The Internet Connection War
AT&T Internet Services for Consumers, a Strategic Evaluation.
MGT 555 - Technology Forecasting and Strategic Planning
TEAM AT&T
Joe Coppola
Steve Delahunty
Glen Keune
Abstract
AT&T is in an extremely positive position in order to be the major provider of end consumer
Internet services in the United States. The company has products that cross all levels of
technology to include dialup, broadband, and wireless. The wealth of connection options for the
customer coupled with the maturity of the technology ensures a successful market opportunity.
The strategic plan of AT&T takes into account the internal and external environments. The
company strategy includes long term objectives that foster market dominance.
Outline
I.
Purpose. This evaluation will perform a strategic analysis of the AT&T internet access
technologies for the consumer market. This report identifies core competencies, sources
of competitive advantage, and recommendations to improve AT&T’s strategic position.
II.
Corporate Background. This section includes a brief history of AT&T, along with how
AT&T entered into the consumer Internet services business. The report also analyzes
recent press releases to identify any recent developments.
a.
overview
b.
mission
c.
historical review
d.
recent events
III.
Product Analysis. Here the product offerings of AT&T in this market are identified. An
analysis of the strengths and weaknesses of the two primary technologies is completed.
The market for the firm’s products is explored.
a. overview of products
i.
dialup access
ii.
cable access
iii.
digital subscriber
iv.
wireless
v.
long distance
b.
analysis
i.
opportunities
ii.
threats
iii.
strengths
iv.
weaknesses
v.
market
IV.
Technology Forecast. This section focuses on new emerging technologies that could
impact the dial-up and broadband Internet access market. Recent trends are covered
and the changes in the overall industry explored. Technology forecasting methods are
identified.
a.
dialup services industry trends
b.
cable systems industry trends
c.
other trends
d.
pertinent techniques
V.
Strategic Assessment. A strategic plan for AT&T in terms of the consumer Internet
access products is constructed. This includes a revision of the mission and analysis of
internal and external environments.
a.
mission
b.
company profile
c.
external environment
d.
internal environment
VI.
Strategic Plan Recommendations.
a.
grand strategy
b.
long term objectives
VII.
Strategic Intent. Conclusions.
I. Purpose
This report performs a strategic analysis of AT&T Corporation’s Internet access technologies and
services as they apply to the individual consumer market. A set of grand strategies and long term
objectives required to achieve sustained competitive advantage and improve strategic position
over primary competitors will be established. The report identifies core competencies and how to
best exploit them to achieve the recommended “goals.”
II. Corporate Background
II a. overview
The AT&T corporate website boasts that “AT&T is among the world's premier voice and
data communications companies, serving more than 80 million customers, including
consumers, businesses, and government. With annual revenues of more than $53 billion
and 151,000 employees, AT&T provides services to customers worldwide. Backed by
the research and development capabilities of AT&T Labs, the company runs the world's
largest, most sophisticated communications network and has one of the largest digital
wireless networks in North America. The company is a leading supplier of data and
Internet services for businesses and offers outsourcing, consulting and networkingintegration to large businesses. It is also the nation's largest direct Internet access
service for consumers.”
II b. mission
AT&T’s mission statement is fairly simple:
“We are dedicated to being the world's best at bringing people together--giving
them easy access to each other and to the information and services they want
and need--anytime, anywhere.“
Also pertinent is the AT&T business strategy as depicted in their annual report:
 “Put briefly, our strategy is to build on our position as the world's
networking leader.”
 “Our main strength is our ability to build and manage networks. The
AT&T network is the world's most advanced and reliable one. It is the
core of our business. The more our network is used, the more we earn.”
 “But our network does not stand alone. It is enhanced with what we
uniquely offer: a business that combines communications, computing,
and network products and systems.”
 “We seek continuously to improve our own network and those of other
service providers around the world in order to make communications
more useful to customers. This, in turn, increases network use.“
 “And, as our customers' information needs have become more complex,
we are providing integrated, end-to-end network solutions.“
II c. historical review
Formerly known as the American Telephone and Telegraph Company, AT&T Corporation
was incorporated on March 3, 1885, in New York as a wholly owned subsidiary of the
American Bell Telephone Company. It is presently the largest Telecommunications
Company in the United States and a worldwide leader in communications services. Its
main businesses include long-distance telephone, wireless, AT&T Solutions consulting
services, and the AT&T Universal Card. Until its divestiture on January 1, 1984, AT&T
was the parent company of the Bell System, the regulated enterprise that formerly
provided the bulk of telecommunications in the United States. From 1984 until 1996,
AT&T was an integrated provider of communications services and products, network
equipment and computer systems. In September of 1995 AT&T announced that it would
be splitting into three companies over the subsequent fifteen months. These companies
are: today's AT&T, which provides communication services; Lucent Technologies, a
systems and technology company, which provides communications products; and NCR
Corp., which is in the computer business (History, 1998). AT&T subsequently focused on
its consumer and commercial telephone services which became a vehicle for Internet
Service Providers (ISP) to start offering Internet access. Seeing the potential market the
Internet was developing into AT&T established its own Internet services using its
WorldNet system of wired and wireless telephone technologies.
