Fattening up before the slaughter?

Google factor: 138

It's unknown whether or not David Fellows rides horses. It's doubtful he looks good in a white cowboy hat. But he's clearly the new technology sheriff in town.

After nearly losing the cable TV portion of the company after a (so-far unsuccessful) unsolicited bid from Comcast Corp., AT&T Chairman and CEO Michael Armstrong finally bowed to internal pressure and brought in a group of "cable guys" to save the day.

The three former MediaOne execs–CEO William Schleyer, COO Ron Cooper and CTO Fellows–now have the task of sorting through the mess that their predecessors created, re-tool the group to cut costs and increase profit margins.

AT&T is clearly making one last attempt to save its Broadband division, with hopes to one day spin it off as a separately traded stock. But to get to that point, the company must reinvigorate itself, regain investor confidence and prove that it can survive–and thrive–on its own.

Schleyer will have to craft a new message and take it to Wall Street to buy time. Cooper will be looking at ways to grow in a financially constrained environment while Fellows will look to re-focus the company's technology agenda with an eye toward spending cautiously.

AT&T is arguably still reeling from the heady days of 2000, when the company spent wildly to upgrade its systems in multiple markets. Compared to other MSOs, however, it started its rebuild schedule late, yet seemed driven to complete those rebuilds at the same time others did. That led to an unchecked, undisciplined spending schedule that was great for vendors, but finally caught up with the company this year.

It also lost its way in the set-top arena. After inheriting an agenda from Tele-Com-munications Inc. that called for it to develop and deploy expensive, "thick" digital set-tops, the company announced this summer that it was abandoning that plan.

Beyond all that, Fellows will have to sort out a host of other technology programs. For instance, he'll have to determine if the company should continue to spend heavily to roll out circuit-switched telephony service. Outside of AT&T Broadband, only Cox has followed a similar telephony approach–and Cox just announced that it has become a profitable service offering. AT&T's telephony agenda, conversely, has been criticized as too expensive, despite the fact the company said it had 924,000 telephony-over-cable customers as of the end of the third quarter of 2001.

Despite its well-documented economic woes, AT&T does lead the industry in the number of deployed digital set-top boxes with 3.2 million digital customers. It also boasts 1.2 million high-speed data customers.

Yet Armstrong's vision of a converged company offering a complete suite of voice, video and data services–which looked so good a couple of years ago–is clearly tarnished. It'll be fascinating to watch Fellows, Schleyer and Cooper to see if they can return the shine to AT&T.