AT&T Ceases To Compete In Seven States

AT&T will stop competing for local and long-distance residential customers in seven states, the company said Wednesday. It placed the blame for the action squarely on the Bush Administration and the FCC. The states targeted are Ohio, Missouri, Washington, Tennessee, Louisiana, Arkansas, and New Hampshire.

"This action," AT&T said in a statement, "is a result of a June 9 decision by the Administration and the FCC not to appeal a recent Federal court decision that overturned FCC wholesale rules put in place to introduce competition in local markets. The reversal of local competition policy by the Administration will permit the Bell companies to raise wholesale rates as early as November."

The November date is important, because the Administration has been striving to hold back increases on consumer telephone bills -- said by consumer groups to be inevitable after the June 9 decision -- until after the November elections.

AT&T's decision to include long distance in its decision was something of a surprise because long distance has long been the firm's telephone flagship in the consumer market. The company indicated that it cannot compete with "competitive bundles" -- the packages of local and long distance telephoning -- offered by the Bells, so it is dropping out of the seven states entirely. The states involved have a combined population of 38 million.

AT&T's action likewise goes to the heart of the breakup of the original AT&T two decades ago. The telephone colossus was broken up to provide consumers and business with competitive alternatives. "We foresee a future with less choice for consumers," said AT&T Chairman and CEO David Dorman in a statement. "Competitive alternatives are simply not available today for most Americans, because as AT&T loses the ability to provide them with an alternative to the Bell companies, they will have virtually no choice of telecommunications provider."The "Bell companies" are the former Regional Bell Operating Companies (RBOCs) -- BellSouth, Qwest, SBC, and Verizon.

AT&T said it is reassessing "its ability to serve residential consumers in the other 39 states in which it provides local and long-distance service." The firm said as it continues its examination of the 39 states, it will make additional announcements later.

AT&T indicated that the loss of "an effective local bundle" impacts its ability to offer a competitive bundle of services, particularly a package of local and long distance calling. "Without an effective local product in its service bundle," the company said, "AT&T foresees that it will not be able to effectively provide customers with a complete package of telecommunications services."

The Telecommunications Act of 1996 called for increased telephony competition. Some 20 million subscribers have been receiving service from non-Bell providers. Implicit in the Act was a deal in which the Bells would be able to offer long distance service and the long distance providers -- chiefly AT&T and MCI -- would be able to offer local telephone service. MCI has also indicated it is likewise considering withdrawing from competing in consumer markets.

AT&T emphasized that it will not abandon its existing residential customers in the seven states and that its enterprise, business and VoIP services are not affected by Wednesday's announcement.Indeed, AT&T this week announced a flurry of facilities-based enterprise wins: on Wednesday, the firm reported that it nailed down a $67.5 million contract with Hilton Hotels and entered into a $60 million networking deal with Deutsche Bank. On Monday, AT&T said it won a $54 million contract with the IRS to build a virtual private network.