SBC Communications Announces Advances in Initiative to Develop IP-Based Residential Network for Integrated Video, Internet, VoIP Services

Business Wire, June 22, 2004

SAN ANTONIO -- SBC Companies and Microsoft Begin Testing IP-Based, Digital TV Services over Fiber; Regulatory Clarity Advances Multi-Billion Dollar Network Investment

SBC Communications Inc. (NYSE:SBC) today announced key advances in developing a network capable of delivering a new generation of integrated digital TV, super-high-speed broadband and voice over IP (Internet Protocol) services to residential and small business customers.

SBC companies have defined a strategy to drive fiber deeper into its networks to power high-speed, IP-based local connections. Pending final clarity on applicable regulatory requirements and successful completion of neighborhood-level trials, which begin this summer, the SBC strategy could result in an incremental investment of $4 billion to $6 billion over five years to deploy the network and make advanced services available to millions of customers in the SBC service territory.

"Fiber technologies and IP-based services will enable a communications revolution, allowing consumers and businesses to experience integrated video, data and voice services beyond what can be provided over any network today," said Edward E. Whitacre Jr., SBC chairman and CEO. "This next generation of services will require us to revolutionize our local networks as well, which we will do as economic and regulatory conditions make practical.

"The recent decision by the Bush Administration to allow unlawful telephone wholesale rules to lapse and let stand the FCC's decision not to unbundle broadband is a positive step," said Whitacre. "We are now more optimistic that we may be headed toward rational, market-oriented regulations that will promote investment and deployment of new capabilities."

An IP network can provide a highly flexible infrastructure for fast delivery of advanced services, while also reducing maintenance and upgrade costs when compared with traditional networks. SBC companies would create the new network by deploying fiber deeper into neighborhoods and using IP technology to deliver video, voice, data and other advanced services and applications over a single network connection. The services could be accessed and shared via any number of IP-enabled household devices, such as TVs, set-top boxes, PCs, PDAs or phones.

SBC companies also are pursuing development of new services that can take advantage of the network's bandwidth. For example, SBC companies and Microsoft have begun testing an IP-based switched television service based on the Microsoft TV IPTV platform. This infrastructure would enable a new type of next-generation digital video entertainment experience, offering features like standard and high-definition programming, customizable channel lineups, video-on-demand, digital video recording, multimedia interactive program guides, event notifications and more. IP-based television services also will enable household TV devices to participate in connected home experiences with other devices in the home.

SBC companies and Microsoft plan to begin field trials for the IP-based television platform later this year. The SBC trial is the first planned trial of the Microsoft TV IPTV platform with a U.S.-based telecommunications provider.

The SBC Fiber Roadmap

SBC companies are focusing on a strategy that would drive fiber much deeper into local neighborhoods. First, the company would shift new network investments toward IP-based services over fiber. In most cases, SBC companies would deploy Fiber to the Premises (FTTP) for new network builds, such as developing subdivisions. While well-suited for new construction, the cost, deployment time and customer inconvenience required for FTTP deployment in existing neighborhoods makes widespread deployment impractical for SBC companies and potentially undesirable for some customers.

In existing neighborhoods, SBC companies would use Fiber to the Node (FTTN) technology to run fiber much deeper in its network to nodes that serve 300 to 500 homes. From the nodes to each home or small business, SBC companies would continue to use their existing network connections. FTTN enables significantly higher broadband speeds than any residential service offered by a major carrier in the U.S. today, with download speeds of 15 to 25 megabits per second (Mbps) and upload speeds of 1 to 3 Mbps dedicated to each customer. The Microsoft TV IPTV platform would make it possible to deliver standard-and high-definition TV programming to multiple TV sets in the home over an FTTN network while leaving ample bandwidth available for super high-speed broadband and Voice over IP (VoIP) services.

The FTTN/FTTP strategy would deliver an optimal balance of network capability, cost, speed of deployment, and convenience for customers. FTTN provides a highly efficient means of delivering next-generation services over a relatively short deployment timeframe, while also providing a framework for eventual replacement of copper connections directly to homes and businesses, if and when the technology, economics and customer demand are ripe.