Article 3 of 352
AT&T tries to calm customer fears Breakup could
mean higher rates
The Washington Times
Consumers are unlikely to notice substantial changes as
long- distance company AT&T Corp. begins taking the steps
toward the self- imposed breakup it outlined on Wednesday.
But consumer advocates and analysts still are figuring out
the ramifications of the telecommunications giant's move to
restructure itself into four companies.
"I think this is a signal that consumers have a rough road
in front of them because the consumer business is going to
have a difficult time," said Jamie Troup, partner and
telecommunications lawyer at D.C. law firm Arter & Hadden
AT&T insists changes due to restructuring won't be
noticed by consumers and that the four new companies -
AT&T Consumer, AT&T Broadband, AT&T Business and
AT&T Wireless - will be better off because their revenue
won't be siphoned off by other units.
Industry watchers aren't so sure. With news of the
restructuring, analysts still are wondering:
* Whether a relatively weak AT&T long-distance company
* Whether the company will increase long-distance calling
* Whether consumers will have difficulty dealing with an
AT&T that has four separate parts.
AT&T wanted the cable television lines it bought when
it acquired Tele-Communications Inc. and MediaOne Group so it
could market cable, Internet and phone service together. That
would prevent it from having to pay access charges to the Baby
Bells once it began marketing local calling service.
Just the threat that AT&T would begin offering local
calling services through its cable infrastructure made
companies such as Verizon Communications, which already offers
the service, more responsive to consumers' needs, said
Nicholas Economides , professor of economics at New
"If the threat goes away, consumers lose," he said.
There are also questions about what happened to AT&T's
own long- distance calling service. Because AT&T will
isolate its long- distance business from its other businesses,
analysts wonder if the company will be forced to increase
The division lacks the revenue growth of other AT&T
Revenue from AT&T's long-distance services fell in the
third quarter by 10.8 percent, from $5.2 billion a year ago to
$4.7 billion this year.
Mr. Troup said AT&T's long-distance business could
raise rates to get rid of low-margin customers and increase
its profit margin once it is spun off.
The Federal Communication Commission may be unable to
prevent those rate increases, he said.
If AT&T does raise long-distance calling rates, it
would likely help AT&T competitors such as Sprint Corp.
and WorldCom gain some of AT&T's 60 million long-distance
That means consumers would have much less choice, Consumers
Union spokesman David Butler said.
Customers are also likely to have more practical concerns,
said Lawrence K. Vanston, president of Austin, Texas-based
Technology Futures Inc., a telecommunications research and
The new units of AT&T will have to prove to customers
that quality of service and seemingly simple issues such as
billing aren't affected, Mr. Vanston said. Each new AT&T
unit will operate independently and have separate customer
AT&T spokesman John Heath said consumers shouldn't
notice anything different.
"It is in no one's interest to do anything that diminishes
the AT&T brand," he said.
Nevertheless, analysts predict few AT&T shareholders
will want to maintain their investment in AT&T Consumer,
the long-distance company.
"It's a relatively weak part of the company," Mr.
It could be further weakened by corporate debt. AT&T
has $61 billion in debt, but it has not been determined how
much debt will be doled out to each new unit.
"I think shareholders of AT&T Wireless will do the
best," Mr. Troup said.
What's more worrisome is not that the company's
shareholders could abandon AT&T Consumer, but that the
division's most talented workers could bolt to the other, more
profitable, units, Mr. Troup said.