Ma Bell's long-awaited Baby Bell: look out IBM
American Telephone & Telegaph Company has expanded its telecommunications business and says it will do for data communications what the switchboard did for telephone service.Skip to next paragraph
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AT&T, the nation's largest nonindustrial corporation, has formed a new subsidiary, called American Bell Inc. Its first product will allow different types of computers and computer terminals to communicate with each other.
It will be called the Advanced Information Systems/Net 1 and provide data storage, transmission, and programming capabilities. Arch McGill, AT&T's vice-president of business marketing, says the new system will be the ''cornerstone'' of American Bell's business.
Under Net 1, as the telephone executives call it, customers will connect their terminals to one of several service points American Bell has established around the country. If an insurance company, for example, wanted to send information to another office that had a different type of computer system, it could contact one of these service points. American Bell, then, would translate the sender's computer message into a language that could be read by the receiver and send it on.
AT&T, under the terms of two decisions handed down by the Federal Communications Commission in 1980 and 1981, had to provide so-called ''enhanced services,'' through a fully separated subsidiary by Jan. 1, 1983. Enhanced services are those where customers' information is changed, processed, or stored. Last week, the FCC approved the telephone company's capitalization plan for its new subsidiary, which will be totally owned by AT&T. Charles L. Brown, AT&T's chairman, says he does not think it would be incompatible with AT&T previously announced plans to divest itself of its operating companies.
Linell McCurry, a vice-president with Butcher & Singer, a Philadelphia-based brokerage house, says the important thing about American Bell's new system was the fact that it would be Ma Bell's first venture into an unregulated business. As such, she states, ''a lot of people will be watching it to determine how successful they are.''
AT&T will be competing directly with at least two companies, General Telephone & Electronics (GTE) and Tymshare Inc. GTE had no comment. These companies provide a service that collects information from a customer's terminal , transmits it to a central location, called a ''node'' by American Bell, and then retransmits it to a different location. This is considered a relatively inexpensive way of electronically transferring information. AT&T says 84 percent of the terminals currently made -- and a larger number currently in use -- are compatible with its system. Because of this compatibility, Harry Edelson, an analyst with First Boston Co., a brokerage house, in a research report entitled, ''Battle of the Giants,'' says the company most affected might be IBM. IBM has established the dominant computer standards, so lots of users buy IBM equipment. Now, he notes, they can just plug into American Bell's system and not worry about network standards.
American Bell's new system, Ms. McCurry says, will be most useful to small companies that don't have the money to spend setting up earth stations or microwave transmission stations. In fact, American Bell's new chief executive officer, Salvatore Barbera, says he could envision a company in the retail industry using the new service. One example, he says, would be a company with 50 or more large outlets, ordering merchandise from its suppliers -- computer to computer -- without regard for differences in their data communications systems. Mr. Barbera also mentions the insurance industry as a potential customer.
AT&T has been trying to get into the computer business since 1978 when it petitioned the FCC for permission to begin a separate company to compete in unregulated businesses. However, it wasn't until 1980 that the FCC granted permission and it approved the capitalization plan for the company on June 10 of this year. Since Ma Bell hadn't picked a name for the new company, analysts have called it ''Baby Bell'' up to this point. It will open its doors for business on July 1.
American Bell will be headquartered in Parsippany, N.J. and will have a staff of nearly 1,000.