It is important to realize that cable was invented by AT&T. In a 1999 speech to the
National Cable Television Association (NCTA) C. Michael Armstrong, Chairman and CEO
of AT&T, noted “It's true: Cable came out of the AT&T labs after World War II, when
AT&T engineers developed it to transmit long-distance calls.”
AT&T today continues to innovate new communication technologies and is expanding its
ability beyond dial-up Internet services to deliver a broader variety of telecommunication
services across an ever expanding market. Most recently with the advent of broadband
Internet delivery technologies such as Digital Subscriber Line (DSL), cable, and wireless,
AT&T has begun to focus on this new emergent high-speed Internet market and this
report will target that aspect of AT&T’s strategic outlook. AT&T's recent acquisition of
TCI and MediaOne have made it the largest cable operator in the country, and it has
launched an ambitious effort to deliver broadband Internet service and telephony over a
variety of cable networks (Werbach, 1999). There has also been an aggressive program
established to provide businesses with broadband Internet access using DSL technology
in order to economically support the increasing demand in telecommuting. Additionally,
AT&T wireless should explore new wireless broadband technologies that could some day
equal or even exceed the broadband capability of cable and Digital Subscriber Line
(DSL) services.
II d. recent events
12.1.99
Charter Communications and AT&T BIS Announce Intent to Exchange Cable
Systems to Create Regional "Super Clusters". Charter Communications and
AT&T Broadband & Internet Services announced that they have signed a
letter of intent to trade certain cable systems to create more efficient cable
operations and speed the delivery of broadband technology and services to
more consumers.
5.6.99
MediaOne Group and AT&T sign definitive merger agreement. MediaOne
Group and AT&T entered into a definitive merger agreement under which
MediaOne Group’s shareowners will receive .95 of a share of AT&T common
stock and at least $30.85 in cash for each share of MediaOne Group stock
they own.
5.5.99
AT&T and Comcast agree to swap cable systems. AT&T and Comcast
Corporation announced that they had reached an agreement under which
Comcast will be able to increase its cable subscribers by about two million
households and the two companies will collaborate in bringing competitive
local telephone service to Comcast’s customers.
6.6.99
AT&T, Microsoft announce agreements to accelerate deployment of
broadband services. AT&T and Microsoft Corp. announced a series of
agreements in which the companies will work together to accelerate the
deployment of next-generation broadband and Internet services to millions of
American homes.
III. Product Analysis
AT&T offers the full spectrum of Internet access services. They have an extensive network
based on their long distance telephone network that is cable of delivering conventional narrowband Internet access via AT&T’s access service (WorldNet) throughout most of the continental
United States. They also offer broadband Internet access via cable modem or DSL and
eventually wireless.
These products will now be evaluated based on their strengths,
weaknesses, and potential for future growth.
III a. overview of products
i. dialup access
According to Clark (1999), “Most people now connect using a dial-up modem, a
device that converts back and forth between streams of data and patterns of
audible-frequency tones, enabling the data to be sent down telephone lines
originally designed to carry voices. At the other end of the line, an Internet
service provider acts as a kind of portal through which the subscriber can contact
and exchange data with countless nodes around the globe. Dial-up modems are
easy to use, and most computers come with one built in. But their performance is
limited. In addition, the need to place--and pay for--a telephone call to establish a
connection to the service provider means that access to the Internet is not
continuously and conveniently available.” Through their WorldNet ISP services
AT&T has captured a large part of the domestic narrow-band Internet access
market. Conventional narrowband Internet access requires only a telephone line
and a computer with a standard analog modem. This service, while very reliable
and the least expensive to provide to consumers, will more than likely fall victim
to the ever growing demand for broadband Internet access. According to
Forrester, “By the end of 2002, 32% of on-line households will be connecting to
the Internet via broadband. Eighty percent of broadband users will be cable
modem subscribers, while the remaining 20% will use DSL (MacKenzie,
Clemmer, & Morrisette, 1998).”
ii. cable access
Cable lines, which are essentially coaxial cables—the same as used to deliver
television—are rapidly becoming a means through which a variety of media are
delivered. One of the more significant developments over the last decade has
been the ability to deliver Internet access via these same cable lines. Seeing the
potential market for improved Internet access speeds, cable companies, as early
as 1991 began to upgrade existing cable systems to Internet capable systems.
