July 22, 2004 8:53 AM PDT

AT&T drops hunt for residential customers

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AT&T said Thursday that it will drop efforts to attract new residential telephone users nationwide, a move prompted by recent changes in a telephone competition rule.

The move is an extension of a similar announcement the telecommunications giant made last month, when it said it would discontinue its hunt for new residential customers in seven states. At the time of last month's announcement, the long-distance giant said it was reviewing whether to continue to invest in attracting more residential customers in 39 other states in which it operates.

Despite its decision to discontinue future investment in the residential market for local and long-distance service, AT&T will continue to provide service for its existing residential telephone customers, the company noted.

AT&T's announcements were prompted by a decision last month by the Bush administration. The White House decided not to appeal a federal court ruling that struck down rules setting the rates that the Bell operating companies could charge to lease their local phone lines to competitors. Without those rules in place, AT&T, MCI and others say the Bells will raise the lease prices by at least $10 per line, making it cost-prohibitive to expand such services.

SBC Communications, one of the four Bells, said Thursday that "AT&T left the traditional consumer business years ago," when it decided not to build its own network. "Those companies which have invested in their networks and facilities to meet those customer demands will be positioned to succeed in the highly competitive consumer marketplace," SBC added.

Although AT&T says the collapse of the rules is all but forcing it out of the residential phone market, it's not giving up without a fight. In early July, AT&T began leasing local phone lines from McLeodUSA, a small provider serving about two dozen states. While not enough to cover all of AT&T's current residential phone customers whose service is now threatened, McLeodUSA's network--and business arrangements with the Bells--positions AT&T to renew its fight for new customers in some states.

At the same time, AT&T will focus more on further developing its business markets, where it makes 75 percent of its total revenue.

"AT&T is the leading provider of communications services to business customers, offering a full range of leading-edge networking and communications solutions on a global basis," David Dorman, AT&T chief executive, said in a statement.

The long-distance giant will specifically concentrate on bolstering its business customer base in emerging technologies, such as voice over Internet Protocol, known as VoIP, which it's now using to sell unlimited local phone service in 100 major markets.

The company announced its decision as part of its earnings announcement Thursday.

Revenue in the second quarter reached $7.6 billion, down 13.2 percent from the same period a year ago. AT&T noted that the decline largely stemmed from a drop in long-distance voice revenue.

Net income fell to $108 million, or 14 cents a share, in the second quarter, a decline from $536 million, or 68 cents a share, a year ago.

 

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