In what is a watershed moment in the history of telephone business, the company that literally invented and made consumer phone service decided to bow down to the regulatory pressure and said sayonara to Joe Blow. AT&T is no longer going to spend money on acquiring consumers as customers. AT&T CEO David Dorman was quite clear in putting the blame on the regulators who have basically handed his company a mortal blow.
AT&T will now focus its full energies on the Business Services segment where we are the clear industry leader and where we have the most certainty. As a result, AT&T will no longer compete for Consumer local or stand alone long-distance customers. While we provide our existing customers with quality service, and they can continue to expect that from AT&T, we will not invest additional dollars on acquiring new customers, and we will not invest to fight legal battles that no longer make sense given the dramatic shift in the government’s position on local market competition.
Well things have changed for the erstwhile monopoly which has seen its prestige and business being clawed away by upstarts and its own progeny. Unfair bias towards the Bells has only made life tough. But nothing compares to the fact that voice is a commodity and will soon become an add-on to lure dollars from other services.
The fact is, the residential telecom market has been transformed by competition to a market of bundles with more than 40 percent of American households now taking some form of bundle service, and the numbers are growing rapidly. Obviously, this is a historical shift that has broad reaching implications not only for AT&T, but the industry at large. While nearly 75 percent of our revenue now comes from AT&T Business, the AT&T brand has been known throughout the world as a premiere consumer telecom provider. However, we determined that without the support of the regulatory environment to allow for evolution to facilities-based competition, our focus for the future needs to be the business market where we have clear and differentiated advantages versus our traditional IXC competitors and the RBOCs.
With all the competitive pressure in the business markets, it is surprising that AT&T is making the move now. I am not sure how much money they can make from that business. It is truly a muddled strategy, and there are going to be debt-related implications. Fitch has already reduced the company’s debt to junk status. Imagine, the company that made up the portfolio of widows and orphans is now “junk.” The company is counting on VoIP, and I am not sure that is really going to fly. It is still a long ways from proliferation of VoIP, especially when companies start selling $10 unlimited voice plans along with DSL service.
AT&T has a solid future ahead with sharper focus on providing leading-edge networking and communication solutions to business customers domestically and around the globe.
So what is my take: by being out of the long distance, AT&T has cleared the regulatory roadblock and is now ready to be acquired. BellSouth and Verizon will not have any problems in stepping up to the plate. So as they say, goodbye Ma Bell.