The first trial use of the capability was introduced in 1995 and has steadily gained
momentum. Cable offers significant performance benefits over analog modems,
ISDN, and T1 technologies. Primarily designed for residential users, cable
modems connect over one channel of an upgraded cable television system.
Connections are constant, with download and upload speeds as high as 30 Mbps
or more. Cable is currently available to more users than ADSL and is expected to
grow dramatically. To further exploit the capability of cable Internet service,
AT&T labs, According to Schwartz (1999), are focusing their effort on the use of
telephony over cable technology. According to plans outlined by AT&T, the
company will begin to use standard circuit-switched technologies normally
associated with telephone networks over cable. In the next two years, AT&T will
offer customers IP-based voice calls via its cable network…Rather than
marketing the services on a person-to-person basis, AT&T will tout the benefits
of telecommuting to its business customers, trying to sell senior management on
the concept of paying for a high-performance cable subscription for their
employees. “
According to AT&T, their AT&T@Home cable service offers, “No dialing in, no
busy signals, no unexpected disconnects, absolutely no hassles! AT&T@Home
provides all the features your family needs to enjoy the Web, including: a
customized browser, unlimited use for a low monthly fee, multiple email
accounts, personal WebSpace, 24/7 technical support, search & navigation tools,
chat and newsgroup access, and 12 channels of news, information and
entertainment. Not to mention a whole new dimension of revolutionary content
you
can't find anywhere else. Watch video clips on demand. Listen to CD-quality
music while you surf. Pummel your rivals in the hottest online games -- all without
the delays experienced on typical dial-up connections.”
Cable is still not the perfect broadband Internet capability, primarily due to the
degradation in performance experienced as more users tap the same cable
distribution system. However, AT&T is looking to innovate changes that will
mitigate these current limitations. AT&T Labs most recent initiative is called
“LightWire.” Being piloted in Salt Lake City, LightWire will increase total
bandwidth of coaxial cable by as much as 1 GHz and will "triple the upstream
bandwidth for each home," according to documents from AT&T Labs. The
LightWire system is a two-way technology that will support all current services
over cable, including digital TV, cable TV, and voice telephony, without reducing
performance as the number of users increases. Other AT&T lab technologies
being planned are “Shoebox” - a search and indexing service for digital photos
that can retrieve photos by finding a matching face, “DjVu” - a graphicscompression technology that will be used for the distribution of high-quality
scanned images, and “Digital Video Library” - a retrieval service that will allow
users to access stored television programs and movies (Schwartz, 2000).
iii. digital subscriber
DSL provides a dedicated service over a single telephone line; cable modems
offer a dedicated service over a shared media. While cable modems have
greater downstream bandwidth capabilities (up to 30 Mbps), that bandwidth is
shared among all users on a line, and will therefore vary, perhaps dramatically,
as more users in a neighborhood get online at the same time. Cable modem
upstream traffic will in many cases be slower than DSL, either because the
particular cable modem is inherently slower, or because of rate reductions
caused by contention for upstream bandwidth slots by increased user activity.
The big difference between DSL and cable modems, however, is the number of
lines available to each. There are no more than 12 million homes today that can
support two-way cable modem transmissions, and while the figure also grows
steadily, it will not catch up with telephone lines for many years. Additionally,
many of the older cable networks are not capable of offering a return channel;
consequently, such networks will need significant upgrading before they can offer
high bandwidth services. AT&T offers DSL service but it is currently geared
primarily to small business and corporate customers.
AT&T, having a substantial telephone line network in place, stands to benefit
from the advantages DSL currently offers, however, as previously mentioned,
cable Internet limitations are being addressed and it may be only a matter of time
before cable surpasses DSL in its total utility. In the interim, AT&T will offer DSL
Internet service in 17 markets throughout the nation and has aggressive rollout
plans to expand its footprint to more than 100 markets by the fourth quarter of
2000. AT&T plans to make its DSL services available at more than 2000 DSL
points-of-presence (POPs) by year-end 2000 using Symmetric Digital Subscriber
Line (SDSL), Asymmetric Digital Subscriber Line (ADSL) and ISDN Digital
Subscriber Line (IDSL) technologies.
