FAIRHAVEN, Mass. — Michael Brightman is reminded daily that workers in New Delhi do the same job he does.

His Indian counterparts routinely direct AT&T customers to him for long-distance billing problems that the New Delhi workers can’t answer.

Brightman and 139 others will be laid off this month from AT&T’s call center on Massachusetts’ southeastern coast. AT&T said the work force reduction resulted from a July decision to phase out residential long-distance service.

«This work did not move. It went away,» said spokeswoman Tracey Belko. «We are not moving any of these jobs overseas.»

Brightman and co-workers picketing here last month don’t buy it. To them, jobs are being lost in the United States, while increasing overseas. Union officials said AT&T gave information on its offshore activity in January showing one out of four AT&T customer calls were handled by independent U.S. contractors employing 1,400 workers overseas.

In five years, AT&T has cut its national call-center employment by half, to 3,270, the union said. «Is it coincidental, or is it a shift?» Brightman asked about his layoff.

Data on numbers of U.S. jobs moving overseas in recent years are scattered and unreliable. As the AT&T example shows, jobs may be cut in the United States, and employment may increase overseas, but companies are reluctant to draw connections between the two, while unions are only too willing to do so. Groups such as the U. S. Chamber of Commerce peg the number at perhaps 200,000 jobs a year.

But a new report commissioned by a bipartisan congressional commission said 406,000 jobs will migrate overseas this year, double the conventional wisdom. This trend is expected to continue for several years as a greater variety of jobs are offshored, including to Latin America and the Caribbean.

Job movement overseas «is absolutely accelerating, and it’s changing in its nature,» said Kate Bronfenbrenner, a professor in Cornell University’s School of Industrial and Labor Relations, who prepared the report for the U.S.-China Economic and Security Review Commission. «Whereas in 2001 it was almost all in manufacturing, now we see an increase in information technology, communications, financial services, and white-collar work, from research and design to back office.» The report will be presented at public hearings in Seattle in January.

Some economists cite growing numbers of U.S. jobs transplanted overseas as the main reason for slow employment growth during the current economy recovery. Another 400,000 jobs added to the total 1.8 million jobs created in the United States in 2004 would be «a big deal,» said Stephen Roach, Morgan Stanley’s chief economist. «Offshore labor pools have become increasingly attractive,» he said, and «more and more of the new hiring incrementally is occurring offshore.»

But Shang-Jin Wei of the International Monetary Fund argued when a company employs people overseas, lower costs and high profits enable it to hire elsewhere in the organization.

«We create one job for every job lost,» he said.

Greater ease in Internet and phone transmission, spiraling healthcare costs to cover U.S. employees, and more experience employing people in foreign lands are fueling overseas hiring for jobs that once would have remained here. The most compelling incentive remains the disparity between wages earned in the United States and in less-developed nations.

In India, a computer programmer with a college degree and two or three years’ experience earns about $20,000 a year, said firms that employ workers there. Indian workers who process financial transactions make $12,000 to $15,000. Call-center workers there earn about $1,200 a year, compared with Brightman’s $40,000 salary from AT&T.

The joint report, by Cornell and the University of Massachusetts at Amherst, is the first to look at offshoring in all industries and to use the same method to compare two years, 2001 and 2004. Private consulting firms have examined specific industries. An often-cited study by Forrester Research last spring estimated 225,000 white-collar U.S. service jobs would locate overseas in 2004, bringing to 540,000 the total of those jobs now overseas. A 2004 study by Deloitte Research said 850,000 financial jobs could be headed overseas by 2010. The new report found that 204,000 jobs were moved overseas in 2001, doubling to 406,000 this year.

There is no reliable government data. The U. S. Bureau of Labor Statistics surveys employers on job relocations, but those data are widely viewed as too low. In the first quarter of 2004, the bureau reported 4,633 jobs were moved offshore. The bureau said it could not estimate second-quarter activity, due to incomplete information from employers.

«Companies are very reluctant to say what they’re doing,» said Ronil Hira, professor of public policy at Rochester Institute of Technology. «They don’t want to take the public-relations hit.»

To estimate blue- and white-collar job movements, Bronfenbrenner and UMass professor Stephanie Luce tallied reports of job transfers in the United States and foreign, English-language media in the first quarter of 2004. They then applied a multiplier to increase the job estimates and adjust for the underreporting.

In Mexico, for example, they estimated fully two-thirds of production shifts in 2004 were reported by the media, because all of the jobs were in manufacturing and were publicized by unions or confirmed by business filings to the U. S. Securities and Exchange Commission, government applications for worker assistance under the federal Trade Adjustment Act, and state plant-closing notifications. In contrast, only one-third of jobs moving to Asia are reported, they said, because the region attracts smaller employers less likely to be in manufacturing and unlikely to report movements.

