AT&T Holds Calls

Citing a major change in federal regulatory policy, AT&T will
stop pursuing new local and long-distance residential customers in
Arkansas, Louisiana, Missouri, New Hampshire, Ohio, Tennessee and

“The customer acquisition costs are very high in those states,” AT&T
spokesman Bob Nersesian told

AT&T is assessing whether to continue marketing for new subscribers in the
remaining 39 states where it sells local and long-distance service,
although no timetable has been made for the decision.

The carrier will continue serving existing residential customers in those
states. And the move does not affect corporate, government and other small
and medium business subscribers, or users of the carrier’s new
Voice over Internet Protocol offering.

The retreat comes after the Bush Administration chose not to appeal a lower
court ruling that tossed out regulations forcing Baby Bells — BellSouth
, Verizon , SBC and Qwest
— 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 some consumer advocates said the line-sharing evened the playing field.

AT&T then unsuccessfully asked
the Supreme Court to temporarily stay the new rules. It’s currently weighing
a direct appeal of the case to the nation’s highest court, Nersesian said.

In recent years, the company’s standalone long-distance revenues have
dropped sharply as customers switched to regional telecoms, national
wireless providers and, more recently, VoIP offerings from upstarts like its
Garden State neighbor Vonage.

While fully aware of this trend, the discounted access allowed AT&T to
cost-effectively include local phone service as part of a package of
communications services.

Now AT&T is pushing hard in other areas of its business. It is competing
with MCI, Sprint and others for large networking and
service deals with corporate and government customers. These services, along
with an aggressive rollout of consumer and business VoIP offerings, are key
to AT&T’s strategy.

Using the strength of its network as a selling point, AT&T has landed some
large contracts lately. Today AT&T announced two deals: a five-year, $60
million pact to standardize voice and data platforms for Deutsche Bank’s
U.S. operations; and a $67.5 million contract to expand a high-speed wide
area network offering for Hilton Hotels’ guest services infrastructure.

The deal follows a five-year, $54 million award from
the IRS to design and build an upgraded network
connecting the agencies’ field offices and allowing for secure, remote access
by workers.

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