AT&T Pulls the Wires and Tosses Down the Gauntlet

America's telecommunications companies want to cut the cord of America's home telephones and replace them with a single, do-everything phone.

You'd use it at home and carry it around the neighborhood, where it works like a cordless telephone.

And you'd take the same phone on the road, where it acts like a cellular phone, but with much clearer connections. Hooked to a computer, it promises superfast connections to the Internet.

"This is a technology breakthrough, which we think is on the level of when AT&T invented the transistor," says Todd Wolfenbarger, of AT&T Wireless in Kirkland, Wash.

New way into local business

Telephone companies have dreamed of this for years. AT&T now claims it has the technology to do it today, and for about the price consumers already pay for telephones.

The system, called "fixed wireless service," gives long-distance companies a new way to break into the local phone business, creating new competition and, potentially, lowering America's home-phone bill.

"We're ready to start deploying this," says AT&T's Wolfenbarger, "[but] we can't deploy it until we have a network built."

The first large test of the system is scheduled for later this year, with almost 40,000 AT&T customers in Chicago.

Box on house acts as antenna

The technology centers on an electronic box, about the size of a pizza carton, that mounts to the side of the house.

The "box" is really an antenna that allows a wireless phone to connect as clearly as a regular, corded model. And such a connection would more than double the speed of Internet access for most home-computer users.

Competitors and analysts say they are intrigued but cautious about AT&T's announcement.

"Let's not get too hyped up about this," says Walt Piecyk, an analyst at PaineWebber Inc. in New York. "It won't be widely available until 1998."

It's also not clear how extensively AT&T plans to deploy the technology. For one thing, it's expensive to put up the necessary antennas needed to serve each neighborhood.

Analysts say AT&T may be using the technology as a bargaining chip. This is the threat: If AT&T builds a nationwide network, it could hook consumers directly to its long-distance service. This would bypass the regional Bell companies, which currently provide local phone service.

But a cheaper way for AT&T to enter the local phone business would be to lease local phone lines that already lead to the homeowner's doorstep. By announcing the technology now, analysts say, AT&T is telling the Bells to keep those leasing rates low or risk being bypassed.

AT&T is not alone in its quest for wireless phones.

"We are aggressively looking at the wireless local loop, and that is key to our strategy long-term," says Tom Murphy, spokesman for Sprint PCS in Kansas City, Mo. "What has always been the inhibitor has been the box."

Long-term, it does seem likely that telephone companies will get more revenue from their wireless services than their traditional wired networks. "It is inevitable, but not necessarily in 10 years," says Rebecca Diercks, a wireless analyst at Business Research Group in Newton, Mass.