The U. S. Chamber of Commerce’s chief economist, Martin Regalia, criticized the 406,000 job-loss estimate in 2004 as at the «high end of any estimates out there.» The multiplier was arbitrary, he said, because it was not based on hard data. «I don’t think starting with news reports is the way to do scientific research.»

Bronfenbrenner defended her data as «extremely conservative» and said firms go to great lengths to suppress or downplay in the U.S. press any jobs shifts, though they may publicize them in the country where they are relocating.

For example, the report cites the U.S. consulting firm of Accenture Ltd., which last year told the Press Trust of India it would add 5,700 employees there by the end of 2004. Early this year, it laid off 90 employees at its Delaware software development office. While Accenture told The News Journal in Wilmington, Del., that India «is one of the areas we’re looking at,» it was never made clear whether the jobs were ultimately moved, the report said. The researchers ultimately could not produce a firm figure on job movement overseas in this case; the multiplier, she said, is intended to account for situations such as Accenture’s.

To make a connection between a layoff in the United States and job expansion in India is «simplistic,» said Fred Hawrysh, a spokesman for Accenture. Hawrysh said Accenture’s U.S. employment overall rose last year.

Dallas-based Texas Instruments has operated in Attleboro, Mass., since the 1920s. It is now laying off 1,180 in the plant, which makes pressure and temperature sensors. The jobs are being transferred to Texas Instruments plants in South Korea, Mexico, Malaysia, and China, said spokeswoman Linda Megathlin. The layoffs are part of a conversion of Attleboro from a manufacturing to a marketing and research facility. To staff the office, the company plans to hire about 100 engineers, technicians, and managers, she said.

Attleboro Mayor Kevin Dumas is philosophical about layoffs in his city. While Texas Instruments is no longer Attleboro’s biggest employer, «We’re also seeing an influx of new jobs coming open in the city,» he said.

All Jay Carvalho knows is he could make a good living, without a college degree, working for AT&T. Facing layoff, the 26-year-old has «no idea» what is next but said it won’t be easy to improve on this job, which pays about $40,000 a year, with benefits. «I’ll be happy if I get $10 an hour,» he said.

Dear AT&T Broadband,
I’m a little confused. I hope I have the name right this month. «Dear striped blue deathstar» seems too informal (and may infringe on a high school classmate’s intellectual property—sorry, George). «AT&T» I understand; «Broadband» I’m not so sure about. But never mind. I’m one of your customers and, I suspect, a hot prospect to get where you and other convergence operators need to be—and I just don’t see it.

The Goal?
I’m no businessman, but I read the business section. Don’t we all? As I understand it, you and your primary competitors are investing tens of billions in infrastructure and content with the expectation that you’ll get it back (and more) in monthly fees. I’ve seen a target number floating around $150 to $170 per month for a middle-class household, for a full range of «broadband» services and content.

"Maybe your goals are more modest. Would $120 per month be enough? I know you’re not the only ones in the game; the frequency with which they tear up El Camino Real to lay new fiber demonstrates that.

The Quandary
Here’s my question: How do we get there from here? To put it another way, what combination of services and content will convince a moderately skeptical, college-educated, literate householder to pay you $150 to $170 per month?

I should be an easy sell. Consider where you touch me already:
• You know I use your cable TV. There’s no decent rooftop reception around here and your competition is typically nonexistent. That’s $32 a month. Your customer service is no worse than TCI was—but then, how could it be?
• You’re not as big a player in the Internet business, but you’re my ISP, and in that area, I think you’re great. Consistent 50K connections, fast connections, good Web hosting with plenty of space: I see why you come in tops on PC magazine studies. That’s another $19.50 a month.
• I still use your long distance, mostly because we don’t do enough long distance calling to justify any fancy plan—and I even carry one of your credit card/calling card combinations (with the $1/month plan to reduce calling-card costs).

That’s $52 a month, plus maybe another $3 to $6 in long distance revenues. I notice that there are no price breaks for using multiple AT&T services, which doesn’t entice me to consolidate more stuff with you.

The Possibilities
Sure, I know you want my local phone service and keep throwing that «digital» line at me. But I like having some competition, thank you—and you’d only get another $12 or so if I did switch.

You’d love to have me add $10 for digital cable and $20 for @Home Net access. Given the lack of bundling price breaks, that would bring me up to $82, or even $94 with local phone service.

But that highlights one of our problems. Offer me all the cable I can eat, TV and high-speed Net alike, for (say) $55 a month, and we might have a deal. Otherwise—well, I know the reputation of TCI Digital for overcompressing signals; if I had enough Net use to justify @Home, I wouldn’t have time for digital cable (and vice versa); it just doesn’t add up.

Even if it did, $94 is a long way from $150. I don’t comprehend what you’re going to offer that makes $1,800 a year sound like a great deal. Some kind of content? You’re doing that already, with the expanded cable service that proves Bruce Springsteen’s point. Once I knock the shopping, foreign language, sports, and ultraconservative news stations off my TV’s channel-surfing list, I come up with almost exactly 57 stations—and sure enough, most of the time nothing much is on.

