mercurycenter.com
AT&T readies
promotion for local service
BY JENNIFER FILES
Mercury News
AT&T Corp. plans to announce today that it will temporarily give
away local phone service in 10 U.S. markets including some parts of
the Bay Area, marking its biggest effort yet to capture a piece of the
$60 billion local telephone business.
Customers who sign up for AT&T local service between Sept. 1 and
Nov. 15 will receive free local calling through January. With some
plans, subscribers can also get free long-distance. AT&T, of Basking
Ridge, N.J., will waive most taxes and fees during the period for
customers gained during the promotion.
AT&T's latest promotion covers two dozen Bay Area communities,
where AT&T now provides phone service over its cable lines. It
doesn't include San Jose, San Francisco or Oakland, which don't
have the service.
The marketing initiative reflects the intensifying competition among the
nation's largest phone service providers. As companies offer new
services, they're slashing prices in a race to sign up subscribers before
competitors lure them away.
That principle -- with its corollary -- that timely installation becomes
more difficult as customers swarm to great deals -- is driving the war
between phone and cable companies over high-speed Internet
access, for instance.
AT&T's latest offer proves it's also true for the bread-and-butter
phone business.
In the Bay Area, AT&T hopes to cut more deeply into Pacific Bell's
near-monopoly on residential local phone service, a sector where no
Pac Bell competitor has yet found a way to make a profit. Pac Bell
has lost only about 2 percent of its residential phone customers in
California in the four years since local phone deregulaton, though
competitors have captured a larger share of the more profitable
business market.
Building new phone lines to customers' homes is prohibitively
expensive, and while regulators have set up a system to let rivals
piggy-back on Pac Bell's network, companies say it often doesn't
make financial sense because of fees they must pay to Pac Bell.
MCI, for one, tried to sell local phone service in California but
stopped signing up new customers because it said it was losing too
much money.
So far, AT&T is Pac Bell's only sizable residential rival in the Bay
Area, though alternative cable companies including Seren Innovations
Inc. offer phone service in some cities.
``Cable is the most practical way of coming in and competing for
residential customers,'' said Kelly Boyd, a senior analyst in the
California Public Utilities Commission's Office of Ratepayer
Advocates.
AT&T and other long-distance companies are beginning to lose
market share, since local phone companies are slowly gaining
regulators' permission to enter the long-distance business. For
instance, by offering low rates and a well-known brand, Pacific Bell's
sister company Southwestern Bell has signed up 500,000 Texas
long-distance customers in less than three months after gaining the
government's permission to sell the service.
In the Bay Area, AT&T's local phone service costs $10 a month.
Customers can also buy enhanced packages, including a $30.95 plan
that offers unlimited local calling and 3 hours a month of local-toll and
long-distance calling.
The company has previously given away installation and as much as
one month's free local service, but not nearly on the scale of the
current offer, which could give customers as much as 4 1/2 free
months of service.
Overall, the company hopes to increase the number of local phone
customers nationwide it serves via cable lines from 224,000 in June to
more than 500,000 by the end of 2000.
The promotion extends to other metropolitan areas where AT&T sells
telephone-over-cable service, including Chicago, Dallas , Denver,
Hartford, Pittsburgh, Portland, Salt Lake City, Seattle and St. Louis.
AT&T has added installation workers to meet anticipated demand,
said spokesman Andrew Johnson.
Currently, AT&T tells Bay Area customers it can hook up cable
telephone service in seven to 10 days -- but only three days if they're
ordering new service rather than transferring from Pac Bell. Increased
demand from the promotion could lengthen the process to two weeks
or more, said company spokesman Andrew Johnson.
``We know it's an aggressive offer, and we think it'll be a big splash in
the market. We're going to do our darndest to get everybody through
here as quick as we can,'' Johnson said.
In a separate development, Standard & Poor's warned Tuesday that
it may cut AT&T's credit and debt ratings, reflecting ``concerns
regarding AT&T's cable television strategy, long-term prospects for
AT&T's core long-distance business, a more aggressive wireless
expansion plan and the company's overall strategic direction.''
Among other things, S&P said AT&T's cable television strategy has
``proven more time consuming and expensive'' than expected. In a
statement, AT&T said, ``We have every reason for confidence in our
long-term prospects.''
AT&T shares rose $1.50 to $31.75 Tuesday. |
