SBC’s key marketing strategy remains centered around service bundling, said Randall Stephenson, Senior Executive VP & CFO of SBC Communications, speaking at the UBS conference in New York. Long distance bundling has been the decisive factor is stopping and even reversing local access line loss to UNE-p competitors in SBC’s southwestern and western territories. Stephenson said the same effect will also occur in SBC’s mid-western territory now that the company has gained permission to offer long distance. Adding DSL to the bundle increases the “stickiness” of the service by up to 73%. DSL is expected to grow next year. Stephenson claimed that SBC’s overall margins are actually improving despite the growth in bundling. For example, he said the cost of provisioning and delivering a DSL service have fallen faster than the DSL price cuts at SBC. He predicts the U.S. broadband market will become heavily penetrated in two to three years and that, by then, SBC will have captured a significant share of this mass-market. SBC is also on-track to launch its Dish video service next quarter, potentially increasing its ARPU even further.
“Wireless and wireline integration will take bundling to a new level,” said Stephenson, especially since there is a huge overlap between the Cingular Wireless footprint and SBC territory. In the very near future, SBC will be launching a unified messaging service featuring common voice mail, email and call forwarding between land lines and wireless phones. Wireless minutes can already be ported to wireline phones. Stephenson expects this type of tight integration will mitigate the effects of local number portability.
Regarding consumer VoIP services, such as the plan that Verizon announced earlier this week, Stephenson said he believes there will be some market interest in such a service, but that there would not be too great of a price savings for consumers compared to other bundled services.
“In the long term, obviously it (VoIP) is a threat,” said Stephenson, especially because as cable modems “achieve share and broadband pipes are in the house, VoIP becomes a substitute. However, it is not rocket science and I believe SBC can do VoIP as well as anyone.”
Stephenson confirmed that SBC is developing its own consumer VoIP service, which it will launch “when market demand develops.” SBC is already offering an enterprise VoIP service. It sees the market for national, enterprise data services as one of its biggest opportunities. The company is also looking to significantly improve its operational efficiency by standardizing its network platforms and consolidating call centers and network centers.
Stephenson does not believe FTTP makes economic sense as an overbuild solution. However, Stephenson said SBC would be opportunistic about deploying FTTP in new builds and to existing apartment buildings where it does not need to dig trenches.
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