Please help. I have repeatedly, five months in a row, asked AT&T Long Distance to stop sending me a bill.

I do not want or use the services.

Representatives insist that my local carrier has to send the company a stop order of some kind, but when I call SBC representatives say there is no record of us having AT&T as our long distance carrier so they can’t do anything.

We go back and forth with this every month, and I’m disgusted with all of them.

I’m wondering how many people they are doing this to who might not even know that they don’t really owe the money but don’t understand the process by which to extricate themselves from this incompetent grip.

How can it be that I can call AT&T repeatedly and tell the representatives I don’t want and am not using the company’s service, yet they still send a bill. Please help.

Susan Lavin and James Maile
Cupertino

A I know just what you have been going through. I feel your frustration. Dealing with AT&T Long Distance has been a long, fruitless battle for me, too, although I have not seen a bill for a while from this service I do not use.

But there is a happy ending to your story. AT&T representatives admitted they made an error in your case and have made the necessary adjustments.

Consumer alert

The California Department of Consumer Affairs has issued a consumer alert warning of a new law that goes into effect today that ends the practice of ``check floating,’’ or writing a check and going to the bank later to make a deposit to cover it.

Also, if you have been getting your checks back in the mail, that will be replaced with copies instead of the originals.

These changes are part of the Check Clearing for the 21st Century Act (Check 21), the new federal law.

The new law is intended to improve the efficiency of the nation’s check-payment system, as well as its security, using electronic imaging technology, the department said in a news release.

Your money now will be transferred out of your account shortly after a sale is completed, whether the check is processed at a checkout register or mailed to a payment center.

Under Check 21, consumers have a right to a faster refund if they suffer a loss related to a substitute check. The law says banks have 10 business days to make a decision on a customer’s claim, and consumers who have incorrect charges against their checking accounts can then receive up to $2,500 back, with any remaining amount due within 45 days of the claim.

If you have questions about how this will work for you, call your bank.

You can also find more information at www.federalreserve.gov. Click on ``Check 21.’’

Here’s how to contact Action Line:

• Mail: San Jose Mercury News, 750 Ridder Park Drive, San Jose, Calif. 95190

• E-mail:

actionline@mercurynews.com

• On the Web: www.

mercurynews.com/mld/mercurynews/

news/columnists/action_line/

• Phone: 1-(888) 688–6400. (This toll-free number contains frequently asked questions.)

• Fax: (408) 288–8060.

• Live Online: noon-1 p.m. Mondays at www.mercurynews.com.

Please include name, address and phone number. Action Line regrets that because of the number of requests, we cannot respond to all questions.

Last month I received a letter from a person claiming that he was charged a small fee on his credit card by AT&T when he has not used AT&T for several years.

After receiving this letter, I noticed that there was a charge from AT&T on my own credit card statement and I do not have AT&T as my provider. I have written about this matter and received the following e-mails:

«Your column concerning AT&T referred to credit card charges appearing in the amount of $30 each. I was embroiled with erroneous charges with them for monthly automatic billing of $10.95 for [an]Internet connection when I was hit with the first $30. In July, I was once again hit with $30 so I called the 800 number listed below the charge. Mind you, I do not have a long distance carrier inasmuch as I make those calls with a calling card. The 800 number was answered in India. She heard my story and could not help me. She gave me another number. No help there either. After the third call to AT&T, I got a questionnaire on my e-mail that if I had any questions about my account, I could use that vehicle to register my complaint. I finally said ENUF and dropped it. Well to my surprise, my latest bill includes another charge for $30. I will take your suggestion to call the Florida Attorney General.»

«I have had this done to me three times by AT&T. The amounts vary from $10.95 to $4.95. They always credit my account eventually, but in the meantime they have use of my money interest free and if I happen to overlook the charge they have my money period! I now check my credit card balance frequently.»

«About six months ago or so [AT&T] sent me a bill for approx. $23 for service charges for being my long distance carrier. I immediately called them and advised them that I had not used their service in years since I have a cell phone. They finally gave me credit for those charges and supposedly marked my file accordingly. About a month or so ago, I received another bill from them for the same amount, but covering a different time period. Again, I immediately called them and was advised that my record had never stated that I was not using them, and the gentleman marked it accordingly and gave me credit for the billed amount. Please advise.»

The Florida Attorney General’s office in April warned consumers that AT&T long-distance phone charges were being improperly added to some local phone bills.

If you do not use AT&T but have charges from that carrier, they should immediately report it to the attorney general’s fraud hotline at 866–966–7226 and to AT&T at 800–222–0300.

Mark Bogen is a lawyer based in Boca Raton. For questions, you can reach him at BOGEN2000@aol.com or write him c/o the South Florida Sun-Sentinel, 333 SW 12th Ave., Deerfield Beach, FL 33442.

