With its acquisition of BellSouth, a newer, transmogrified AT&T is taking shape. Its new footprint resembles the coverage zones of Cingular Wireless, a GSM-based PCS service provider, augmented on the fixed-line side of the business by the geographic regions served by the erstwhile “Bell Operating Companies” called Ameritech, SNET, Pacific Bell, BellSouth and Southwestern Bell.

Nonetheless, the attitude of the new company is pure SBC, as personified by its long-time CEO, Edward E. Whitacre, Jr. This outspoken individual made the company’s tactical plans visible most famously in an interview that appeared in Business Week back in early November 2005. Whitacre foreshadowed the AT&T and BellSouth purchases when he noted that “It’s still about scale and scope. It’s about owning the assets that connect customers.”

Connecting customers is all well-and-good; however Whitacre let the other shoe drop (or should I say, threw down the gloves) when he declared war on the Voice over IP carriers that plan to piggy-back their services over existing broadband networks. “We and the cable companies have made an investment and for a Google or Yahoo! or Vonage or anybody to expect to use these pipes [for] free is nuts!” he exclaimed.

He may be right, but the counter argument is that AT&T offers a flavor of VoIP services of its own and some equitable formula must be constructed whereby new entrants can survive and thrive as they enter the business of connecting customers of their own. In short, get ready for the new millennium’s IP-Telephony Smack Down.

Same Stuff, Different Millennium
Many of us are old enough to remember when AT&T was divided into seven regional holding companies (yes I’m including Cincinnati Bell and SNET with the more easily remembered Ameritech, BellSouth, NYNEX, PacTel and U S West) that were quickly, but incorrectly, dubbed the Bell Operating Companies (BOCs). Very few seem to remember the drawn out hearings before Judge Harold Greene addressing issues whether AT&T’s size accelerated or chilled innovation.

Few remember that the idea of drawing the line between AT&T’s long-distance holdings and its local operating companies occurred very late in the battle. Many a BOC employee had already been issued business cards from “AT&T American Bell” when the consensus view was that a less synthetic division of the company would be between its communications holdings and its manufacturing/R&D wing. After all, you had a monopoly carrier generating the specifications for systems, software and hardware that could be fulfilled by its “captive” manufacturing company.

Judge Greene’s last minute epiphany was that the real “bottleneck” in the communications process was line from the phone company’s central offices directly to its customers. That’s why he determined that it was important to separate the subsidiaries that owned “the last mile” from the companies that interconnected those links (AT&T Long-Distance) as well as the firm that manufactured key components of the infrastructure (then called Western Electric), which Judge Greene ordered to be separated from AT&T in his “Modified Final Judgment” issued in 1981.

Bell Labs, the R&D subsidiary of AT&T, stayed with Lucent, which led many observers to wonder whether Ma Bell’s break up would spell the end to the introduction of innovative services to Bell System customers. The dirty little secret at the time was that, although R&D spending by AT&T and Bell Labs was impressive, few competitive forces required the Bell Companies to bring new products and services to the market. From the perspective of researchers at Bell Labs, the company killed more good ideas than other communications could even conceive of.

In case you’re wondering, research by Columbia University Professor Eli Noam shows that AT&T’s break-up did not result in a decline in R&D investment by telecom firms. In a tract entitled “Beyond Liberalization: Past Performance, Present Hype and Future Direction” the opposite occurred. My friends who worked at Bell Labs in the glory days may take exception but Noam notes that spending on R&D by telecommunications actually went up in the post-Divestiture era. Total R&D employment rose from 24,100 in 1981 to 33,500 in 1985. What’s more a Business Week survey in 1991 showed that the telecommunications industry’s average R&D spending outpaced “all-industry” both on a per-employee and percentage of revenues basis. As for Bell Labs, its R&D budget increased from $2 billion to $2.7 billion, of which about 10% went to basic research.

Girding to do Battle with the Cable Companies
The problem is, the new AT&T (nee SBC) is not very R&D minded. In his Business Week interview, Whitacre made it clear that his company’s biggest competition would come from cable companies, not the little, innovative IP-telephony companies or Verizon. From this comment it can be gleaned that he regards IPTV (the delivery of video content over the broadband Internet) as the proverbial “brass ring” that all the riders on the telecom merry-go-round strive to grab.

Whitacre is also a strong adherent to the tenet of “Forced Access.” He knows in his heart that government policy is forcing him to provide a free ride to his competitors. In my home state of California, for instance, where state regulations are designed to favor what I would call “competitive access”, a study the self-styled free market-oriented Pacific Research Instititute asserted that, as a result of “the hostile investment climate, Whitacre’s company slashed spending in California from $8 billion in 2002 to $5 billion in 2003″

Will This Slow Conversational Transformation?
My guess is that promoting efficient Conversational Access Technologies is not on the top of Whitacre’s to-do list. But it should be. Over the years of conducting research in the CAT field, Opus Research knows of no less than four major initiatives arising from various AT&T properties that further CAT’s cause. Given the highly competitive and guarded nature SBC Technology Research Inc. (SBC-TRI), the company’s R&D subsidiary, we’re sure that there are many more.

Let’s start with the groundbreaking work that Eric Shepcaro has been doing as one of the driving forces behind AT&T’s VoIP and “emerging technology” efforts, including his stint as the evangelist for VoiceTone, the managed speech recognition utility embedded in the AT&T network and CallVantage, AT&T’s answer to Vonage and its ilk.

BellSouth has been much more progressive than SBC in its efforts to deploy speech recognition in its customer service fabric. While AT&T was crafting VoiceTone, BellSouth was working with BeVocal to define a managed service that included speech recognition and logic to support the cross-sale and upsale of services and products from Cingular.

BellSouth has also been ahead of SBC’s curve in deploying speech recognition capability as part of its directory assistance query handling. Much of its platform is the result of home-grown design using recognition engines from Nuance and IP-based call routing from Soleo. Incidentally, Cingular added automated speech recognition to its directory assistance fabric when it acquired the assets and operations of AT&T Wireless (sometimes called AT&T Blue). Tellme Networks is the provider of some innovative services that include ever changing “skins” that correspond with icons in popular culture, like Yoda, the amiable Jedi knight from the Star Wars movie series.

Finally, SBC’s own customer care contact centers are making a quantum leap forward in deployment of speech recognition and enhanced call routing in front of a set of contact centers that involve 10,000 agents in nearly 100 locations. The transformation started in earnest in 2003 with contact centers handling 2-3 million calls per month in two of the company’s regions. In this case the Genesys Voice Platform (GVP) is the platform in front of the full suite of T-Server based CTI resources.

In short the “new AT&T” is no stranger to CAT, and we can only hope that the company will use its customer-facing, self-service technologies as the basis for competition, not the predatory methodologies implied by the provocative positions that CEO Whitacre is taking as he girds up for battle with gargantuan Cable TV system operators on the one hand and the Liliputian VoIP providers on the other.

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