AT&T offers local residential phone service to SBC customers in

Journal Record, The (Oklahoma City), Dec 12, 2003 by Janice Francis-Smith

AT&T is now offering local residential phone service to SBC customers in Oklahoma, banking on the hope that the Oklahoma Corporation Commission will allow them to continue with their plan.

On Thursday, AT&T announced that the company has begun offering residential service in Oklahoma, Missouri and Kansas, in SBC's service footprint. AT&T is entering Verizon's local residential market in southern California as well.

AT&T also announced Thursday that it is extending it DSL service to residential customers in Illinois, Ohio and Wisconsin, and will roll out a voice over Internet protocol (VoIP) offer across the U.S. during 2004.

I know first-hand from experience that when competitors enter a state in the communications market, the local telephone monopolist responds by dropping prices and increasing service, said Kevin Crull, senior vice president of AT&T Consumer.

Crull noted that Thursday's announcement came on the 20th anniversary of the breakup of the Bell system. One thing that is evident and demonstrated is that prices will and do come down, and innovation will flourish when competition is available, he said. Analysts estimate that competition in the telecommunications industry could save consumers billions, said Crull.

AT&T is able to lease phone lines from incumbent local carriers in much the same way SBC and Verizon are able to offer long-distance service by leasing the infrastructure built by long-distance carriers, said Crull.

In making today's announcement, we're banking on decisions that the state regulatory level that will keep this competition available, said Crull. Regulators so far have resisted enormous pressure from incumbent monopolies to scuttle federal Telecom Act provisions that are just now allowing us to bring more choice and new services to residential customers.

At this stage of the game, the FCC made decisions earlier this year that preserved competition, and they also decided that decisions on an ongoing basis have to be made at the local level, actually in the state regulatory bodies, said Crull.

Each state commission with the possible exception of Alaska and Hawaii has opened a triennial review proceeding, said Rose Johnson, AT&T's vice president of law and government affairs. The purpose of those proceedings is to determine whether competitors will continue to get access to the various aspects of the local network in order to be able to provide competitive service. Those proceedings are likely to conclude mid-2004, and we're optimistic that we're going to continue to hang on to the elements that we need in order to provide local service.

The primary element - from a residential perspective and small business perspective - that's at issue is unbundled network switching, Johnson continued. It's essentially the computers that are used to switch local traffic from one customer to another to complete local phone calls.

Other issues are also being considered that affect large business customers, said Johnson.

AT&T is also working with the Oklahoma Corporation Commission in an attempt to lower the leasing rates for SBC lines in some in rural areas, said Kerry Hibbs of AT&T Media Relations. The leasing rates are so high out there that now we couldn't offer service at a price customers could afford, said Hibbs. They're higher than in some other states.

AT&T has expanded its local service offering. As of Sept. 30, local service through AT&T was available in just 15 markets. With Thursday's announcement, AT&T now offers local service in 24 states to 58 percent of U.S. households (61 million households). AT&T provides local service to more than 3.8 million residential customers. Local service trials are being conducted in another 11 states.

Though AT&T is now able to offer DSL service in only 11 states, that will soon change, said Crull. The company is working with Covad Communications Group, a national broadband service provider, to offer DSL service bundled with other AT&T local and long-distance services.

Covad is implementing the technology needed for AT&T to split the loop it leases from SBC to offer local, long-distance and DSL service on the same line, a process called line splitting. Throughout 2004, AT&T will gradually add DSL service to its offering for areas where the company provides local phone service.

Other than implementing line-splitting technology, the new offering will not require much investment, said Crull. The company is already staffed adequately to handle the additional customers, he said.

VoIP, which allows for the transfer of both voice and data over the Internet, will follow. According to Crull, AT&T is responding to consumer demand for one-stop shopping.

In focus groups and also by voting with their dollars in states that we've already entered, consumers have told us overwhelmingly that they enjoy the convenience of one-stop shopping - a single bill and a single company to call& whether they're calling around the corner or around the world, said Crull.

AT&T Consumer Services division's revenue reached $2.4 billion for the third quarter of 2003, the company reported. Revenues were down 15.8 percent compared to the prior year's third quarter, as a result of the continued impact of competition, wireless and Internet substitution, and customer migration to lower priced products and calling plans, reads the report. These declines were partially offset by growth in bundled revenue and pricing actions. Bundled revenue grew by 77 percent compared to the prior year third quarter, and now represents over 22 percent of AT&T Consumer Services' total revenue.