ATLANTA, /PRNewswire/ Randstad North America, a provider of
professional employment services, has signed an estimated $25 million, three-
year contract with AT&T for an integrated networking solution supporting
approximately 500 locations across the United States and Canada.

The contract renews and expands a long-standing business relationship
between AT&T and Randstad. It also includes local, long-distance,
teleconference services and Voice over Internet Protocol (VoIP) communications
supported by AT&T’s fully managed, dedicated high-speed Internet access
solution.

«We put more than 50,000 people to work everyday. Fulfilling our
commitment to our customers and talent in a time-sensitive environment is a
huge task that requires expertise and solid business relationships,» said Larry Clark, chief information officer of Randstad North America. «AT&T
provides us with reliable and flexible tools that are an important element of
our technology and associated operations workflow system, enabling us to focus
on the quality of the transaction for our customers.»

Randstad, a wholly owned subsidiary of Randstad Holding nv, the fourth
largest staffing organization in the world, maintains one of the most
sophisticated and integrated front- and back- office systems in the staffing
industry. The system allows personnel «self-service» access and makes real-
time data readily available. AT&T’s integrated networking solution provides
secure, instantaneous communications between Randstad’s North American branch
offices, allowing the company to track its talent, process payroll and manage
the deployment of thousands of personnel each day.

AT&T provides Randstad with a high-reliability solution that reduces
network downtime and can save thousands of dollars in lost manpower and
productivity. Through the development of standardized processes, Randstad has
streamlined transactions, reduced errors and increased employee productivity.
Randstad uses AT&T’s VoIP service for outbound long distance from its
corporate headquarters, significantly reducing the cost of national and
international long distance. By running voice traffic on AT&T Managed Internet
Service, Randstad is able to converge voice applications and realize fixed
costs for enterprise-wide calling.

In addition, Randstad gains around-the-clock access to up-to-the-minute
information about the performance of its network through the AT&T
BusinessDirect(R) Web portal. Randstad can perform a variety of functions that
help control the performance and cost of its network through the secure
BusinessDirect Web site, including placing and checking status on orders,
billing analysis, and issuing and tracking maintenance requests.

About AT&T

For more than 125 years, AT&T (NYSE «T») has been known for unparalleled
quality and reliability in communications. Backed by the research and
development capabilities of AT&T Labs, the company is a global leader in
local, long distance, Internet and transaction-based voice and data services.

About Randstad North America
Headquartered in Atlanta, Ga., Randstad North America is a wholly owned
subsidiary of Randstad Holding nv, a $5.9 billion provider of professional
employment services and the fourth largest staffing organization in the world,
with 2,269 offices in 17 countries across Europe and North America. In 2003,
Randstad’s 12,280 worldwide employment experts put 206,000 people to work
around the world each day. During the same period, Randstad North America’s
2,230 staffing professionals put 193,273 individuals to work in the U.S. and
Canada and provided employment services, outsourcing and counsel to 12,000
U.S. and Canadian employers through 463 branches and client-dedicated
locations across the U.S. and Canada. In keeping with its focus on attracting
and retaining the best talent, Randstad offers short- and long-term
assignments, contract engagements and direct hire opportunities in five core
practice areas — Office Talent, Industrial Talent, Creative Talent, Technical
Services and Professional Resources. Randstad also offers eligible external
talent skills assessments, career counseling, training, health and dental
insurance coverage, paid vacation and generous employer contributions to a
401(k) plan. More information is available at the company’s Web site,
[ >>> ] Investment information is available at
[ >>> ]

By Ben McClure

AT&T’s (NYSE: T) massive $7.1 billion loss in the third quarter shouldn’t come as a shock. The struggling long-distance phone company warned of the trouble weeks ago with its decision to write down $12.5 billion in assets and lay off 12,500 employees.

What’s more surprising is that AT&T’s results were less bleak than expected. While total sales fell 12% to $7.6 billion, Wall Street was expecting sales of $7.3 billion. Revenues from AT&T’s business services unit held steady from the second quarter for the first time in two years, despite predictions that business revenues would continue to fall.

AT&T’s third-quarter report is fairly upbeat. The market seems to like AT&T’s $3.5 billion cash balance and free cash flow generation that -- at least for now -- is propping up AT&T’s $0.95 per-share annual dividend.

But Fools take note: Don’t get too excited about a couple of less-bleak-than-expected numbers. AT&T still has more than its fair share of risk. There are good reasons to steer clear of the stock -- especially at its current price of $15.96.

AT&T’s departure from its $8 billion consumer long-distance business will likely translate into even faster revenue declines. Falling revenues translate into shrinking free cash.

AT&T is gambling on the business unit for future growth. Investors should be concerned about growth in the corporate segment in the face of brutal price competition from MCI (Nasdaq: MCIP) and Sprint (NYSE: FON), and even cable operators such as Comcast (Nasdaq: CMCSA) and Baby Bells Verizon (NYSE: VZ), SBC Communications (NYSE: SBC), and BellSouth (NYSE: BLS) have a stake in the market. The long-haul business environment is going to be tough, to say the least.

