SBC, AT&T merger presents full menu of converged services

SBC Communications’ acquisition of AT&T last week signals a new era for telecommunications — one in which IT managers can expect converged communications services from what will be the largest company of its kind in the United States

The deal is expected to lead the way to major changes in the telecommunications industry, with companies surviving by offering a range of options: corporate data services, local calling, long distance, Internet access, wireless, and cable TV. Several analysts predict that MCI and Sprint could be in play next, with BellSouth and Verizon Communications possible suitors. Regardless, network managers will now be able to consider SBC as a possibility for enterprise services, said Bryan Van Dussen, a telecommunications analyst at The Yankee Group.

The $16 billion acquisition would create a formidable company, combining SBC’s strong domestic and local telecommunications holdings, noteworthy hosted IP communications platform, and ambitious VoIP plans with AT&T’s long distance, international footprint, and corporate data services.

“The irony of a Baby Bell acquiring AT&T cannot be overlooked, but there is also a compelling logic at play here,” said Mike Cansfield, research director at Ovum. “Both are profitable, but having to fight hard in their respective markets. Join the two, cut out the overlaps, and drive synergies; … and bigger will make better.”

For enterprise customers, the AT&T acquisition signals a likely move toward fewer choices for telecom and IP services, with a handful of huge companies competing for enterprise dollars. Although some consumer groups decried a narrowing of choices, competition among a handful of providers should provide enterprise customers with choices based on cost and innovative products, said Jeff Kagan, an independent telecom analyst.

“I do think a handful of very large companies offering everything to everyone will be good for competition, good for the companies, and good for customers — both business and consumer,” Kagan said. “Then there will also be many smaller companies competing for smaller bundles or stand-alone services.”

According to analysts, the deal also affects the wireless market, at least in part because AT&T Wireless Services was bought by Cingular, a joint venture between SBC and BellSouth. If SBC delivers on its promise of landline-mobile convergence, Cingular’s value will receive a boost, but if that doesn’t happen, “Cingular doesn’t gain at all from this,” said Tom Nolle, president of CIMI, a network consulting company. Meanwhile, Verizon will continue to dominate the wireless market, at least for now, TNS Vice President Charles White and other analysts said.

Owning AT&T’s national network — its biggest asset, according to analysts — would free SBC from having to negotiate access to that network, although that also effectively kills the era of multiple, competitive Baby Bells providing more options to users.

“AT&T … was in a position of rapid disintegration,” CIMI’s Nolle said.

— Stacy Cowley, IDG News Service, contributed to this article.