iv. wireless
According to a recent Scientific American article “Research shows that
broadband subscribers value high data transmission rates over other service
attributes, and their "need for speed" more than doubles every year as Internet
Web sites become more elaborate and data-intensive. Satellites are well
positioned to serve this burgeoning demand for rapid Internet downloads, with
maximum transmission speeds twice as fast as LMDS, three to six times faster
than cable modems, and up to 12 times faster than DSL. Competitive diversity is
also a consideration. Although discussions of broadband communications tend to
focus on technological and economic issues, the most important driver behind
satellite services may well be the competitive aspirations of large, powerful
telecommunications companies. There are simply more firms planning to market
broadband services than there will be ground-based broadband networks
available. A September 1999 Phillips Group study claims that satellite – for
broadband Internet access - offers longer-term potential as service providers
plan two-way systems that would lead to mass acceptance. However, the study
also contends that the time lag in entering the market will prevent satellite-based
systems from making a serious challenge to the domination of the cable-based
broadband in the residential market, and DSL in the business market. However,
these predictions might be short-lived.
AT&T wireless services are currently primarily geared to cellular voice telephony
vs. data and in this market AT&T is growing steadily—adding 440,000 wireless
subscribers in 4th quarter of 1999 alone. Although AT&T currently offers no fixed
wireless broadband capability, in response to the potential demand for such
services they are rapidly moving toward a solution that they initially named
“Project Angel.” This is a new fixed-wireless plan that has now been rechristened “AT&T National Wireless Local Exchange Carrier.” The new initiative
now is concentrated on delivering data at speeds as high as 1Mb/s. The
approach involves a residential base station that allows users to use cellular-like
cordless with no per-minute airtime charges. The unit reportedly will cost AT&T
about $750 per household to install. A $350 million debut, covering 1.5 million
homes in Fort Worth, TX, and two other unidentified cities, is slated to begin
during spring of 2000, according to the company (Holt, 2000).
To consolidate their wireless features AT&T will now establish a separate
wireless tracking stock for it’s AT&T Wireless Group. The new tracking stock is
designed to reflect the economic performance of all AT&T's wireless services
businesses, including voice and data mobility, fixed-wireless and ownership
interests in domestic and international wireless operators. This falls directly in
line with our grand strategy of combining the full range of communications
services via fixed and mobile wireless broadband on a global basis.
v. long distance
As noted on the AT&T website “AT&T runs the world's largest, most powerful
long-distance network and the largest digital wireless network in North America.“
AT&T is the number one long distance company in the United States. The
strengths and knowledge of that business are of great benefit to other newer
operations in the firm, such as the broadband business.
Some interesting facts from AT&T regarding their long distance faculties include:






Handled 88.5 billion voice calls in 1999.
On an average business day, handles more than 280 million voice calls
and more than 300 million on peak days.
Set an all-time record on Tuesday, November 16, 1999, when it handled
328.7 million voice calls.
On an average business day, handles more than 75 terabytes [75 trillion
bytes] of data on standard data circuits, plus an estimated 600 terabytes
of data on Private Line facilities.
Includes more than 43,000 route miles of fiber-optic cable to carry longdistance traffic.
Is 100 percent digital for all switched traffic.
AT&T's primary services have always been in the long-distance telephone
market. With more than 400 companies offering long-distance service today,
AT&T recognizes the need for quality customer service, competitive pricing, and
cutting edge technology in the area of long-distance telephone service. AT&T
offers one of the most competitive consumer long-distance plans in the industry.
All nationwide long-distance calls are just $.07 per minute.
III b. analysis
i. opportunities
Pearce and Robinson (1997) define an opportunity as "a major favorable
situation in a firm's environment" (p. 171). Dominance of the fixed, wireless
broadband market likely if the AT&T National Wireless Local Exchange Carrier
program realizes the economies of scale required to bring household installation
costs down. In the interim, AT&T’s expansive network of broadband cable
service provided via their AT&T@Home service will garner at least 30% of the
domestic broadband Internet market.
ii. threats
Pearce and Robinson (1997) define a threat as "a major unfavorable situation in
a firm's environment" (p. 171). AOL/Time Warner and their strategic alliances
pose a significant threat to both cable and fixed wireless broadband markets
targeted by AT&T. Federal regulation of the Internet and Internet service
distribution systems, if implemented, could impede market expansion in the
timeframes targeted by our long-term objectives.
iii. strengths
AT&T’s dominance in wireless broadband technology combined with their global
partnerships in wireless communication. Mitigation of existing broadband cable
limitations using AT&T’s “LightWire,” should the prototype testing prove
successful will place AT&T into a technology leadership position in this market.
