Planned Split: a Boon or Bust for Consumers?

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AT&T; Corp.’s plan to break itself into three companies is designed primarily to help boost the telecommunications giant’s value on Wall Street. But although the dramatic breakup may eventually produce better results for shareholders, will it do the same for AT&T;’s tens of millions of customers?

The short answer is that no one really knows how consumers will fare under the new AT&T.; Interviews with consumer advocates and others have produced some best-guess answers.

Question: What changes can AT&T; customers expect in the wake of the company’s split-up?

Answer: In the near term, few or none. Phone rates and bills will be unchanged, as will rates and bills for cable and Internet-access services.


Q: What will happen to long-distance prices?

A: That is unclear. Long-distance remains an exceptionally profitable business for AT&T;, but its share of the pie is shrinking. If AT&T; chooses, it could press to raise revenues by raising prices.

Q: What will happen to cable prices?

A: Again, it is unclear. Under the current structure, there has been a steady increase in average cable-service prices. That is likely to continue, because there is little regulation beyond the most basic-level cable service.

Q: What about buying several AT&T; services together, in a package?

A: Such all-in-one service bundling is a goal that drove AT&T; to buy cable companies. But now it seems unlikely that AT&T; will be able to offer seamless packages of services because the providers will all be separate companies. It also may make it difficult for AT&T; to offer customers multiple services on one bill.

Q: Will it be different for business customers?

A: In most cases, business customers fare better than residential customers, largely because corporations tend to be more profitable to serve. But businesses also are among the most demanding and the customers who most want one-stop shopping for communications services. Thus, if AT&T; is unable to easily offer them packages of wireless, local, long-distance and high-speed data services (through the separate units), businesses could leave AT&T.;

Q: Looking ahead, what will the long-term effects be for consumers?

A: Consumer groups view the four-way split of AT&T; as a setback for competition in the residential market. They believe that the separate broadband company will be less aggressive in offering telephone service over cable lines, viewing that as an expensive add-on that will produce less revenue and complicate the system. If that happens, there will be less competition for local phone companies such as Pacific Bell.

In addition, some believe that AT&T;’s wireless business may lose interest in its fixed-wireless technology, which had been touted as a way for the combined AT&T; to sell packages of Internet and phone services without using wires from local phone companies.