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. Last Updated: 07/27/2016

AT&T's Dream Faces High Hurdles

NEW YORK -- In a series of deals over the last year that culminated in its agreement last week to acquire MediaOne Group Inc., AT&T Corp. has committed itself to spending more than $90 billion on a technological vision that is largely untested and that may not exist anywhere but on AT&T's drawing boards.

The promise is great: a system that could allow AT&T to provide competition against Baby Bells in local phone markets through cable connections f even while delivering interactive television, which could allow viewers to select their own camera angles or replays, and lightning-quick Internet access to households more accustomed to molasses-like speeds.

But the technical and organizational challenges standing between that vision and AT&T's present are so great that one AT&T executive likened the company's ambitions to launching a space station. It is one of the most grand technical voyages in communications since the old Ma Bell started stringing telephone wires across the nation.

"We need to figure out how to build it, how to deploy it, how to support it, how to maintain it,'' Michael Armstrong, AT&T's chairman, said Thursday in an interview. Referring to new customers, he added: "The issue is not doing this for a few hundred people a month. It's for tens of thousands of people a month.''

On Thursday, AT&T enlisted Microsoft Corp., the leviathan of software, to help in that effort. As expected, Microsoft agreed to invest $5 billion in AT&T, while the phone giant agreed to use Microsoft's software in some of the advanced television set-top boxes that AT&T plans to use to bring its vision into living rooms.

But the $90 billion AT&T has already committed to its vision is just to acquire Tele-Communications Inc., a deal announced last summer, and MediaOne, in an agreement formalized Thursday. Now billions more must be spent turning relatively raw assets into systems that can deliver the dream.

It will probably take years for most people, even those in AT&T's cable markets, to see tangible results of the company's ambitions. And it is not clear if customers will end up footing the bill, though AT&T is well aware that its pricing will have to undercut local telephone incumbents if it is to have much chance of success.

Put simply, the main technical challenge for AT&T is to get cable television networks to do things that they were never meant to.

Traditional cable networks are well suited for their original job: transmitting television images. Cable networks have very high capacities for information; a cable subscriber's home is generally receiving every channel at once while the set-top box serves only as a filter to display one at a time.

But traditional cable networks are built to transmit information in only one direction: from the cable company toward the user, and not the reverse.

That poses a problem for telephones, which provide a two-way service. Traditional telephone networks are in some way the obverse of cable systems: They easily transmit communications in two directions, but they do not have to carry much information at the same time.

But even once a cable system has been adapted to send and receive data, voice and television signals, it is still not ready for the digital future. To offer high-speed Internet service, huge investments must be made in high-speed Internet switches that can route millions, even billions of bits of digital information every second. Even more daunting is the prospect of offering telephone service.

Every house that intends to switch from conventional to cable-based phone service must be visited by a trained technician to install an electronic box outside the house to connect the home's inside telephone wiring to the external cable wire.

Big telephone switches the size of a van must be purchased and configured, almost by hand, to link with the cable network.

These technical challenges are just to offer phone service using conventional telephone technology, known as circuit switching, albeit over cable wires. To offer phone service over cable lines using Internet technology is even more complicated. In fact, the technology to do so reliably does not even exist yet. Armstrong said that he does not anticipate using Internet phone systems until 2001.