AT&T

unveils new business networks

(CBS.MW) -- Mirroring moves by its main rivals, AT&T went public Tuesday with plans for its service allowing business customers to transmit data and voice over a single network at higher speeds.

Integrated Network Connect is designed to simplify networking access, lower costs, increase speed and provide more reliability, AT&T (T) officials said at the Comnet trade show. Service should start in the second half of 1999.

The company also will offer new services geared to improve the private networks of businesses, called Enterprise Class Virtual Private Network.

AT&T is the last of the Big Three long-distance carriers -- Sprint (FON) and MCI WorldCom (WCOM) are the others -- to announce its own integrated network. Testing has been under way for several months, AT&T said.

For now, businesses gain access to voice and data services over separate networks, which costs more and is less efficient. With demand for universal service growing, however, carriers are racing to become the first operator to offer all-in-one networks.

The new network is based on the superior, packet-based Internet Protocol. Advanced IP networks provide far more bandwidth at a sharply reduced cost.

However, businesses that require the greater security frame relay-based technology provides also will be able to hook into AT&T's advanced IP network.

Since many businesses have invested in frame relay-based systems, AT&T aims to ensure that their investments are not wasted as they switch over to the IP standard, which is expected to become the dominant standard for information transfer within a few years. More customers are likely to switch over if their frame relay systems can be plugged into AT&T's IP architecture, company officials believe.

The new network is also supposed to be far more flexible than AT&T's current offerings. "No more one size fits all," Bob Annunziata, president of AT&T business services, told reporters.

Industry analysts, however, are unsure how businesses will initially respond to the new network. AT&T and Sprint hope to bill companies not for the minutes they use, but on how many bits of information they send and receive. Sprint had encountered some resistance to the change in billing, analysts say.

AT&T officials acknowledge they do not expect businesses to migrate to the new pricing scheme immediately. "We don't expect anyone to converge overnight," said Tim Murray, vice president of business network services.

Added Annunziata: "It's not: 'Build it and they shall come.' "

The company's new network is the latest brainchild of hard-charging Chief Executive C. Michael Armstrong, who only took over the top spot in November 1997 but is intent on rapidly reshaping Ma Bell into what he calls the premier "end-to-end broadband" supplier.

In the past year, AT&T has purchased a Teleport, a local phone company targeted at businesses; struck up a global networking partership with British Telecommunications; agreed to buy Tele-Communications Inc, the second largest U.S. cable operator; and acquired IBM's international data network.

The goal: to be able to offer local, long-distance, data, Internet, wireless and cable TV services to anyone in the United States and elsewhere.

"For AT&T, it's the beginning of our future," Armstrong said in a speech at Comnet. "When it's all said and done, we intend to take a backseat to no one in terms of a facilities-based global reach."

A clear route to that goal does not exist, however. Such a strategy requires AT&T to spend tens of billions of dollars over the next decade even as its onetime bread-and-butter consumer long-distance service continues to decline amid intensified competition.

After an initial hesitancy, however, analysts and investors have been giving the company high marks. Earlier this month, AT&T's stock hit an all-time high of 100. The stock has since regressed a bit, falling 3/14 Tuesday to 86 7/16.

Jeffry Bartash is a reporter for CBS MarketWatch.

Written By Jeffry Bartash, CBS MarketWatch