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AT&T Stops Marketing Long-Distance Service: ; Telecommunications Company Fights for Its; Survival Amid Competition

Posted on: Tuesday, 27 July 2004, 06:00 CDT

WASHINGTON - AT&T Corp., once a cornerstone of the U.S. telecommunications industry and still one of the world's most recognizable brands, has announced 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 will not say how many long-distance customers it has in West Virginia. It is thought to be the dominant long-distance carrier in the state. The company faces intense competition here. For example, Verizon - the state's leading provider of local service - began offering long-distance service in West Virginia in May 2003.

AT&T chief executive David Dorman said Thursday 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.

Even its business customer base is dwindling, although not as rapidly as its consumer operations.

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.

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