Sure, AT&T has aggressively cut its debt from a peak of $60 billion through asset sales and debt buybacks, but net debt still comes in at a hefty $7 billion. AT&T has to take care of other obligations, including pensions and retirees’ health. Plus, this month’s big asset writedown will drive up AT&T’s deferred tax bills in the coming years.

Valuing AT&T is tricky. AT&T is trading at a free cash multiple of 4 and a price-to-earnings ratio of 10, well below its peers. But, with AT&T’s rapidly shrinking business, multiples of free cash flow and even earnings could be a «value trap» for investors.

Given the double-digit revenue declines, AT&T’s 6.2% dividend yield doesn’t look too enticing. Consider that long-distance competitor (and Motley Fool Inside Value recommendation) MCI yields 10%; SBC Communications, with its sturdy business model, yields a healthy 4.7%. An 8% yield is probably more apt for AT&T given its risky outlook, which prices the company at about $12 per share.

Oct. 21 (Bloomberg) -- AT&T Corp., the largest U.S. long- distance carrier, had a third-quarter loss of $7.12 billion on costs to write down the value of its long-distance telephone network and cut jobs.

The net loss totaled $8.95 a share, after net income of $418 million, or 53 cents, a year earlier. Sales fell 12 percent to $7.64 billion, the company said in a statement.

The writedown will increase future profit by decreasing depreciation expenses. Chief Executive Officer David Dorman recorded costs of $11.4 billion because the company’s July decision to withdraw from the consumer market makes its network less valuable. AT&T also had costs of $1.1 billion related to Dorman’s plan to cut 12,300 jobs this year, or 20 percent of the workforce, as sales fell for a 19th-consecutive period.

``The writedown will make future earnings look better, but it doesn’t change the cash flowing in,’’ said Mark Hesse- Withbroe, an analyst at U. S. Bancorp Asset Management, whose Minneapolis-based parent, U. S. Bancorp, owned 440,000 AT&T shares as of June 30.

Shares of AT&T rose 10 cents to $15.58 in New York Stock Exchange composite trading yesterday. They had fallen 23 percent this year.

The writedown lowers depreciation expenses by $1 billion in the second half, the company said this month. That reduction and savings from job cuts caused analysts to raise full-year profit estimates, excluding some costs, to $1.36 a share from 52 cents, according to Thomson Financial.

Analyst Estimates

Excluding costs for the writedown, job cuts and other expenses, profit would have been 75 cents a share. Analysts expected 51 cents, the average of 16 estimates in a survey by Thomson Financial. Sales estimates averaged $7.32 billion.

Revenue in the company’s consumer unit, which includes long- distance, local and Internet calling, dropped 15 percent to $1.98 billion. Sales in the unit that sells voice and Internet services to corporations fell 10 percent to $5.65 billion.

The company said it expects full-year operating income, plus depreciation and amortization and minus capital expenditures, of $4.8 billion, compared with an earlier forecast of $4.5 billion.

AT&T’s sales last rose in the fourth quarter of 1999. The company, under then-Chief Executive C. Michael Armstrong, began selling assets and abandoning an effort to become a one-stop provider of television, wireless and calling services.

Sales to consumers have dropped as cell-phone use spread and customers switched to regional telephone companies such as SBC Communications Inc., which began offering long distance in 2001.

AT&T had 26 million consumer customers at the end of the third quarter, down from 34.2 million at the end of last year.

Court Setback

AT&T tried to win back customers by selling packages of local and long-distance service. Dorman scrapped that plan in July after an appeals court discarded rules that gave AT&T access to competitors’ local networks at below-market rates.

Dorman said he will instead focus on selling the company’s Internet-based calling service, CallVantage, to consumers and voice and data services to corporations such as International Business Machines Corp.

``Global enterprise customers that we do business with depend on us for data communications, voice communications and the like,’’ Dorman said in an Oct. 8 interview. ``That’s not a market that is going to go away.’’

Sales to businesses have been hurt by price competition with MCI Inc., the No. 2 long-distance provider, and regional phone companies such as Verizon Communications Inc. Dorman this week eliminated 1,600 union jobs in that unit as part of his plan to bring AT&T’s workforce to about 49,300 by yearend.

This year’s job cuts will save $1.2 billion a year, and lower consumer-unit marketing costs will save $700 million, AT&T said. The company said this month it plans to trim at least an additional 3,800 jobs in the first part of 2005.

(AT&T is holding a conference call at 8:15 a.m. New York Time. To listen, see {LIVE }.)

To contact the reporter on this story:
Chris Johnson in Princeton at cjohnson24@bloomberg.net.

To contact the editor responsible for this story:
Emma Moody at emoody@bloomberg.net.

