AT&T to Stop New Residential Service in Seven States
NEW YORK – AT&T Corp. (T) said Wednesday it will stop selling traditional local and long-distance residential service in seven states, blaming its move on a court decision that it says will result in higher prices for its use of regional networks.
AT&T will stop marketing its traditional services to residential customers in Arkansas, Louisiana, Missouri, New Hampshire, Ohio, Tennessee and Washington. Existing customers will be able to keep their service and the announcement does not affect business or government customers.
The company also will continue to sell its voice over Internet protocol services in the seven states. The service comes into homes over broadband connections such as DSL lines (search) or cable, bypassing access fees that have been a source of contention between AT&T and its regional rivals.
AT&T has 4.3 million residential customers nationwide and 30 million long-distance customers. It would not disclose how many customers it has in the states where it will stop selling its traditional service.
The company said its decision came as a result of a court ruling that overturned Federal Communications Commission (search) rules requiring the regional Bell companies to sell access to their networks at a discount. The company said the rates it pays the Bells could increase as early as November, meaning "AT&T will likely be unable to economically serve customers with the competitive bundles currently available."
AT&T said it is reassessing its residential service in the other 39 states in which it provides local and long-distance service.
"We foresee a future with less choice for consumers," said David Dorman, chairman and CEO of AT&T.
"Competitive alternatives are simply not available today for most Americans," he added, "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."
But Scott Cleland, chief executive of Precursor, an investment research firm, called AT&T's move "a political announcement" driven by the company's anger at the Bush administration. AT&T has blamed the White House for refusing to challenge the court ruling.
"The states that are mentioned are election-sensitive states," Cleland said. "AT&T will continue to offer local service in those states."
AT&T shares were up 15 cents to $16.49 on the New York Stock Exchange.
In recent years, the bulk of AT&T's revenue has come from business customers. In 2003, revenue from that segment was $24.9 billion, while revenue from residential customers was $9.4 billion.
Long-distance price wars and the substitution of cell phones for hard-wired phones have depressed AT&T's revenue for the past four years. In its 2003 annual report, the company said it expects a 7 percent to 10 percent decline in long-distance voice revenue this year.
"The traditional carrier long-distance business is in very bad shape," said Farooq Hussain of the Network Conceptions LLC consulting group. "We're looking to see who survives. MCI and AT&T are the most damaged, since they don't have any wireless."
Of AT&T, he said, "This is a ship that's sinking."