AT&T to stop new service in seven states
By Jeffry Bartash, CBS.MarketWatch.com
Last Update:
10:15 AM ET June 23, 2004
WASHINGTON (CBS.MW) -- AT&T will stop offering local and long-distance service to new consumers in seven states, the company said Wednesday.
The move comes in the wake of a court ruling that threw out federal rules designed to boost competition in telecommunications services.
While it will continue to serve current customers and the business market, AT&T (T: news, chart, profile) said it will no longer seek to sign up consumers in Ohio, Missouri, Washington, Tennessee, Louisiana, Arkansas and New Hampshire.
Shares of AT&T eased 1 cent to $16.33 in recent dealings.
AT&T had threatened to withdraw from some markets after a federal court rejected existing regulations and the White House declined to challenge the ruling.
In carrying out its threat, AT&T is sending a message to regulators and lawmakers that their desire for more competition in the phone business could be undermined unless they intervene.
Under the old rules, AT&T and other carriers were allowed to lease access to Baby Bell carriers' local networks at sharp discounts. AT&T used those rules to win 4.5 million local phone customers in just the past few years.
Yet the Bells challenged the regulations, saying that competitors were paying below-market costs. The U.S. appeals court in the District of Columbia agreed, throwing out the rules in March.
Two weeks ago, the Bush administration decided to let the ruling stand.
Instead of just pulling out of some local phone markets, however, AT&T has stepped up the pressure with its decision to stop selling long-distance service in the seven states. The company has never taken such a drastic step before.
"Competitive alternatives are simply not available today for most Americans," CEO David Dorman warned, "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."
The Bells, however, point to the growing threat of such alternatives as cable telephony, wireless and new-fangled services such as Internet calling.
At the same time, they have tried to soothe policymakers with vows to invest more money in their networks and to deliver innovative new services if regulations are relaxed.
Just a day earlier, for example, SBC Communications (SBC: news, chart, profile) promised to spend up to $6 billion over five years to build a superfast Internet network capable of delivering digital television. See story.
With a presidential election upcoming, both sides are likely to intensify lobbying efforts in an effort to win over lawmakers, and more big announcements could follow.
Indeed, AT&T said it may withdraw from more markets if new regulations drawn up by the Federal Communications Commission prove to be onerous.
"Without these rules, AT&T has been forced to reassess its ability to serve residential consumers in the other 39 states in which it provides local and long-distance service," the company said.
AT&T started to provide local service in most of the states it's withdrawing from in 2003 or later, so they don't represent the company's largest markets. A company spokeswoman declined to say how many local customers AT&T serves in those states. |
