DOWN & OUT

Poor AT&T. Several years ago, I would have scoffed at the idea that at any time in the future I would write the preceding words, but I write them this week as AT&T prepares to be dumped from the storied Dow Jones Industrial stock index. The original Ma Bell, from which all other Bells and — at the risk of overstating it, the rest of the telecom industry — sprung, has been deemed not viable enough for the Dow.

The only thing that could possibly be more humbling than AT&T getting pushed out of the Dow is the knowledge that the company taking its place is one of its so-called Baby Bell offspring: Verizon Communications.

AT&T is being dumped from the Dow along with two other old-school behemoths, Eastman Kodak and International Paper. Joining the Dow with Verizon are biotech giant Pfizer and financial services firm AIG. This kind of thing doesn't happen everyday. In fact, it has been at least four years since the Dow delisted any of its component firms. Dow watchers say it's being made to reflect that the Dow is less focused on material and industrial stocks now, and trying to be more focused on technology and service-related components.

On the surface, that doesn't fully explain why AT&T is being dumped for Verizon, since they are both telecom firms. However, take a good look at AT&T and you'll find it to be less relevant to the current telecom industry balance than it's ever been. It is no longer in the wireless business. It is no longer in the broadband business. It has made so little progress being a local telco that it's hardly worth mentioning.

In an attempt to get back to the future, the company now has plans to roll out voice-over-IP service nationwide, but in another questionable move, it chose a brand for that service that sounds closer to that of a competitor's, Vonage, than to its own once formidable global brand name (Vonage apparently feels the same way, and has filed a lawsuit against AT&T).

After Cingular Wireless announced its acquisition of AT&T Wireless earlier this year, the move was seen as being orchestrated in the interests of reassembling Ma Bell at the behest of Cingular's parents, SBC and BellSouth. Telephony received many calls and e-mails from former AT&T employees saddened that the original Ma Bell would be left out of this undeniably huge part of the future of telecom. Every single one of them sounded proud of a company they thought of as innovative, reliable and customer-focused.

Don't make the mistake of connecting these qualities with AT&T having been a monopoly at one point long ago. There are ways for any company to attain these qualities, or to reinvent the firm sufficiently to keep them. AT&T hasn't been able to do that. All in all, it's been a very tough year for AT&T, and we've only just completed the first quarter.