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SBC Makes $6 Billion Broadband Play

SBC Communications Inc. intends to transform itself into the largest single broadband service provider in the U.S. over the next three years.

Dubbed the Project Pronto, the $6 billion initiative announced Monday is SBC's first effort to utilize the resources gained from their recent acquisition of Ameritech.

SBC (SBC)plans to provide an estimated 77 million clients with Digital Subscriber Line services through its Ameritech, Nevada Bell, Pacific Bell, SNET and Southwestern Bell facilities. SBC estimates the potential client base represents about 80 percent of their combined markets. Ultimately, SBC intends to make broadband services available to all of its customers.

Through a strategic alliance formed in February with Williams Communications Inc., SBC plans to rebuild its network to push fiber deeper into the communities it serves. The network upgrade accelerates SBC's convergence of its voice and data backbone systems into a next-generation, packet-switched network.

Edward E. Whitacre Jr., SBC chairman and chief executive officer, said the Pronto Project is designed to let SBC lead the nation in meeting the demand for broadband and emerging broadband-powered services.

"This initiative is about the future; about building a new company around how all of our residential and business customers use, and will use, the Internet while providing them with dialtone-like reliability," Whitacre said. "It is also about giving SBC the opportunity to continue to capitalize on incredible growth in data and broadband services and achieve significantly more operating and cost efficiencies well into the next millennium. "

Whitacre added that readily recognized dialtones would soon become familiar to personal computer users a "etones."

"We see a rapidly changing marketplace where traditional dialtone is still a staple service, but where millions of our customers will demand the convenience, productivity, availability and reliability of our broadband service which we call 'e-tone,' " Whitacre said.

With the completion of its recent acquisition of Ameritech, SBC is one of the largest telecommunications providers, serving approximately 100 million people or about one-third of the nation's access lines.

Whitacre said that the massive DSL deployment and network upgrade is just the first part of SBC's global strategy to provide broadband services.

"By converting the 'last mile' into a high-speed 'first mile' on-ramp to the Internet, we are making nearly all of our approximately 60 million access lines more powerful for customers and more valuable to shareowners," Whitacre said. "Project Pronto, together with our expanding service footprint and plans to provide long-distance service, is an integral part of our plan to be a full-service, global provider and the only communications company our customers need."

Earlier this year, SBC announced its plans to deploy DSL access in more than 500 central offices. The company will meet this commitment in early November, making DSL service available to nearly 10 million customer locations in Texas, California, Nevada, Missouri and Arkansas.

At the completion of Project Pronto, SBC's plans to quadruple its DSL deployment and equip approximately 1,400 central offices with DSL technology. The plan requires that more than 12,000 miles of fiber sheath needs to be laid in order to install or upgrade 25,000 neighborhood broadband gateways.

According to SBC, when the expanded deployment program is completed customers will be able to receive minimum downstream connection speedsof 1.5 megabits per second, with more than 60 percent eligible to receive guaranteed speeds of 6 megabits a second.

SBC Further intends to offer advanced broadband services including voice-over-ADSL, video conferencing, and switched virtual circuitry, which will allow telecommuters to readily switch between their home access Internet Service Provider and their corporate Local Area Network without rebooting their computer.

The announcement may be good news for SBC-owed Pacific Bell digital subscriber line customers. Chronic service disruptions on Pac Bell's DSL network were reported last week on the West Coast.

Some Bay Area customers experienced outages for more than two days. Pac Ball acknowledged that there had been periodical outages of their PacBell.Net DSL services, but that services had been restored to customers experiencing downtime.

Pacific Bell launched their ADSL program in over a year ago and more than 20 ISPs immediately joined their partnership program offering high-speed access in over 200 California communities.

Brad Sachs, Flashcom president, said their DSL service has not been impacted by the PacBell.Net outage.

"We're not experiencing any outages or service disruptions with Pac Bell because we operate on a different network," Sachs said. "To our knowledge, only PacBell.Net local DSL services have been disrupted."

An industry analyst noted that Pac Bell outages totaled 316 hours during the first 6-months of the year and that DSL services were not the only segment of their service that was not up to speed. Email and news group services are routinely disrupted at PacBell.Net due to network layout anomalies.

The SBC Communications subsidiary is also reported to have caused 15 major computer outages at California State agencies. Pacific Bell network failures jeopardized their 7-year, $1 billion contract with the state when the California Highway Patrol and Department of Motor Vehicles could not access their records.

Although Pacific Bell and SBC representatives have offered no comment about current service failures, analysts contend that service disruptions will continue in the bandwidth hungry Silicon Valley until Pacific Bell complete necessary voice and data network upgrades.

In related news, SBC also announced the formation of an alliance with E*TRADE Group, Inc. to provide high-speed DSL Internet access to thousands of E*TRADE's most active investors.

Additionally, SBC and E*TRADE (EGRP) announced plans for a series of cooperative-marketing initiatives that would enable the companies to jointly market their services to as many as 35 million consumers.

Jerry Gramaglia, E*TRADE chief marketing officer, said being first to offer new and enhanced services is important to their clients.

"This exclusive DSL offering underscores our commitment to always pushing the limits in enhancing our customers' online experience, and to being the first and best in product innovation," Gramaglia said. "SBC's DSL service offers speed and convenience that we know our customers will value, and it gives us a platform to add cutting-edge content such as streaming audio and video to our site."

James D. Gallemore, SBC executive vice president of strategic marketing and planning, said DSL broadband service is changing the online experience.

"We're pleased to be allied with E*TRADE to provide its customers with lightning-fast speeds to E*TRADE's popular Web site, making it easier to use and enabling customers to be more productive and responsive to changes in the fast-paced financial markets," Gallenmore said.

SBC's DSL service will enable certain E*TRADE customers in the Power E*TRADE program to connect to the Internet at speeds of up to 1.5 Mbps. E*TRADE plans to begin providing SBC's DSL serviceto its qualifying customers within the next few months.