AT&T has the benefit of a building on a 115 year reputation as a pioneer in the
telecommunications industry. As we begin to see a convergence of technologies
(i.e. voice, data, and video over cable), AT&T is uniquely positioned to lead the
market in this area. Some of their grand strategies are in the areas of market
development and concentric diversification. In the area of market development,
AT&T positions the cable modem product as a new use of the existing cable
network as well as uses of their nationwide infrastructure to the benefit of their
dialup and wireless access services. In the area of concentric diversification,
AT&T had acquired the @Home cable product as well as a pending acquisition of
Media One, a major cable system. AT&T has also announced some wireless
system acquisitions.
iv. weaknesses
AT&T’s long-term objective of fixed, wireless broadband depends on elimination
of reliability issues that can interrupt service (weather, etc) as well as further
refinement of technology to reduce the cost of in-home fixed wireless hardware.
Wireless upstream data transfer technology is still early in the development stage
(Derfler Jr., & Freed, 1999).
AT&T is relying heavily on its cable and dialup technologies for Internet access. It
will face heavy competition from regional bell companies who offer other
broadband services such as DSL. Consumers who are especially concerned
about guaranteed bandwidth and security may opt for DSL over cable because it
offers distinct advantages in those areas. Though major strides have been made
towards securing the cable data networks, there have been reports of customers
being able to view hundreds of other computer systems on the network.
v. market
AT&T is leveraging its current capabilities and finding new uses for existing
products. Later on this year, AT&T will begin to offer a new product called ROSE,
or Remote Office Service. This uses the AT&T network to direct calls to and from
the telecommuting workforce much in the same way an office PBX system works.
Building on that concept, in the next two years, AT&T will offer customers IPbased voice calls via its cable network giving consumers a choice in the local
telephone market.
AT&T faces the risks of deregulation of the cable market to allow for competition
using the cable lines. This is a distinct risk that would allow competitors to make
use of the AT&T cable system in direct efforts to take away customers.
IV. Technology Forecast
In order for any business to stay competitive, it is necessary to predict probable events that will
help the organization prepare for the future. These predictions attempt to identify the timing and
amount of change in environmental factors, such as technology advancements, that may affect
the future.(Bright, 21) This process of identifying future technological occurrences is known as
Technology Forecasting. (TF) The communications industry in particular is susceptible rapid
changes in technology. This section will explore Internet access technology, and advances in that
technology that could affect AT&T’s position in the market place.
IV a. dialup services industry trends
The dial-up Internet access technology that is available today does not differ much from
what was in place when AOL, Prodigy, and CompuServe began offering their online
services years ago. In order for a computer system to use this type of service, it must
have an internally or externally connected modem, access to a POTS (plain old
telephone service) line, and software that allows it to connect to the remote network. The
only advances that have been made regarding this type of technology is the speed of the
connection. The last great leap in dial-up speed came in 1997 when two competing
technologies were introduced, both offering up to 56,000bps download speed. The ITU
(International Telecommunication Union) agreed on a standard named V.90 for this new
higher speed modem.(ITU 98-4, 1998) This represents what we feel will be the last
technological break through for modem users. This is due the current limitation that the
FCC has placed on the speed of analog modems of a maximum of 53kbps download. If
the FCC does not lift this regulation, then dial-up users will be limited to this speed.
Although the technology used by analog modems to access the Internet will not likely
change in the next 3-4 years, the service itself has and will undergo significant changes.
Several companies are trying the concept of free Internet access, in exchange for placing
advertisements on your computer screen. This will only moderately impact AT&T’s
WorldNet service, as free ISP’s are not compatible with all software, and the level of
service cannot compare to what is currently being offered by AT&T.
IV b. cable systems industry trends
When compared to traditional modem technology, cable modems are still very young.
Cable modem technology offers broadband Internet access over the same infrastructure
used by the current cable television network. Depending on the type and age of the
network already in place, the cable provider may be limited to downstream-only access.
The AT&T network is both an upstream and downstream access provider. Cable
companies who are limited to downstream-only service are working to upgrade their
network to be upstream capable in order to better compete with other consumer access
products such as xDSL.
Internet security has always been a hot topic, however, with the advent of always-on
Internet connections for the home user, it is now coming to the forefront of everyone’s
mind. Internet connections using DSL or cable modems present a security risk for several
reasons. To begin with, they are always on. This “always on” status gives hackers the
potential for attacking a system at anytime, because it is always available. Also, many
people who subscribe to cable modem or DSL service are unaware of the security risks
those technologies pose, thus they are less likely to install a firewall or other protection
software. Security is a large area that requires endless monitoring so that AT&T can be
on the forefront of any developments that may assist our customers in securing their
systems (Goldberg, 2000).
IV c. other trends
Wireless – AT&T’s position in the wireless marketplace will give us a distinct advantage
over other competitors. AT&T’s current offering is low-bandwidth wireless access in very
few markets, however, if the broadband tests in Texas are successful, wireless access
will be offered in markets across the US. This trend will continue to increase, as the need
for alternative access methods are required. Advancements in wireless technology will
allow for greater access speeds, creating more choices in the broadband access market.
