AT&T CEO decries consumer market slowdown

Stephenson hailed an important discovery AT&T made last year regarding enterprise customers migrating from legacy technologies such as ATM and frame relay to IP: A drop in bandwidth and spending follows that migration, but it’s only temporary.

“This has probably been one of our biggest ah-ha’s in last few months,” he said. “It’s been a pleasant surprise.”

When enterprise customers migrate to lower-cost packet-based technologies, their revenue contribution immediately drops 30% to 50%, he said. As a result, AT&T had been lowering its bandwidth expectations for those locations and re-engineering its network accordingly. “Every time we did that, within six months, we had to augment capacity into those business locations,” he said. Today AT&T engineers bandwidth ahead of expectations in locations where customers are migrating to IP, as many customers return to their previous spending level within a year of migration. “When people move onto an IP/MPLS infrastructure, they immediately want to put new applications, new services and new capabilities on that infrastructure,” he said.

In response to a question from an analyst, Stephenson said the company had not “scratched the surface” in terms of potential cost cutting at the company. “All our business units have their own help desks, their own sales staff, call centers and network operating centers,” he said. “We haven’t scratched the surface of consolidating operations across those functions. We’re still consolidating network operating centers across the LECs.”

Unlike Verizon Communications, however, AT&T hasn’t yet seen a good business case for shedding its rural access lines, Stephenson said. “We’ve looked at it a number of times. To sell them now, you have to assume someone else can operate them better than you can. We have yet to find a scenario where there’s value added to sell off rural lines.”

Eventually, new technologies may yield a broadband alternative suited to rural markets that impacts those economics as well, he said. “We keep working at it. We’re getting closer and closer to some ideas.”