American Telephone & Telegraph Co. lost 5 percent of its domestic market share to other long-distance companies last year because of "equal access" and more aggressive marketing strategies on the part of its major competitors.

The toughest competition the telephone giant is facing from MCI Communications Corp., GTE/Sprint and other long-distance companies is the fight for customers in so-called "equal access" markets. Customers in those places can now choose a long-distance company other than AT&T as a primary long-distance company. The process of equal access eliminates lengthy codes customers had to dial to reach AT&T's competitors.

Equal access, mandated by the breakup of the Bell System, guarantees AT&T's competitors the same quality of connection to the local telephone network that AT&T enjoys. One third of all telephone lines are expected to be converted to the service by September, and all lines are expected to be converted by the end of 1986.

Conversions are taking place in at least 25 major cities, including Washington, Baltimore and Philadelphia, on a neighborhood-by-neighborhood basis.

"I think it is crystal clear that as more than 400 companies have entered the long-distance marketplace that AT&T's market share has been dropping," said Sam Willcoxon, executive vice president of marketing for AT&T Communications, the long-distance arm of AT&T.

Over the last several years, hundreds of "resellers" have entered the long-distance market, renting and then reselling AT&T long-distance lines at retail prices. Many of these companies do not provide nationwide long-distance service.

As equal access is phased in, AT&T notifies virtually everyone using long-distance service, Willcoxon said. Of those notified, more than two-thirds of those who make a selection stay with AT&T, he said. Those who don't choose a primary carrier are assigned to AT&T.

Willcoxon claims AT&T now has only 57 percent of the long-distance market, but analysts and competitors scoff at that estimate. Analysts say the company previously commanded 90 percent and now holds 85 percent. They estimate that AT&T's market share will decline to 60 percent by 1990. "We have AT&T with 85 percent of the market at the end of 1984," said Mary Johnston, a senior analyst with the Yankee Group, a Boston consulting firm. That is expected to drop to 80 percent in 1985, around 70 percent in 1986 and around 60 percent by 1990, she said. By then, about four long-distance companies will dominate the market and others will not have survived the competitive shakeout, she said.

Survival by other companies may hinge on their providing new packages of services, such as radio paging together with a long-distance service, as the price gap between AT&T and other long-distance companies narrows, industry sources said. AT&T is expected to continue providing premium service at a slightly higher price.

MCI Communications Corp. and GTE/Sprint, which held 5 percent and 2.5 percent, respectively, a year ago, have increased their market shares to 6.5 percent and 4 percent, Johnston said. Other long-distance companies now hold about 4.5 percent of the market, up from 2.5 percent, she said.

Some long-distance competitors of AT&T are claiming a bigger share of the market than analysts are estimating. "We are increasing our customer counts by three or four times," said Edward Carter, senior vice president of marketing for MCI. Customer count is "in excess" of 400,000 business and 2.5 million residential customers and growing "significantly," Carter said.

But other long-distance companies say results are not as dramatic as they had hoped. In most equal-access markets, customers are not required to make a choice -- by ballot, for example -- of a primary long-distance service. Instead, long-distance companies deluge customers with mailings, phone calls, and in some cases personal visits. Customers must contact the long-distance company of their choice and arrange service. The local telephone company only provides customers with a list of available providers and an explanation of equal access.

Between 75 percent and 90 percent of all contacted customers are defaulting to AT&T because of the lack of incentives to make a choice, said Dale Pilz, chief executive officer at GTE/Sprint. "We believe the competitive effort has been damaged by the lack of balloting," he said. "People don't really have to make a decision -- they can throw all the paper into the wastebasket."

Worse yet, the company finds it must "resell" its service to customers that now subscribe to Sprint by punching in a code. "If we don't resell our service, the telephone company defaults our customers to AT&T," he said. Sprint said it is making gains in its customer base despite the procedure. The company's last count showed 1.4 million customers, 25 percent of which are businesses.

The Justice Department is looking into the issue of how much the regional telephone companies should assist AT&T's competitors in the process of customer choice, a department official said