Ackerman paints picture of cautious aggression

BellSouth Chairman Duane Ackerman walked a very careful line in presenting his company’s future to those assembled at the 15th Annual Smith Barney Citigroup Entertainment, Media and Telecommunications Conference in Arizona. On the one hand, Ackerman portrayed BellSouth as aggressively pursuing growth opportunities in IP services while on the other, painting the picture of a fiscally strong, cautious performer, not prone to irrational spending.

Ackerman also used the forum to advance two now familiar BellSouth themes: First, that regulatory relief is needed immediately and second, that BellSouth is competitively pricing its service bundle to compete with cable. BellSouth has not grabbed the headlines of two former Bells, SBC Communications and Verizon, in advancing new broadband networks, but Ackerman firmly stated the company’s continued leadership in local loop fiber.

"We have steadily transformed our company toward broadband growth," he said. "We are already a leader in broadband deployment, passing over a million homes and adding to this all the time. We service 46% of our households with a combination of fiber and short copper loops. We are taking a mosaic approach of fiber and ADSL 2+."

By way of caution, Ackerman added, however, that BellSouth is "investing in broadband in ways that just make economic sense. We will invest more than a billion in our network to advance our BB capabilities. We will shift capital to the projects that offer the best payback. And we will continue to compete aggressively in the marketplace with DSL promotions and pricing strategies."

The latter includes a 1.5 Megabit DSL service launched in October that garnered 220,000 subscribers. Overall, Bellsouth added 630,000 DSL lines to reach more than 2 million customers with its high-speed Internet access service in 2004.

Ackerman positioned his company as having "one of the strongest balance sheets in the industry," and pointed to strong dividend yields. While BellSouth continues to focus on the fundamentals, it has shifted its product mix to areas of growth, including wireless, data, long-distance and Yellow Pages, he added.

Only a week after BellSouth announced new discounts for its bundled services, Ackerman stressed his company’s ability to compete today with the cable industry in voice, data and video, working with DirecTV as its DBS partner.

"We are price competitive today, we are in the market today with a triple-play head to head with cable out of the gate," he said. "[The satellite partnership] gets us into triple-play competition immediately, and when people put satellite in, they are either disconnecting cable or not putting cable in. We haven’t seen a lot of strong price competition from cable yet."

High on Ackerman’s wish list for 2005 are regulatory reforms, including rules that more widely limit CLECs’ remaining ability to lease access lines where competition exists, and changes in how universal service is funded. BellSouth is waiting until the FCC’s final TRO order comes out, but could well challenge it in court, he said.

In the meantime, the company will be pushing for regulatory reform on Capital Hill.

"Regulation should foster a far more consumer-controlled, investor friendly environment than we have now," he said. "Only basic retail should be limited by regulation. In wholesale services, companies should be able to buy only unbundled local copper loops at negotiated rates, and both things should have a sunset date. All providers should be required to provide 911, law enforcement assistance and handicapped access to services."

As for universal service, the BellSouth chairman wants "the service base to include all service providers," so that the burden is shared. He also suggested using general tax revenues to support the program.

"The marketplace should drive the future of the industry, not regulation," he concluded. "New legislation needs to be simple, short and clear."