As I was growing up, AT&T was known as “Ma Bell.” For over half of my life, AT&T had pretty much a lock on the telecommunications market. Many had a love-hate relationship with the firm, due to everything from service and billing issues to quality of service problems. In fact, detractors often called AT&T’s logo the “Death Star,” a reference to Star Wars’ planet-killing space station. Yet it was the basically the only game in town when it came to phone services.
But in 1982, the U.S. government pushed to break up AT&T, forcing it to split into what were called “Baby Bells.” These Baby Bells became regional telecommunications companies, eventually leading to the birth of companies like MCI, Sprint, and, more recently, leading to the rise of firms like Verizon and T-Mobile. By the end of the 1980s, deregulation was in full swing, creating a competitive environment that has been extremely beneficial for modern communication.
I was on an AT&T mobile advisory board in the mid-90s. I remember telling AT&T’s team that VoIP, meaning voice calls placed over the Internet, would be highly disruptive to their business. But at the time, landline phones were AT&T’s major cash cow, and it just couldn’t see how VoIP could replace that. This was also the early days of cell phones, and to AT&T’s credit, it was already embracing that technology. But by the early 2000s it became clear that VoIP and wireless were transformational technologies, and AT&T began integrating them into its offerings. In 2006, AT&T started to offer its own TV service called Uverse to compete with cable companies, and began offering its Triple Play strategy including VoIP calling, Internet access and television.
Now AT&T is looking to reinvent itself once again. While its early television offerings had some success, the firm realized that it needed a more serious offering, which led to its $49 billion acquisition of pay TV provider DirecTV in 2014. Seeing the growth of mobile video, AT&T is in the process of launching a streaming TV service. Add to that AT&T’s proposed purchase of Time Warner, which if approved would give the firm a massive library of premium video content including CNN, HBO, TNT and more. Should the massive $85.4 billion deal pass regulatory muster, it would boost AT&T’s position as a modern media and telecommunications firm. (AT&T also sees connected cars as part of its vision, with 7 million automobiles in the U.S. already carrying the company’s modems.)
These strategic moves are vital for ATT’s future. But they’re also important for the evolution of media and telecom firms more widely. AT&T is no longer just a telecommunications company — it’s evolving into a wireless communications and content delivery firm offering streaming media on any device. That makes it a greater threat to rivals like Verizon, Sprint and T-Mobile, all of whom may invest more heavily in content to compete. (Verizon has already made moves in this direction, recently acquiring Internet firms AOL and Yahoo, but AT&T’s move could make it more likely to merge with a television provider, too.)
AT&T is taking the integrated content-and-pipes approach because it recognizes people want their communications and content to be available on every device they own. As our research at Creative Strategies has shown, consumers want a wide range of services, but only one or two bills to deal with. With wireless services as well as content, AT&T would be able to offer exactly that kind of package. The merger could also help AT&T compete against powerful Silicon Valley firms, like Facebook and Google, which currently dominate the online advertising sector.
AT&T is no longer the AT&T of our past. This new version is on its way to becoming one of the most powerful communications and content firms in the world. If its merger with Time Warner is approved, it will set the tone for what its rivals will need to do to compete.
Tim Bajarin is recognized as one of the leading industry consultants, analysts and futurists, covering the field of personal computers and consumer technology. Mr. Bajarin is the President of Creative Strategies, Inc. and has been with the company since 1981 where he has served as a consultant providing analysis to most of the leading hardware and software vendors in the industry.
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