NEW YORK-Worries are misplaced that the proposed split of AT&T Corp. into four parts next year means a lost opportunity to tap the lucrative potential of multimedia bundling of services, the company’s chairman and chief executive officer said.
“A lot of analysts are concerned about the break-up because they said we are abandoning our bundling strategy,” C. Michael Armstrong said last week at the “2000 Bear Stearns Global Communications Conference,” here.
“You do not get much market elasticity or customer retention bundling across facilities as you do in bundling within a facility. Very few people buy our wireless services because they can get our wireline long distant, although we discount across facilities.”
AT&T has had a lot of success bundling wireless local, long-distance and roaming calls into national, regional and family packages, Armstrong said. Similarly, its business package of local, long-distance and data wireline communications gets good customer reception. The carrier seeks to replicate those successes with cable by bundling voice, television and data services.
“All of our companies will be AT&T companies, with the same brand and subject to terms, conditions, licensing fees and obligations. For applications like messaging, they will be obligated to do so with each other. There will be cross marketing of services,” he said.
“Wireless need a long-distance network, as does consumer (wireline). They will generate high traffic levels that will reduce our unit costs.”
Part of the four-way split plan calls for the full-fledged spinoff of AT&T’s wireless business, for which the carrier now trades a special class of tracking stock.
“Wireless has the ability to thrive on its own. That is why this is the right thing to do,” Armstrong said.
The company’s cable television operations are promising, but not quite ready for prime time. Therefore, a tracking stock for this business is the optimal first step, he said.
In assessing where the company stand today, Armstrong said AT&T misjudged the accelerating rate of decline in landline long-distance prices, brought about by stiff competition. It also failed to gauge adequately the rapidity of talk-time migration to alternative networks, including mobile and fixed wireless, Internet Protocols and cable, he said.
Armstrong also criticized state and federal telecommunications regulators for what he said is their failure to remove the handcuffs that place it at unfair disadvantage to incumbents as it makes a foray into the local wireline business.
