time Warner and other cable operators are rapidly adding VoIP — Voice over Internet Protocol — to their service bundles. By 2008, some analysts predict there will be more than 40 million VoIP subscribers. The assault is one reason the big carriers are losing about 5% of their basic phone subscribers each year. Those losses are expected to accelerate over time.

Phone companies, eager to blunt their losses, are returning fire by adding video to their lineups.

Once the competitive rumble gets going, BellSouth will quickly feel the heat, says Jan Dawson, an analyst for Ovum in Boston. "BellSouth's profit margins will be squeezed and squeezed and squeezed until there is potentially nothing left," he says.
It says later in the article that one of BellSouth's problems is its emphasis on short-term performance. This has made the company reluctant to invest in new technologies (fiber!) that larger phone companies and cable companies have embraced.

The result is that the end game for BellSouth is underway. It likely will come to some conclusion around the time CEO Ackerman retires in about two years.

That will be about the same time that LUS starts taking customers on line with their new fiber to the premises system.

Anyone know where bets can be placed on what the name of the local incumbent phone carrier will be here in Lafayette when the LUS system is lighted?

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