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SBC Announces Sweeping Broadband Initiative In
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n October 18, 1999, SBC
announced its first major
initiative from the merger with
Ameritech. The initiative, called
Project Pronto, involves the
companys entire 13 state in-region
territory, and is designed to transform
SBC into a broadband service
provider capable of meeting all
customers needs for data, voice and
video products. SBC plans to invest
more than $6 billion over the next
three years in fiber, electronics and
ATM technology in order to create a
robust, comprehensive, data-centric
broadband network architecture.
This initiative will dramatically
improve SBCs cost structure, while
greatly expanding the companys
ability to deliver broadband services
to all its customers.
SBCs broadband initiative is
much more than a local loop or
DSL strategy. These investments
will make broadband the standard
for SBCs network, fundamentally
changing the way the company
operates. In addition, the invest-
ments will position SBC to
effectively and efficiently capitalize
on changes in technology, as well as
changes in customer demand.
October 18, 1999
No. 211
SBC Announces Sweeping
Broadband Initiative
First major post-merger initiative
involves planned $6 billion investment
over three years
O InvestorBriefing
SBC Communications Inc.
2
The time is right to make these
significant investments. The
performance of broadband
technologies has improved
dramatically while the associated
costs have declined. Customer
demand for broadband services is
real and growing rapidly.
Cumulatively, these factors present
SBC with a compelling business
opportunity. The network
efficiency improvements alone will
pay for this initiative, leaving SBC
with a data network that will be
second to none in its ability to
satisfy the exploding demand for
broadband services. This new
network structure, combined with
SBCs partnership with Williams
Communications which is the
nations newest, most advanced
long-distance network enables
the company to deliver end-to-end
broadband services locally,
throughout its markets and to the
30 out-region markets SBC plans
to enter.
$6 Billion Network
Investment
Of the $6 billion that SBC plans
to invest over the next three years,
75 percent will be directed toward
improvements to the basic local
loop infrastructure (i.e., fiber
feeder and next-generation remote
terminals). The remaining
25 percent will fund other
infrastructure improvements,
especially in the tandem and
interoffice network. Upon
completion, SBCs next-generation
network will be capable of
meeting customers voice, data
and video needs with the right
technology, at the right speeds
and with the right reliability.
SBCs new network architecture
is designed to be optimum from
both a voice and data perspective.
It will be scalable, with the
capability to manage the ongoing
shift in voice and data traffic
volumes. Voice traffic today is
predominantly circuit switched,
but this network deployment will
give SBC the flexibility to readily
move to other voice protocols,
including voice over ATM, voice
over ADSL and, ultimately, voice
over IP. Data traffic will be
diverted from the circuit-switched
network, packetized and adapted
to Internet Protocol. This
approach to voice and data traffic
will allow SBC to fully utilize the
capacity of the existing circuit-
switched network, while focusing
ongoing capital expenditures on
data capabilities.
The higher speeds afforded by
these network improvements will
enable SBC to offer a myriad of
Internet-based video products
including video streaming and
video conferencing on its
landline networks. These network
improvements also will allow SBC
The network efficiency
improvements alone pay
for this initiative,
leaving SBC with a
data network that will
be second to none.
Project Pronto Highlights
$6 billion capital investment
Annual savings of $1.5 billion
by 2004
Capital and expense savings
pay for initiative on NPV basis
$3.5 billion in new revenue by
2004
100 basis-point improvement
in annual revenue growth
Significant value creation, well
in excess of $10 billion NPV InvestorBriefing
SBC Communications Inc.
3 InvestorBriefing
SBC Communications Inc.
4
to provide television entertainment
as the technology evolves and
becomes financially feasible to
implement. SBC will also have the
flexibility to continue to offer
video and Internet services using
satellite transmission through its
strategic marketing and distribu-
tion agreement with DIRECTV
TM
.
Loop Infrastructure
SBC plans to invest approximately
$4.5 billion to initially extend the
reach of broadband capability to
more than 80 percent of its
customer base. SBC estimates that
this deployment will immediately
enable at least 60 percent of its
broadband customer base to have
guaranteed download speeds of
six megabits per second (Mbps),
with the remainder having
guaranteed speeds of 1.5 Mbps or
more. Further improvements in
these speeds are expected as
technology advances.
