A network of friends: AT&T turns to other providers for network expansion

Instead of bearing the entire financial burden of a self-contained network buildout and suffering through the time it requires, AT&T has decided upon a cooperative approach. For its 16,500-mile fiber-optic network expansion into 30 metropolitan areas, AT&T has tapped CapRock Communications, PF.Net and Touch America to build the fiber segments in their respective regions.

While there are some variations in each deal, in general, AT&T will share costs with the three companies to overlay conduits and fiber on its existing routes. With the expansion, which will cost an estimated $1 billion over two years, AT&T can offer OC-192 services as soon as the conduits and fiber are installed and OC-768 services once the hardware is available to support it.

"We saw future needs escalating, so we wanted to be prepared," said Steve Allen, project manager of the expansion for AT&T. "We just keep seeing growth going up, up, up and away."

The carrier also saw the need to handle more content traffic in the future. "It's a way to link together our cable T.V. properties of MediaOne and [Tele-Communications Inc.]," Allen said.

In addition to being prepared for those future needs, AT&T wanted to reduce all the costs associated with the network expansion while being cognizant of time constraints. By partnering with the other providers, AT&T avoids having to deal with construction headaches firsthand. The carrier expects to save about 60% of the cost of building on its own, Allen said.

"We traditionally do our own buildouts and utilize our own rights-of-way, but this lets us utilize [existing] rights-of-way and get the network where we need it faster and cheaper," Allen said. The cooperative effort allows AT&T to build the network more quickly than providers such as Level 3 Communications and Qwest Communications, Allen said.

"This really makes a lot of sense because it lowers the cost of construction so significantly, and you have a partner overseeing the construction to make sure you get the best quality," said Jere Thompson, president and CEO of CapRock. "You can't get the same watchdog if you are doing it alone."

Providers are better off working with someone else than building separate lines heading the same direction, Thompson said. He also believes that the companies involved can recover close to, if not all of, the costs involved with the construction during the next two years.

The expansion, which began a few months ago in CapRock's case, includes the installation of four separate conduits to AT&T's specifications. AT&T will take three of those conduits while the company carrying out the build will take one.

Of the 16,500 route miles of fiber to be laid, CapRock, PF.Net and Touch America will deploy 10,500 miles of the cable. AT&T already has deployed 3100 miles of fiber and intends to deploy an additional 2900 miles on its own.

CapRock will install the fiber in Arkansas, Louisiana, Oklahoma and Texas, while PF.Net will concentrate on sections of the East Coast and some southern states. Touch America will install three routes. One will run through Minnesota, Wisconsin, Illinois and Missouri; a second will run through Iowa, Nebraska, Colorado, Wyoming, Utah and Nevada to California; and the third will run from Montana through Idaho to Washington.

To further finance its buildout and keep up its standard business model, AT&T also will wholesale some of the available capacity.

The carrier plans to fill one of the conduits initially and leave the other two empty to make way for newer fiber when it becomes available.

"We can simply push new fiber into the spares and then pull it out of the old conduits," Allen said. "We don't expect to be digging in the dirt again - once you do it this way, you're set."

Strains on capacity and the need to meet customer demand definitely may have inspired AT&T to take a joint buildout stance. "This is really not an unexpected move from AT&T, but it shows they are planning ahead," said Neil Dunay, an analyst with KMI. "We expect to see similar moves come from MCI WorldCom and Sprint." But AT&T definitely is taking an aggressive stance early on, compared to MCI WorldCom and Sprint, which Dunay does not expect to make a similar move until 2001 because of their pending merger.