AT&T CEO decries consumer market slowdown

AT&T sees softness in local access, broadband

Addressing an investor conference today, Randall Stephenson, AT&T’s chief executive officer, complained of a current slowdown in the company’s consumer business but expressed optimism that its enterprise business would be less affected by the same overall economic trends.

Stephenson complained of a broad “softness” in all of the company’s consumer markets, including local access, broadband and wireless--in that order. “The main place we’re seeing it is in non-paid disconnects,” he said. “As the economy gets soft, wireless becomes the last thing consumers turn to [to cut back on].”

Stephenson expressed uncertainty about how access line loss would trend this year. He attributed its erosion in recent months more to wireless migration than to cable competition, a notion he interpreted as a vindication of AT&T’s heavy focus on wireless service. “Wireless will continue to be the entry point into the home,” he said. “If you can price and bundle based on wireless, you have huge competitive advantage in the marketplace. Over time, we’ll integrate those products more and more to take advantage of the market that way.”

At the same time, Stephenson said AT&T’s spending on wireless infrastructure would start to decline this year as the company completes its 3G network buildout. “Wireless will be in a bit of a down cycle,” he said. “Our cell site density is very impressive--some would say too impressive.”

At the same time, the carrier will continue to increase its spending on deploying IPTV, he said.

Stephenson predicted AT&T would not achieve more than 20% penetration of its IPTV markets before the end of this year. The first 10% of market share is relatively easy to obtain, he said, as some consumers are eager to take the first opportunity to leave their incumbent cable provider. In some cases, they’ll even pay a premium to do so, he said. “The next 10% requires serious marketing in terms of bundling, packaging and promotions. That’s the stage we’re in now. We won’t get to 20% in most markets before the end of this year. It will be a fairly stable pricing environment.”

Despite the troubling trends AT&T sees in the consumer space, it isn’t seeing the same softness in enterprise markets today, the CEO said. If the economy should slow, Stephenson doesn’t imagine much impact to AT&T’s enterprise business. “Why do people move to IP? To save costs,” he said. “If we move to down cycle, it probably will not change people’s behavior a lot. I don’t think it will have a radical effect on us. We’re not seeing it now.”

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