Currently in Japan, engineers from Matsushita Communication, Ericsson, Lucent, Nokia,
and others are working on the next standard of broadband wireless, known as W-CDMA.
This new standard will increase transmission speeds by over 40 times the current
limitation of 9.6kbps. While this is still slower than current DSL and cable modem speeds,
it will give customers an alternative when cable modems or DSL is not available.
(“Wideband CDMA”, Online)
Satellite – AT&T is not currently involved in the development or implementation of
broadband satellite Internet access technology.
DSL – In order to best support the current customer base, AT&T is in the process of an
aggressive, nation-wide roll out of DSL service. AT&T's DSL service will be able to offer
customers much faster connections (when compared to dial-up) to the Internet at
competitive prices. Also, AT&T offers ease of installation and ongoing support with
multiple access technologies such as cable and dial-up. AT&T understands the necessity
for multiple technologies, and will make these available so as to serve the broadest
market possible (AT&T DSL FAQ, On-line).
IV d. pertinent techniques
Monitoring. The most helpful form of forecasting for determining future technologies in
the realm of Internet access is called monitoring. To forecast by monitoring, the
forecaster must keep an eye on the environment for ideas that may be applied to an
application. The process is as follows:
1. Search the environment for signals of innovators carrying potential significant
technological change.
2. Identify consequences if the trend initiated by the innovator is carried out.
3. Choose events that should be followed in order to verify true speed and direction
of the innovation.
4. Present the data to management for their use in decisions about the
organizations reaction (Burgleman & Maidique & Wheelwright, p. 198).
When monitoring the industry for dial-up, cable, wireless and DSL, it is imperative to
examine the developers of the hardware supporting those technologies. Many early signs
of new technologies are evident in industry trade magazines and web sites.
Trend Extrapolation. Another form of forecasting, called trend extrapolation, is based on
the assumption that attributes generally progress in an orderly manner over time. By
compiling past data and placing it on a graph, we can create a line showing future trends.
According to Kinetic Strategies Inc., there were 1.4 million cable modem subscribers in
the U.S. and Canada by October 1999, up from 1 million subscribers in July. By using
those figures in a trend extrapolation graph, we can see the beginnings of an s-curve,
which is typical of this type of forecasting.
Cable Modem Users
160
Number of Users
(in Millions)
140
120
100
80
60
40
20
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Date
By analyzing the above graph, it can be concluded that by March of 2003, we can expect
there to be nearly 140 million people online using cable modems. (“Cable Modem Market
Stats”, 1999)
Technology forecasting is an indispensable tool in determining the future of an
organization. AT&T regularly analyzes the marketplace for trends in new technologies
and uses trend extrapolation to predict future demand for our products.
V. Strategic Assessment
V a. mission
AT&T does have a corporate mission statement. “We are dedicated to being the world's
best at bringing people together--giving them easy access to each other and to the
information and services they want and need--anytime, anywhere.“ This
Pearce and Robinson (1997) show seven desired outcomes for a company mission
statement, paraphrased here:
1 - Ensure a central purpose for the organization
2 - Provide a basis for resource utilization
3 - Develop a basis for resource allocation
4 - Create a company climate
5 - Serve as a focus for direction
6 - Allow for translation of objectives and goals
7 - Provide for controls and parameters
It does not seem that the short mission statement of AT&T meets many of these
outcomes.
However when coupled with the company strategic planning business
strategy, most of the outcomes are met.
Strategic planning is evident in AT&T’s business strategy as depicted in the company
annual report. Key points extracted from this business strategy help to provide
management direction.
 Position the company as the world’s networking leader.
 Capitalize on strengths of building and managing advanced technology networks.
 Combine businesses of communications, computing, and network products.
 Continuous improvement process.
 Customer product focus.
The company strategy is well suited to the Internet market and specifically the consumer
market. AT&T can utilize their business strategy to improve their position.
V b. company profile
AT&T has created a subsidiary for their Internet services. The name of AT&T Broadband
& Internet Services is not widely known and most customers just assume that they are
dealing with AT&T prime. This subsidiary is actually really the former TCI which was
acquired by AT&T to truly broaden their market in the broadband arena. Although
currently the #2 cable operator, one AT&T completes their acquisition of Media One the
subsidiary will pass Time Warner and become the #1 cable provider in the United States.
The current market share of AT&T for the cable industry is excellent. Salamone (2000)
noted in Internet Week the current breakout of cable subscribers by company.