Oct. 20 (Bloomberg) -- AT&T Corp. Chief Executive Officer David Dorman is accelerating his plan to shed 20 percent of the telephone company’s workforce in an effort to reduce costs and stem a slide in profit.

About 1,600 union jobs will be cut this week, the biggest round of reductions by AT&T this year, said Ralph Maly, who represents the employees at the Communications Workers of America union. AT&T, the largest U.S. long-distance telephone company, slashed almost 90 percent of the 12,300 jobs earmarked for elimination by the end of the year.

Dorman, who became CEO in November 2002, is speeding efforts to lower costs as the company prepares to report its first net loss in nine quarters and a sales decline of 15 percent, according to analysts surveyed by Thomson Financial. Bedminster, New Jersey-based AT&T tomorrow may report third-quarter revenue of $7.32 billion, the analysts estimate. AT&T said it will write down $11.4 billion of assets, wiping out any income.

``They probably can’t cut fast enough to keep pace with the revenue decline,’’ said Mark Hesse-Withbroe, an analyst at U. S. Bancorp Asset Management, whose Minneapolis-based parent, U. S. Bancorp, owned 440,000 AT&T shares as of June 30.

Shares of AT&T have fallen 49 percent since Dorman, now 50, took over for former chief executive C. Michael Armstrong. In New York Stock Exchange composite trading yesterday, the stock fell 21 cents to $15.48.

Falling Asset Value

Dorman’s decision in July to withdraw from the consumer market prompted the job reductions and will cause AT&T to mark down the value of its network assets, recording the expense in the third quarter. The workforce reductions will also reduce third-quarter earnings by $1.1 billion.

Excluding those expenses, AT&T will probably report profit fell to 51 cents a share from 58 cents a year earlier, analysts estimate.

The 1,600 workers were notified yesterday that their jobs will be gone in 60 days, Maly said. They include about 200 people at a call center in Phoenix, Maly said. AT&T has also closed offices in West Virginia, Hawaii and Puerto Rico.

AT&T spokesman Andy Backover wouldn’t comment on the staff reductions. Dorman wouldn’t comment for this story.

Sales in AT&T’s consumer division, which generates 26 percent of revenue, probably fell 21 percent to $1.9 billion, Lehman Brothers analyst Blake Bath wrote in a note this month.

Shrinking Workforce

Some customers departed for regional carriers such as SBC Communications Inc. as AT&T exited the residential market. Mobile- phone operators such as Verizon Wireless also lured users.

``There’s almost no such thing as long-distance any more,’’ said John Krause, an Appleton, Wisconsin-based analyst at Thrivent Financial for Lutherans, which holds AT&T shares among $60 billion in assets. ``It’s hard to sell somebody on a $5 a month plan, plus 10 cents a minute. Nobody does that.’’

Dorman, who earned $3.91 million in salary and bonus last year, is shrinking the workforce to 49,000 from 300,000 a decade ago. After spinning off local-phone operations in a court-ordered breakup in 1984, AT&T four years ago abandoned an effort to transform itself into a one-stop provider of television, wireless and calling services.

Higher Margin

Eliminating jobs and reducing spending on residential advertising and marketing will make the consumer division more profitable, resulting in a ``significant improvement’’ in third- quarter operating margin, or operating profit as a percentage of sales, from 12 percent in the June period, AT&T said Oct. 7.

Expenses for the falling value of assets will decline by $1 billion in the second half because of the writedown, AT&T said.

The firings, which will bring AT&T’s workforce to about 49,300 by the end of the year, may reduce payroll by $490 million this year, and $675 million more next year, JPMorgan analyst Jason Bazinet wrote to clients this month.

The job cuts and decision to retreat from consumer calling are part of a ``long line of missteps the company has made,’’ said Maly, vice president for communications and technologies at the CWA.

AT&T had 30.3 million long-distance-only customers and 3.9 million customers with local and long-distance service at the end of 2003.

AT&T Business

Dorman is staking the future of the 127-year-old company on sales to large corporations. He’ll court consumers by selling a service that routes phone calls over the Internet.

Third-quarter sales in the unit that serves companies such as International Business Machines Corp. fell 14 percent to $5.4 billion, said UBS AG analyst John Hodulik in a Sept. 29 note.

AT&T Business, which accounted for 73 percent of second- quarter sales, is under price pressure from MCI Inc., the No. 2 U.S. long-distance operator, and newer entrants such as SBC and Verizon Communications Inc. The unit is becoming less profitable as it bears a larger portion of AT&T’s expenses, Hodulik said.

``Continued pricing pressure is being exacerbated by falling consumer traffic, which forces business services to cover a larger portion of network costs,’’ Hodulik wrote.

In a sign that regional carriers are becoming a more serious threat, San Antonio-based SBC in September won a $100 million contract from Ford Motor Co. to create an Internet calling network for 50,000 users.

