Copyright 2004 The Atlanta Journal-Constitution

The Atlanta Journal-Constitution

December 7, 2004 Tuesday Home Edition

Upping the ante against cable TV rivals, BellSouth said Monday it plans to begin offering super-fast speeds for Internet service next year in parts of its top 30 markets, including Atlanta.

BellSouth said its goal is to provide 80 percent of households in its nine-state territory in the Southeast with such service in two or three years.

Higher speeds will drive more applications, BellSouth said.

The Atlanta-based carrier announced field trials next year to deliver standard- and high-definition TV signals using Microsoft technology, as well as mass-market phone service using voice-over-Internet protocol, or VoIP, technology. BellSouth already provides VoIP service to business customers.

BellSouth now offers satellite video provided by DirecTV that it bundles with its voice and data offerings.

"Sixty percent of those who buy DirecTV from us are coming from a cable company," said BellSouth's chairman and chief executive, F. Duane Ackerman. He spoke Monday at a meeting the company held for analysts in New York.

In next year's second half, BellSouth will begin offering broadband service with download speeds of 4 megabits per second to 6 Mbps. The carrier now offers three levels of service, with the fastest download speed of up to 3 Mbps. Dial-up is 64 kilobits per second.

A speed of up to 24 Mbps, capable of transmitting high-definition TV signals, could be available as early as 2006, said Mark Feidler, who becomes chief operating officer Jan. 1.

BellSouth, which passed the 2 million mark for its digital subscriber line, or DSL, service last month, expects to have 2.7 million broadband subscribers next year, said Ronald Dykes, chief financial officer.

Cable companies have been encroaching on BellSouth's turf, offering phone and high-speed Internet services of their own. Other rival phone companies, too, have entered the fray.

So BellSouth has countered with its own expanded menu of services, including long-distance and wireless.

Dykes said BellSouth expects to add 1.5 million long-distance subscribers to the more than 6 million total that it expects by the end of this year.

Company revenue should grow in the mid- to high-teen percentages in 2005, reflecting the carrier's 40 percent share of the revenue and profits of Cingular Wireless, which it jointly owns with SBC Communications. Atlanta-based Cingular recently completed its $41 billion purchase of AT&T Wireless Services, creating the nation's largest mobile phone provider with more than 47 million subscribers.

Dykes said revenue growth of BellSouth's communications group, or its wireline business, is likely to remain flat as it has been so far this year.

"We're still struggling with access line losses," Dykes told 200 analysts.

Asked by an analyst whether BellSouth would consider a merger with fellow regional Bell company SBC Communications, Ackerman responded:

"BellSouth will look at anything and does look at anything that creates value for the shareholder. Beyond that, I have nothing to say."

As to speculation that BellSouth is interested in acquiring AT&T for its large portfolio of business customers, Ackerman said it will seek to build partnerships with others to expand its enterprise business within and outside its nine-state territory.

"We know where we want to invest our dollars to enable us to compete very significantly for that business," Ackerman said. "We are not looking to go out and start attacking business in Massachusetts tomorrow morning. But we will pursue business outside our territory with alliances."

It is widely believed that BellSouth and AT&T were close to striking a deal to merge about a year ago.