North American Cable Broadband
Subscribers as of December 1999
Comcast
AT&T
Rogers
Cox
Shaw
MediaOne
Time Warner
Others
Comcast
AT&T
Rogers
Cox
Shaw
MediaOne
Time Warner
Others
8%
9%
9%
10%
10%
12%
18%
24%
100.00%
It can be seen that the addition of Media One to AT&T existing cable presence leads to a
21% market share which is the largest of any single cable operator. This does not take
into account the various collaborative efforts with Comcast.
V c. external environment
AT&T is definitely aware of their competition and external forces on the company. It
seems that AT&T had formed the Broadband & Internet subsidiary to better meet the
market in this area. There are only a few major players in the cable industry and AT&T is
among the largest while being posed to become the number one. Competition is fierce in
the Internet access industry and especially in the end consumer market. The products
and capabilities of AT&T well complement their ability to meet the market requirements.
The external environment at AT&T includes competitive risks and advantages. Pearce
and Robinson (1997) define the external environment as consisting "of all the conditions
and forces that affect its strategic options and define its competitive situation" (p. 15).
The major external environmental areas that could be expected to impact AT&T in the
next five years include:
Competition/Market. An increase in competitors could adversely hamper AT&T’s
sales in this market while a decrease of competitors could enhance AT&T market
position. The market in the cable sector seems to be moving towards just a few
major players.
Technology. The need to keep current on technology and integrate new
technology where applicable is an advantage if emphasized and a weakness if
ignored. Technology changes rapidly and AT&T maintains several industry
recognized labs. The company is moving to retire older technology such as their
microwave links.
Alliances/Partnerships. AT&T has grown in this area. Examples include work to
provide services in conjunction with competitors and trade market areas.
Additional alliances and partnerships will serve to strengthen the company.
Customers. The customer base in the market will only increase as we move
forward. AT&T is not complacent and continues to push to gain market share of
the home user customer group.
Legislation/Regulations. The Internet is a highly regulated market. New
regulations or changes to regulation can positively and negatively impact AT&T.
The efforts of the company in this area are extremely proactive and include
lobbying staff.
V d. internal environment
The internal environment includes the company strengths and weaknesses. The major
internal environmental changes, or actually areas for change, that could be expected to
impact AT&T in the next five years include:
Marketing
 new product offerings, new technology
 market trends
Financial
 ability to acquire other firms
 corporate resources, capital expenditure
Operations
 network management
 partner relationships
Personnel
 key executive management positions
Quality
 integration of controls on projects, monitoring of quality
 system modernization
 operational support systems
General Management
 performance
 strategic planning
Fortunately most of these areas are strengths of the company versus weaknesses.
AT&T has had years of experience and brings the proper internal environment necessary
to this complex Internet market.
VI. Strategic Plan Recommendations
Grand Strategies provide the strategic direction for actions while long-term objectives are results
a firm seeks to achieve over a specified period (Pearce & Robinson). AT&T has tremendous
opportunity for Internet cable and wireless access dominance over the next 3-5 years provided
realistic, achievable goals are established. The following grand strategies will be employed by
AT&T over the next 6 years, listed in order of priority. Both grand strategies and long term
objectives will be reviewed on an annual basis for both progress reporting and revision purposes.
VI a. grand strategy
Concentrated Growth. The first element of AT&T's grand strategy is a focus on
concentrated growth. Concentrated growth is defined as focusing on a specific product
and market combination. This type of grand strategy is often the most effective, and
comes with the least risk. AT&T's product focus has always been on communication.
Whether that involves long distance, Internet messaging, or other voice and data
products, we will continue to focus in those areas. We will seek to take advantage of the
convergence of these technologies (voice, data & video) and exploit expertise to gain a
larger market share, and increase usage by current customers.
Market Development. The next area of the AT&T grand strategy is in the area of market
development. Pierce and Robinson define market development as identifying new uses
for existing products and new market areas. These new market areas can be
differentiated through geographic location or demographics. This segment of grand
strategy is second only to concentrated growth when considering the risk and costs
involved in implementation. Market development will be realized at AT&T through the use
of current cable, data and wireless infrastructure for new purposes. For example, the
entire cable television infrastructure will be upgraded to handle new technologies such as
digital cable, Internet access, and telephone service. And, wireless technologies will
expand to allow for broadband Internet access, which will in-turn allow for wireless video
conferencing, and other bandwidth intensive activities. Wireless technologies will be an
ideal solution for those customers who have not yet had cable television service offered
in their area, or who are served by a competing cable provider. AT&T will be a "one-stop"
solution for all communication needs, regardless of what technology is chosen by the end
customer.