To achieve this kind of
broadband penetration, SBC will
place or upgrade approximately
25,000 remote terminals at an
average cost of approximately
$86,000 each. These next-
generation remote terminals are
also referred to as neighborhood
broadband gateways. Fiber
backbones will be deployed to
connect these neighborhood
broadband gateways to about
1,400 central offices throughout
SBCs 13-state territory. Fiber, as
well as costs for systems and other
requirements, is estimated to
average about $1.7 million per
central office.
The deployment of fiber and
next-generation remote terminals
will enable SBC to overcome loop-
length and line condition
limitations in its network. While
one immediate advantage of this
deployment is the broader
availability of ADSL, it also gives
SBC the flexibility to react
efficiently and effectively to
continuing technological
improvements and market
developments. Planning includes
deployment scenarios for VDSL or
APON (ATM Passive Optical
Network) technology to address
customers television entertain-
ment needs, as these platforms
become technically and financially
feasible.
Other Network
Infrastructure
SBC intends to spend an
additional $1.8 billion to upgrade
other portions of its network in
order to improve efficiency. Forty
percent of this investment is
targeted for a technology that SBC
is pioneering called Voice
Trunking over ATM, or VTOA. InvestorBriefing
SBC Communications Inc.
5
New Broadband Products
HDSL:
A symmetrical 1.5 Mbps DSL ser-
vice that is ideally suited for video confer-
encing or collaborative computing.
Access Advantage Plus:
Provides a cus-
tomer with DS1 or DS3 channelized ser-
vice allowing the integration of voice and
data on one single facility. The DS1 ser-
vice provides up to 24 DS0 channels to
which a menu of products can be con-
nected.The DS3 service provides up to 28
DS1 channels to which a menu of prod-
ucts can also be connected.
Switched Virtual Circuit (SVC):
A capa-
bility for ADSL subscribers that enables
the user to accommodate multiple con-
nections on the personal computer.
Users can establish a connection to an
Internet Service Provider as well as a con-
nection to a corporate LAN without hav-
ing to change the PC software configura-
tion and reboot the PC.
Voice Over ADSL (VoDSL):
Expands on
existing DSL service capabilities by pro-
viding up to 4 derived voice channels
over the ADSL line and primary POTS
line. VoDSL will provide a solution for
our customers current and future inte-
grated voice and data needs. VoDSL will
offer simplicity, flexibility, convenience
and cost savings. In addition to these
customer realized service benefits,
VoDSL will provide potential infrastruc-
ture benefits that should enable SBC
to reduce operations costs and improve
its ability to scale and manage
network services.
Splitterless DSL:
Provides a full rate DSL
service where the customer would
receive a drop shipment and self-install
the equipment. The equipment would
consist of a modem, NIC card and filters.
The filters would be customer installed in-
line, low-pass microfilters for each analog
device. The purpose is to filter out high-
frequency signals so that both the voice
and data can share common inside
wiring. Splitterless DSL would eliminate
the need for a technician to install a split-
ter and the inside wire. It also eliminates
the need for the customer to have the
CPE installed by a technician.
G.Lite:
A technology that utilizes a new
international standard for use with DSL
services. The use of G.Lite technology as
part of SBCs ADSL offering may reduce
the complexity of an on-site installation
by eliminating the need for new wiring
and a special signal splitter that sepa-
rates voice and data at the users home.
G.Lite technology does, however, require
the use of customer installed filters at
each telephone and analog device, such
as answering and fax machines. This is
referred to as plug and play consumer
installation.
VPOP Dial Access Service (VPOP-DAS):
A cost-effective solution to modem pool-
ing. VPOP-DAS provides for the termina-
tion of calls and interconnection to the
SWBT network of Data Service Providers
(DSPs). SWBT owns, maintains and moni-
tors the modems and associated equip-
ment. Dial Access Service allows SBCs
Data Service Provider customers to
receive multiple calls from end-users
with analog and ISDN