``We do compete with the Bells in the business market, but they don’t have the coverage that we do and they’re not global,’’ Dorman said in an Oct. 8 interview. ``On the business side, we control more of our own destiny.’’

To contact the reporter on this story:
Chris Johnson at cjohnson24@bloomberg.net.

To contact the editor responsible for this story:
Emma Moody at emoody@bloomberg.net.
Last Updated: October 20, 2004 00:01 EDT

By Ellen Simon
THE ASSOCIATED PRESS

NEW YORK -- AT&T Corp. bused 3,000 employees to Washington, D.C., in July 1995 to beg lawmakers to kill new telecom legislation designed to make their industry more competitive.

Before they trooped into congressional offices, CEO Robert Allen addressed them by video and declared: «Like it or not, our future is at stake inside that building.» The theme song from «Rocky» blared.

At the time, it was hard to think of the fat telecommunications giant as having anything in common with the underdog movie boxer. Sure, its 1984 breakup meant it was no longer Ma Bell, the nation’s primary phone company. But it had dominated the industry for the better part of a century and its stock was still in nearly every investor’s portfolio.

Today, the thought of AT&T as underdog is no stretch at all.

Its stock and profits have been sliding for years. Once the largest company in the world, job cuts and spinoffs have shrunk AT&T from 1 million employees in 1984 to 61,000 -- and dropping -- today.

AT&T’s plush, fine art-decorated headquarters, where the executive offices were known as «Carpetland,» have been sold. Its revenues have shrunk from $69.4 billion in 1983, then about 2 percent of the gross national product, to half that in 2003. Moody’s recently downgraded the company’s debt to junk and said the outlook is negative.

There’s no agreement on what eroded AT&T, but the mistakes were plenty.

Former employees say the company passed up technology that ultimately became profitable for others, testing cell phones in the 1980s and a Wi-Fi predecessor in the early 1990s, but passing on both. It was at one time the No. 1 wireless carrier, but quickly lost ground to competitors and spun the business off. AT&T overpaid for cable companies it eventually shed, saddling the company with billions in debt.

What many outsiders and former employees agree on is that the company’s almost centurylong dance with government regulation and protection defined it, guaranteed its dominance for a long time -- then sped its decline.

According to that argument, AT&T’s trajectory was predetermined from the moment it struck its first mutually beneficial deal with the government in 1913.

«You can follow an arrow of events from 1913 to the present,» said Thomas Eisenmann, a Harvard Business School professor who studies the industry.

The deal AT&T president Theodore Vail made that year turned his company into a government-sanctioned monopoly. In exchange for higher long-distance rates, AT&T would provide «universal service,» a phone connection to the farthest farms in the nation.

With that deal, the underpinnings of the Bell monopoly were set: AT&T had to give its rivals access to its network and accept government oversight, but it got almost everything else it wanted. Higher prices for long-distance calls subsidized local calls. Urban service subsidized rural, business service subsidized residential.

AT&T was safe from competition, but there were times when government oversight pushed technology it invented into the hands of others.

AT&T developed the transistor in 1947, but under pressure from the Justice Department’s antitrust division, it licensed it to competitors for $25,000, said Robert Ayres, a scholar at the International Institute of Applied Systems Analysis in Austria. As a result, AT&T’s invention bolstered companies like Texas Instruments Inc.

The Federal Communications Commission didn’t let AT&T conduct large-scale testing of wireless phones until 1977, Ayres said, giving Nordic countries a head start in wireless.

«The FCC got more competition, which is what it wanted, but it wasn’t in the U.S.,» Ayres said.

Other regulatory changes seemed minor but proved otherwise. The Nixon administration FCC changed rules so customers could connect phones from other manufacturers to AT&T’s network, a change from previous policy, under which customers could only rent or buy phones and equipment from AT&T.

«That was the crack in the dike,» said Sandy Teger, who worked at the company for 19 years and was strategy director for multimedia before leaving in 1996. «It started what inevitably happened, breaking the system.»

By 1984, AT&T settled a Justice Department lawsuit by agreeing to spin off the regional Bells, companies we know today as SBC Communications Inc., BellSouth Corp., Verizon Communications Inc. and Qwest Communications International Inc.

Long-distance rates, which had been falling for decades, dropped faster. The first calls from the U.S. to London were sent by radio one at a time in 1927, and cost $75 for 3 minutes. By 1934, a call to Japan cost $39 for the first three minutes. The year of the breakup, AT&T’s long-distance rates dropped 6.4 percent. In the next six years, they dropped about 40 percent.

Following the breakup, the company increasingly acted with its eye on regulators, not technology or customers, critics say.

«At the time I was there, we used to joke that the main strategy was strategy through government lobbying, not business ideas,» said Amy Muller, the company’s former director of corporate strategy, who left in 2000. She was amazed, she said, by the number of lobbyists the company had in Washington and state public utilities commissions.