Product Development. Product development is the third aspect of AT&T's grand strategy,
and it requires a larger amount of risk, and involves higher costs of implementation. This
type of grand strategy focuses on developing new products for present markets. This
could also include adding new features to current products or adding variations of a
product. We will continue to introduce Internet-access related products (LightWire, etc.)
to ensure a wide variety of choices to meet consumer needs. In keeping with this
strategy, all services offered by AT&T will be available in different configurations/levels so
that every customer will have access to products regardless of budget.
Innovation. An emphasis on innovation will also serve as one of AT&T’s grand
strategies. AT&T has always been a leader in technological breakthroughs, and will
continue to build on that reputation in the future. We will devote significant resources to
expand the present capabilities of all current and future Internet-access mediums to
ensure a dominant technological advantage. In keeping with this strategy, AT&T will
develop switching technology for use in cable networks normally only in use by telephone
providers. By implementing switching technology, customers will realize a greater amount
of speed, reliability and security through Internet-enabled cable systems.
Concentric Diversification. To continue emphasis on Internet-related activities, AT&T will
seek to acquire businesses that are related to us in terms of technology, markets, or
products. This type of strategy is known as concentric diversification. The AT&T Internet
presence will be enhanced by the purchase of a well known Internet portal, such as
Yahoo!. By acquiring a site such as Yahoo!, AT&T can leverage the brand to expand
customer base. We will also actively seek to acquire various local and regional ISPs to
consolidate and focus cable services and enable synergies that optimize AT&T delivery
technology with content provisioning.
Strategic Partnership. The final activity related to the grand strategy is the development
of strategic partnerships. AT&T is highly aware of recent activity and legislation regarding
open access to cable systems. To avoid federal intervention into AT&T's operations, we
will develop strategic relationships with competitors seeking access to the AT&T cable
networks. Companies with the potential of becoming strategic partners with AT&T include
AOL, Mindspring, or other national ISPs.
AT&T notes their acquisition and partnership policy from their annual report “We make an
acquisition when that seems the most effective way to take advantage of a particular
market opportunity to further our growth goals. We look for partnerships--whether equity
investments, joint ventures or other alliances--that complement our own strengths.”
VI b. long term strategies
AT&T's long-term objectives are the specific goals we expect to attain by focusing on the
grand strategies as shown above. Pierce and Robinson list seven areas that strategic
planners should establish long-term objectives. These include: profitability, productivity,
competitive position, employee development, employee relations, technological
leadership, and public responsibility. This section will focus on each area, and list the
individual specific goals.
Profitability. The most obvious, and perhaps most important objective of AT&T is to
maintain profitability. Virtually all objectives and goals can be tied to this area in some
way. However, the main purpose of this objective is to exhibit fiscal responsibility to the
shareholders. Profitability will be measured by analysis of earnings per share data,
currently at $1.74. A long term goal of an annual earnings per share growth of 15% per
year is the target.
Profitability is also a concern when the Federal Government introduces regulations that
impact the way we currently do business. The most recent regulations revolve around
opening cable television networks to competitors in the Internet access arena. In order to
maintain profitability, AT&T will Develop revenue-beneficial open-access cable initiatives
by 2002.
Competitive Position. AT&T is heavily focused on dominance in the marketplace. This is
reflected in the following objectives:
1. Control 75% of the US cable Internet market by 2002, 85% by 2004. This will be
realized through the acquisition of regional cable providers.
2. Increase Internet access service advertising expenditures 10% per annum
through 2005.
3. Control 60% of DSL market for non-cable market by 2003. Due to varying market
conditions, not all potential customers will have access to AT&T's cable
networks, thus requiring an alternative for broadband Internet access.
4. Control 70% wireless broadband market by 2006. AT&T already has a major
portion of the wireless voice communication market. Wireless data is simply an
extension of this service will allow AT&T to capitalize on the already existing
infrastructure.
Technological Leadership. AT&T will continue to lead the market in new technology
introduction by directing significant financial and human resources in this area. Goals
include:
1. Offer IP-based voice calls via the AT&T cable network by 2002.
2. Develop 30 Mbps downstream/10 Mbps. upstream wireless broadband by 2004.
Employee Development. AT&T will continue to offer training and education to its
employees and offer financial reimbursement to employees seeking to obtain higher
degrees. By doing so, AT&T will develop and maintain a highly skilled, highly trained
workforce capable of reaching the objectives and strategies outlined in this paper.
VII. Strategic Intent
By following a specific grand strategy and with focus on distinct long term objectives, AT&T can
improve their competitive position in the home user Internet market over the next five years with
resulting increased profit. This market for AT&T will include a near dominance in the wireless
technology arena as well as the broadband sector which coupled will provide superior Internet
access to their home consumers.
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