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AT&T Retreats From Tradition
Firm Stops Marketing Long-Distance Service to Residential Customers
Washington Post Staff Writers
Friday, July 23, 2004; Page E01
AT&T Corp., once a cornerstone of the U.S. telecommunications industry and still one of the world's most recognizable brands, announced yesterday that it will no longer market long-distance service to consumers, a business it has dominated for 100 years.
The decision marks a turning point in the history of Ma Bell, the former monopoly that strung telephone lines across the nation before it was broken up by a federal judge in 1984. Twenty years later, AT&T is fighting for survival in a telecommunications industry roiled by intense competition, technological innovation and cutthroat pricing.
AT&T chief executive David W. Dorman said yesterday that the long-distance giant will focus on business customers, which account for about 70 percent of its revenue. Although AT&T will no longer be marketing to new consumers, it will continue to serve its 35 million current customers, Dorman said.
Consumer groups called AT&T's retreat a serious setback because it will lessen competition, which has driven down rates for consumers. "This is devastating. This takes the most revered name in quality long-distance service and the most aggressive competitor to the [regional] Bell monopolies out of play," said Gene Kimmelman, director of the Washington office of Consumers Union.
The AT&T of today is a sliver of its former self. Once it had 1 million employees and controlled every facet of the telephone system, including the manufacture of handsets and the operation of its local and long-distance networks. The fabled Bell Labs were responsible for some of the biggest breakthroughs in modern science, including the invention of the transistor, the laser and the mobile phone.
Under the breakup, it lost control of the local networks it built and was forced to pay local phone companies more than 40 percent of its revenue to complete its calls. Now AT&T has 60,000 workers. It has spun off its research, manufacturing and wireless businesses.
Despite its setbacks, AT&T is still the nation's largest long-distance provider, although its customer base is eroding at a rapid rate, thanks largely to competition from its former corporate siblings. These regional phone companies, such as Verizon Communications Inc. and BellSouth Corp., are permitted to offer long-distance as well as local service.
Dorman said AT&T pulled back from the consumer market now because regulators have abandoned a policy that he said allowed AT&T to compete for customers.
For eight years, the Federal Communications Commission has encouraged competition in the local phone market by allowing companies such as AT&T to lease parts of the local network at deep discounts.
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