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.