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AT&T Not Calling in Tennessee ; Phone Company Will No Longer Market Residential Local, Long- Distance Services

Posted on: Monday, 28 June 2004, 06:00 CDT

AT&T said Wednesday it will stop selling local and long-distance residential service in Tennessee and six other states, a move the company claims could send phone bills climbing.

Other states affected are Arkansas, Louisiana, Missouri, New Hampshire, Ohio and Washington.

AT&T blames the decision on the Bush administration's refusal to appeal a recent federal court decision affecting BellSouth competitors' rights to use BellSouth's residential access lines.

AT&T and BellSouth are rivals for phone business in Tennessee and other states.

"We foresee a future with less choice for consumers," David Dorman, chairman and CEO of AT&T, said in a statement.

Dorman further stated, "Competitive alternatives are simply not available today for most Americans 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."

AT&T spokesman Gene Regan said the company has no plans for an announcement on job losses but will continue to assess the needs of the business.

The AT&T decision will not affect existing residential and long- distance customers, government or small- and medium-sized business customers. It means AT&T will stop marketing to new customers. The phone giant will accept new customers who personally contact it.

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 or cable, bypassing access fees that have been a source of contention between AT&T and its regional rivals.

AT&T declined to say how many customers it has in Tennessee, but said it has 4.3 million residential customers nationwide and 30 million long-distance customers nationwide.

AT&T's action is the result of a decision by the Bush administration and Federal Communications Commission not to appeal the court ruling overturning FCC rules requiring regional Bell companies to sell access to their networks at a discount.

The FCC put the rules in place to introduce competition in local markets, according to AT&T.

The policy now will allow BellSouth and other Bell companies to raise wholesale rates as early as November, AT&T contends. Those increases are for use of BellSouth equipment and means AT&T "will likely be unable to economically serve customers with the competitive bundles currently available," the phone carrier said.

At the heart of the issue is the cost of access to residential customers using Bell's switching capacity and loops into homes, known as bundling. AT&T believes the court decision allowing BellSouth to raise rates for that usage prices AT&T out of the residential market.

However, Bill McCloskey, BellSouth spokesman in Washington, D.C., said the rates BellSouth charges AT&T are "significantly below what they charge their customers."

He said BellSouth charges AT&T and other companies $20 to $21 a month for access to the local network, but AT&T charges $54.95 a month for local and long-distance service. He said BellSouth is "at a loss" to figure out why AT&T has pulled out of the residential service market.

"They are free to drop out of the business market any time they want," McCloskey said. "If that's their decision, so be it. They have only offered (residential) service in Tennessee since Oct. 30 so there are still in Tennessee approximately 80 other competitors offering service to customers. If they drop out, I suspect the world will still turn."

Regan noted that BellSouth's comparison of its monthly charge to BellSouth's monthly charge is unfair because the AT&T figure cited includes all charges such as billing, marketing, advertising, customer service and other fees.

And Regan said there is no way there are 80 local phone companies operating in Tennessee. Although the Knoxville phone book lists 43 companies offering local phone service, Regan said many of those companies have state certificates but have not established service while others offer "prepaid" phone services.

Regan accused BellSouth of a "cynical disinformation campaign" on the figures it gives out on AT&T bills. "Any first-year business student knows that's a total misrepresentation," he said.

Regan said local phone companies other than BellSouth currently have only 13 percent of the market in Tennessee since Congress opened long-distance competition in 1996.

Tennessee Regulatory Authority Chairman Deborah Taylor Tate said the agency, which regulates telecommunications, would continue to monitor the situation with AT&T service.

The TRA has been promoting competition in local and long- distance service among phone carriers operating in Tennessee.

"If there are any consumer complaints, we will be conducting an investigation and follow up with AT&T about that," she said. "We hate to see any company leave the local market and reduce the number of choices for Tennessee consumers."

Scott Cleland, chief executive of investment research firm Precursor, called AT&T's move "a political announcement" driven by the company's anger at the Bush administration. He said the states affected are "election-sensitive states."

The Associated Press contributed to this report. Business writer Rebecca Ferrar may be reached at 865-342-6357.

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