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AT&T exits consumer market

Posted: 27 Jul 2004 ?? ?Print Version ?Bookmark and Share

Keywords:at&t? voice? video? data?

AT&T will stop pursuing new customers for its standalone local and long-distance consumer businesses and instead focus on bundled voice, data and video.

AT&T Chief Executive David Dorman said Thursday (July 22, 2004) that it would halt all marketing to pursue new customers but continue to support existing customers. Packet-based services will be pursued to provide bundled voice, data and video.

Dorman blamed shifting federal government priorities, which tend to favor incumbent local exchange carriers for delivering unbundled network elements. Dorman said the company "does not relish the decision," but said it was necessary given the incumbents' advantages in local consumer markets.

Nearly 75 percent of AT&T's current customers are businesses, Dorman said, though brand recognition is strongest in consumer markets.

The impact of a changed environment for interexchange carriers was evident in AT&T earnings announced Thursday. The company's second quarter net income was $108 million, compared to $536 million in the same period last year. Analysts said circuit-switched voice will become a commodity service for interexchange carriers and regional carriers alike.

Dorman said AT&T's voice services for business and consumer customers will be focused on the voice-over-Internet Protocol.

"We understand, however, that the consumer VoIP market [is] inherently limited by current broadband penetration levels, and therefore not a real substitute for traditional phone service in the mass market, until broadband penetration grows," Dorman said in a conference call with analysts.

"As a result, AT&T must take a measured approach to acquiring customers, limiting our reliance on high-cost acquisition channels and mass marketing."

Regional carrier SBC Communications Inc. said it was not surprised by AT&T's decision since AT&T has not invested in new consumer offerings in several quarters. AT&T's second-quarter operating income of $348 million included $54 million of net restructuring charges related to employee layoffs and separations.

- Loring Wirbel

EE Times

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