«They always felt the threat of the Baby Bells coming in to long distance, but they felt they could slow that down by lobbying,» she said. «That was the official strategy, to slow it down. Because AT&T did have a long history of government intervention and government protection as a monopoly, it didn’t develop competence in strategy. It was so unused to looking at the outside world or outside forces.»

In other companies, government lobbying was not a path to corporate power. At AT&T, it was. John Zeglis, now chairman and chief executive of AT&T Wireless, was the company’s Washington-based senior vice president for government relations at the time of the Telecom Act of 1996, the next big government change the company faced.

The act let the regional Bells compete in long distance, but required them to rent access to their networks -- and the all-important wires into homes -- to competitors. The 1996 law was the subject of a court battle almost immediately; the litigation continued until this past March, when a federal court overturned the rules.

Last month, AT&T said it would stop competing for residential customers, abandoning what once was its core market, and focus on selling to businesses.

It had long since spun off its computer business and equipment manufacturing arm, which is two separate companies, Lucent Technologies Inc. and Avaya Inc. In the process, it lost its storied Bell Labs, which had produced 11 Nobel Prize-winning scientists.

Analysts now question whether the company can survive on its own. AT&T was widely reported to be in merger talks with BellSouth last year, and Newsweek reported last week that leveraged buyout firm Kohlberg Kravis Roberts & Co. was going to make a run for the company. KKR denied the report.

AT&T spokesman Jim Byrnes says the company is confident of long-term success and is pinning its hopes on selling to businesses.

«As technology continues to transform the way people communicate, we will be innovating, investing in the migration to Voice over Internet and, where it makes sense, marketing emerging technologies to businesses and consumers alike.»

But even some who spent most of their career with AT&T are skeptical.

Notes Sandy Teger: «Big companies look like they’ll last forever.» She can’t pinpoint the moment «when AT&T looked like it would get smaller and smaller, piece by piece and swallowed up. But that’s what happened.

»There were lots of times AT&T understood the problem, but, for whatever reason, wasn’t able to solve it. Maybe it wasn’t solvable. You look at a natural life cycle and, just like a person has a life cycle and a tree has a life cycle, companies have a life cycle. AT&T had a long one."

TRENTON, N.J., /PRNewswire/ Automotive retailers across New
Jersey now can purchase voice and data networking services more easily and
less expensively, thanks to a $7.2 million contract the New Jersey Coalition
of Automotive Retailers (NJ CAR) has negotiated with AT&T.

The agreement allows the 650 members of NJ CAR, a nonprofit organization
serving automotive retailers statewide, to leverage the purchasing power of
the entire group — giving smaller members access to the same volume-based
price advantages for AT&T services as larger members. Additionally, volumes
are «grossed up» across NJ CAR’s membership, meaning individual dealerships
don’t have to commit to monthly minimum or term lengths to receive
advantageous pricing.

The agreement covers an extensive portfolio of AT&T services, including
local, long-distance, high-speed data and Internet access services. NJ CAR
will provide provisioning and logistical support.

«We’re pleased to be able to offer AT&T’s high-quality services, bundled
with the expertise of our staff to meet members’ unique needs,» said Jim
Appleton, president of NJ CAR. «We’re now able to provide a bridge between a
first-tier telecommunications provider and our members to install and deliver
top-notch service for our automotive dealer members.»

About 250 NJ CAR members currently take advantage of the organization’s
telecommunications-purchasing program.

«By purchasing my dealership’s telephone service and Internet access
through NJ CAR, we’ve seen a reduction in our telecom bills, since we receive
excellent prices based on members’ combined volume,» said Ed Barlow, president
of Barlow Chevrolet in Delran, N.J. «And we get the same high-quality voice
and data communications that a Fortune 500 company gets, coupled with the
expertise and customer service of our NJ CAR representative. It’s the perfect
situation for my business.»

AT&T will integrate services for NJ CAR members with its industry-leading
AT&T Business Network (ABN) offer. ABN consolidates data, voice and Internet
services communications needs into a single contract, with a single bill and
discounts across all services. Through the secure AT&T BusinessDirect(R)
portal, NJ CAR members gain online access to real-time reports on network
performance and direct connection to electronic billing and trouble management
systems.

About NJ CAR
The New Jersey Coalition of Automotive Retailers, founded in 1918, is a
non-profit organization serving franchised new car and truck retailers
throughout New Jersey. NJ CAR’s purpose is to promote the principles of
commercial honor and integrity in the sale and service of motor vehicles. The
primary objectives of NJ CAR are to further any legitimate interests of its
members, to keep its members informed on a variety of business matters,
practices, trends and legislation, and to provide special products and
services to its members.

About AT&T
For more than 125 years, AT&T (NYSE: T) has been known for unparalleled
quality and reliability in communications. Backed by the research and
development capabilities of AT&T Labs, the company is a global leader in
local, long distance, Internet and transaction-based voice and data services.

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