The American Telephone and Telegraph Co
The World's Networking Company
One AT&T Way
Bedminster, NJ 07921
32 Avenue of the Americans
New York, N.Y. 10013-2412
900 ROUTE 202/206 NORTH
BEDMINSTER , NJ 07921
David W. Dorman, AT&T Chairman and CEO
James W. Cicconi
General Counsel and Executive Vice President for Law and Government Affairs
President; CEO, AT&T Business Services William J. (Bill) Hannigan
SEVP and CFO Thomas W. Horton
President - AT&T Global Networking Technology Services
AT&T CTO & CIO
Executive Vice President – Human Resources
President and Chief Executive Officer — AT&T Consumer
Constance (Connie) Weaver
AT&T Executive Vice President
Public Relations, Marketing & Brand;
President - AT&T Foundation
AT&T to quit reaching out to consumers
Ma Bell will keep residential service, but focus more on business market
Todd Wallack, Chronicle Staff Writer
Friday, July 23, 2004
AT&T Corp., which was founded by Alexander Graham Bell and dominated the nation's telephone business for generations, said Thursday it plans to stop marketing traditional phone service to residential customers.
The historic decision marks the decline of the company affectionately known as "Ma Bell" and could spell fewer choices and possibly higher prices for consumers.
In the face of regulatory setbacks and shrinking profits, the telephone company said it decided to focus almost exclusively on the business market, which already provides three-quarters of its revenue. Specifically, the company will stop spending $1 billion a year to aggressively sign up new customers for local and long-distance service in California and other states.
"This decision means that AT&T will focus on lines of business where we are a clear leader, where we control our own destiny and where we have distinct competitive advantages," AT&T Chief Executive Officer David Dorman said in a statement.
However, AT&T said it will continue to provide service to its existing 30 million long-distance and 4.7 million local customers. AT&T also said it will continue to sign up new customers who call and ask, leading to speculation that AT&T's move could just be a dramatic bluff to push state and federal regulators to let AT&T and other firms continue to lease local phone lines from SBC Communications and other Baby Bells at steep discounts.
"It's noteworthy to us that they have not stopped selling to consumers,'' said Todd Rosenbluth, a financial analyst with Standard & Poor's, who has a "hold" rating on the company's stock. S&P has received some noninvestment banking revenue from AT&T.
AT&T also said it will continue to market its Internet telephone service, called CallVantage, to consumers, because it does not require AT&T to rent local phone lines from SBC, Verizon Communications and others.
Consumer watchdogs warned that the decision could leave Baby Bells with a near monopoly on local and long-distance telephone service, ironically similar to the monopoly that AT&T once had before a court-ordered breakup in 1984. SBC, the dominant local phone carrier in Northern California, estimates that it has 84 percent of the local phone market. And some other outside estimates are even higher.
"Competition has failed on a massive scale,'' said Regina Costa, a consumer advocate with The Utility Reform Network in San Francisco. "You'll see SBC and Verizon dominating the telecommunications business."
AT&T spokesman Gordon Diamond said the move frees SBC to begin raising prices. "It's not a question of if rates will go up. It's a question of when, '' Diamond said.
"Hogwash," retorted SBC spokesman John Britton.
Britton and other industry representatives pointed out that SBC and the other Baby Bells face growing competition from other technologies, including mobile phones, cable providers offering telephone service and Internet telephony, that limit their ability to raise prices.
"I think (AT&T's move) will only have a minor impact,'' said Susan Kennedy, a member of the California Public Utilities Commission, which regulates phone service. "It would be better if they stayed (in the market) ... but the real competition is going to be from other platforms."
And some traditional telephone competitors, such as MCI, vowed to stay in the market. MCI, long the second-largest long-distance company, said it has signed up 3.5 million customers for its bundle of local and long-distance service, about a tenth of whom are in California.
The move is just the latest sign that AT&T is just a shell of the firm that once ruled the country's telecommunications business.
AT&T's shares, which traded above $90 four years ago, closed at $14.24 Thursday, down 8 cents. Its $11 billion market value is a sliver compared with its offspring, including Verizon's $96 billion and SBC's $78 billion.
In a research note titled Ma Bell No More, Legg Mason analyst Daniel Zito said the company could be an acquisition target. And others predicted the company could be broken up for the fourth time in the past two decades.
In another bleak earnings report Thursday, AT&T said it earned $108 million in the second quarter, down from $536 million a year earlier. Its revenue dropped 13 percent to $7.6 billion.
At the same time, SBC reported its revenue edged up slightly to $10.3 billion, the first time in four years its sales have risen. The company said its profit dropped 16 percent to $1.17 billion, mainly because of charges related to the strike and labor settlement this past spring.
Despite AT&T's continuing financial slide, Thursday's decision surprised some analysts, because the company's consumer business remains profitable. In the latest quarter, it said, it had a 11.9 percent operating profit margin in its consumer business, compared with just 2.7 percent in its corporate business.
"AT&T had a viable bundle for local and long-distance,'' said Rosenbluth, the S&P analyst. In light of AT&T's decision, Rosenbluth said, S&P has concerns about AT&T's future profitability.
But AT&T said it had little choice, because it does not own the phone lines leading to customers' homes, and it faces an uphill battle to continue leasing them at steep discounts.
A storied company turns away from its past
Early years: invention and growth
1876 Alexander Graham Bell invents the telephone. A year later, the Bell Telephone Co. is formed.
1885 The American Telephone and Telegraph Co. is created as a subsidiary of Bell Telephone to build and operate a long-distance telephone network.
Becoming a monopoly: stock for widows and orphans
1913 AT&T settles an antitrust lawsuit by the government. It becomes a government-approved monopoly but agrees to allow independent telephone companies to connect to its long-distance network.
1915 The first transcontinental telephone line goes into service.
1916 AT&T is added to the Dow Jones industrial average. In time, it becomes the most widely held stock because it is so safe.
1919 The first rotary-dial telephones are installed in Norfolk, Va.
1925 Bell Telephone Laboratories is founded. It becomes a center of research, turning out such inventions as the transistor.
1927 Transatlantic phone service is started using radio signals.
1956 First transatlantic telephone cable begins operating.
1984 Ten years after the government filed an antitrust lawsuit, and two years after a settlement was reached, AT&T is broken up, retaining its long- distance and equipment-manufacturing businesses.
2004 AT&T announces that it will no longer market its services to consumers.
The Associated Press contributed to this report.E-mail Todd Wallack at firstname.lastname@example.org.
The CFR / Trilateral / New World Order Connection
American Telephone & Telegraph (AT&T)
Robert E. Allen, Chmn & CEO CFR
Randall L. Tobias, Vice Chmn. CFR
Louis V. Gerstner, Dir. CFR/TC
Juanita M. Kreps, Dir. CFR
Donald F. McHenry, Dir. CFR
Henry B. Schacht, Dir. CFR
Michael I. Sovern, Dir. CFR
Franklin A. Thomas, Dir. CFR
Rawleigh Warner, Jr., Dir. CFR
Thomas H. Wyman, Dir. CFR
AT&Ts MOTION TO SHUT THIS SITE DOWN
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