The fourth business group is what used to be called National Cash Register Company. It is now what we refer to as GIS (Global Information Systems); it was and is a computer company that sells PCs. It sells complete solutions—the same kind of terminology that Jim was using earlier—such as automated teller machines, and is very international. From the start, its business has been about 50 percent domestic and 50 percent foreign. It is a very large company.

Finally, we acquired McCaw Cellular Company, which is now part of our service offerings. McCaw is a very large investment in wireless communications. Almost all of the cellular phone business is done at a frequency around 900 megahertz. People, however, believe that digital cellular phones will gradually take over, using a band around 1.9 gigahertz. The FCC just had an auction, and we spent $1.7 billion to buy up bandwidth in the 1.9-gigahertz region in many parts of the country. Its second auction will be coming up in about a year, and we will probably spend another $1.7 billion for additional bandwidth. We are spending another $4 billion to obtain complete ownership of the cellular business of McCaw. When we are finished, we will probably have made a $25-billion investment in wireless communications. The corporation obviously has bet a lot on what wireless communications are going to do in the future.

Below these business groups, there are lots of smaller business units. There is a switching business unit, a transmission business unit, a microelectronics business unit, a submarine cable business unit, and so on. The research area works closely with the units at this level.

If we look at how we have contributed to those business units, one of the big successes of our research organization in the last 10 years has been in photonics transmission. It is roughly a $2.5-billion-a-year business for AT&T. It has gradually penetrated further and further down from the long-call transmission to the local loop or toward the wire coming into your home.

One of the major battles that is shaping up in this industry is access to your home. There are basically two kinds of companies that have access to your home, maybe three if you count the wireless. The first is cable television and the second is your telephone company. In wireless you could add the cellular phone, digital satellite TV, and—perhaps we should not forget—standard broadcast TV.

Those are the major services that come into your home today, and there is a coming battle among them. The regional telephone companies are betting enormous amounts of money on getting more bandwidth into your home. I do not know how many of you pay attention to this. Large contracts have been signed among AT&T, Pactel, and a number of the regional companies to essentially introduce broadband services into your house. There are various technical schemes for doing that, but every regional operating company wants to have broadband access and to be able to supply cable television.

The cable companies also are trying to figure out how to take their cables and run telephones and data over them. The telephone and cable companies are trying to eat into each other's business.

Then there is a third business that is trying to get access to your home—the wireless services, which would scatter some sort of microcell sites around your neighborhood or maybe even on the side of your house, and your initial link to the outside world would be wireless.

These are some of the major battles that are looming in telecommunications today. This business is probably close to being at a turning point that is not dissimilar to the introduction of integrated circuits in the electronics business. The upheaval is sufficiently large that —20 or 30 years from now—there will be a totally different set of corporations dominating the business. Of course, we at AT&T are hoping that we are still one of them.

But these things are not obvious. Recently there was a major conference on asynchronous transfer mode technology that would create a very flexible packet-based network. Three hundred and fifty corporations showed up at that meeting. So, you can judge how big an issue just one aspect of this technology can be. There are many, many start-ups in the telecommunications world today. About two years ago, Fortune 500 published a list of the hundred fastest-growing companies in the United States. Out of this hundred, 14 of them were in telecommunications.

REORGANIZATION OF AT&T RESEARCH

There is no question that telecommunications is a very fast-moving field today. We are trying to be part of that field and exert leadership as a research organization. When you listen to these developments, you begin to appreciate that while we might have been doing a broad range of research a long time ago, some of those areas are not as relevant as they used to be. This is a problem that we have consistently faced since divestiture.



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