RealTime IT News

AT&T Out of Consumer Long Distance Markets

AT&T will stop pursuing new long-distance customers to adjust to new competitive and regulatory realities. The carrier will continue to support existing customers.

Eventually, management will consider all options -- including sale or spin-off -- for the business that made it one of America's most recognized corporate names.

"We believe all those kinds of things are on the table to be evaluated," AT&T CEO David Dorman said during a conference call with analysts and reporters.

The retreat from long-distance won't have an immediate effect on the company's numbers, AT&T said. The company also contends it won't mean any drastic change in its five-year, $500 million billing contract with Accenture .

AT&T foreshadowed the move when it scuttled campaigns to land new residential customers in seven states last month.

While wireline business was fading because of competition from regional and wireless carriers, a major regulatory change accelerated AT&T's decision.

In early June, the Bush administration declined to appeal a lower court ruling that tossed out regulations forcing Baby Bells to provide discounted access to their lines for competitors like AT&T.

Baby Bells felt the old rules were unfair and stifled innovation, while AT&T and consumer advocates said line-sharing leveled the field.

The announcement of the long-distance retreat came during the company's quarterly earnings call. In the second quarter, AT&T reported earnings of $108 million, or 14 cents per share, down from $536 million, or 68 cents per share, from the same period last year.

Revenue was $7.6 billion -- $5.6 billion from AT&T's business unit and $2 billion from its consumer division -- down 13 percent from the second quarter of 2003. Again, the culprit was waning long-distance revenue.

Given the revenue split, it's not surprising that AT&T will step-up efforts to land enterprise business for managed network services, such as Internet access, hosting and data transport over its IP backbone.

In addition, Dorman offered a look at the company's VoIP strategy. Although the company rolled out a consumer offering, the market is getting crowded -- as is evidenced by Verizon's own VoIP announcement today.

As a result, prices are already starting to come down from what was originally about $40 per month for unlimited calling.

"We think there is a wonderful opportunity to be a scale provider," Dorman said, meaning AT&T would handle VoIP traffic on its network for cable companies, small telecoms and ISPs that want to add voice to their offerings.