AT&T's 'Central Office of the Future'

FRAMINGHAM (07/03/2000) - AT&T Corp. says it's not qualified to become a direct provider of application services to enterprises, which is a nice piece of honesty. But AT&T also claims it's going to conquer just about every other area of the new IP-centric world.

AT&T says it's building 1 million square feet of Web hosting space itself and 2 million more with IBM Corp. and Concert. It's going to be a major provider of collocation, caching and content distribution to mega-Web sites. It's going to be No. 1 in dial IP platforms and network-based security. It will provide space, broadband links and marketing to application service providers.

How is AT&T going to pay for all this when it's spending more than US$100 billion to buy and upgrade cable networks? That was part of an intriguing conversation that several of us at Network World had recently with AT&T Data and Internet President Kathleen Earley.

According to Earley, their ace in the hole is what AT&T calls the Central Office of the Future. AT&T has an enormous network and is building 16,500 miles of new optical transport. It also owns tons of real estate that it can turn into high-performance Internet data centers.

If these old telephony central offices are going to turn into Web centers, there's little evidence of it yet. So far AT&T only has Web hosting in the same old places at the top of every vendor's list - New York, Southern California and Northern California (with one each in Phoenix and the U.K.). AT&T says it's under construction in five more cities on its way to a total of 44 by the end of 2002. But why not build 'em all now while demand is hot?

Earley admits "it can get pretty tense" in the AT&T boardroom when the capital-expenditure money is being doled out. But she's "delighted with every dollar we have spent," including the cable upgrades, because that gives AT&T millions of broadband user connections.

Yet AT&T won't be buying hosting, content or local fiber companies. The problem: Those firms already provide AT&T business. "It's very easy to get capital at AT&T if you sign up for incremental revenue," Earley says. "The question is, do I have to buy our own revenue stream?"

Fair point. But when challenged on the difficulties of starting from scratch, Earley's team still tends to fall back on AT&T's old friends fear, uncertainty and doubt.

When asked how AT&T will catch Exodus' Web hosting momentum, hosting chief Sandy Brown claimed Exodus has "a very modest backbone." When asked how AT&T will compete with Akamai's worldwide network of servers, Brown again retreated to AT&T's backbone, implausibly claiming the number of available servers near end users is irrelevant.

So how fast will AT&T really build hosting and content infrastructure? Says Earley: "Every day I wake up and say, 'How can we go faster?' " Are you listening, Mike Armstrong?

David Rohde is managing editor of The Edge section of Network World. He can be reached at drohde@ nww.com.

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