Profits Down At AT&T And SBC; Bundle, DSL Up

Declining profits at AT&T and SBC Communications underscore the struggles of the entire telecommunications industry, although both firms sought earnestly for a silver lining in their latest financial reports.

Both found some solace in the product bundle -- the packaging of different services in a single bundle typically local and long distance calling along with broadband. AT&T, which saw first quarter income of $304 million drop 47 percent, said its bundled services nevertheless grew more than 50 percent.

In a conference call Thursday, SBC chairman and CEO Edward Whitacre Jr. singled out SBC's bundle strategy as a bright spot. SBC's $1.9 billion in profits represented a 61 percent drop in profits. Whitacre also went out of the way to laud the acquisition of AT&T Wireless by Cingular, which is majority-owned by SBC. Earlier in the week AT&T Wireless reported a sharp drop in subscribers raising fears in some quarters that the final stages of the acquisition could be jeopardized.

"We weren't surprised by AT&T Wireless," said Whitacre. "The issues they have are fixable and they will be fixed." On Tuesday, AT&T Wireless reported a net loss of 367,000 subscribers in its last quarter.

Another bright spot for SBC was its 446,000 increase in DSL broadband lines to reach a total of four million -- a 60 percent increase in the past year. The DSL numbers underscored a Pew Internet and American Life Project report earlier in the week noting that DSL is beginning to overhaul cable modem broadband. Pew found that home use of broadband was up 60 in the past year.SBC -- like its BellSouth, Qwest, and Verizon regional phone siblings -- enjoys a virtual monopoly connecting to local networks while AT&T has no natural monopoly. On Wednesday AT&T was delivered a sharp blow by the FCC, which turned down its petition seeking to avoid paying long distance access fees on calls completed partially over the Internet. The decision means that AT&T could be required to pay a few billion dollars in back fees. The FCC move followed a decision last month by a U. S. Court of Appeals that will force AT&T and other telecommunications firms to pay steeper access fees to connect to the regional telephones monopolies.

AT&T's Chairman and CEO David Dorman took note of the telecommunications industry's difficult environment "characterized by over supply and intense pricing pressure" and pointed to VoIP as a plus sign for the future in spite of the negative FCC decision.

AT&T this week continued to rollout its VoIP residential service in California and Texas. Introduced earlier in the month in New Jersey and Texas, AT&T said it will offer the service in 100 major U. S. markets by the end of the year.