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David W. Dorman

chairman & ceo, at&t corp.

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David Dorman addresses the Boston College Chief Executives' Club in the Wharf Room at the Boston Harbor Hotel.

View of the Telecom Industry

Six months after it resumed offering local phone service in Massachusetts, AT&T Corp. has garnered 4 percent of the state market and expects to reach double digits in 2004, said company chief executive David W. Dorman.

In an appearance at Boston College's Chief Executives' Club of Boston, Dorman indicated that Ma Bell is taking a serious look at offering a low-priced, unlimited phone calling service over the Internet through devices that would be attached to broadband Internet connections, a market now controlled mainly by tiny start-ups.

AT&T's push into local services, including its launch in June 2003 of $50-a-month unlimited local and long distance service in Massachusetts, has attracted over 4 million customers nationally. Selling local service over lines rented from Baby Bells like Verizon Communications Inc. and BellSouth is a key AT&T strategy to offset its steadily declining core long-distance business.

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A who's-who of Boston gathered to hear the address.

But Dorman said even cheaper "voice-over Internet protocol" services are destined to grow explosively, and AT&T recognizes it needs to get in the game. "Resistance is futile," Dorman said. "This is one of those things that is like a tidal wave coming. It's going to be the method of choice for anyone who has a broadband connection" to make phone calls, whether they have a cable modem, a telephone-based digital subscriber line, or some other high-speed Internet access. Dorman gave no details of when AT&T might launch service or the price.

"It's becoming technologically feasible and at a quality level that's worthy of our brand," Dorman said. Asked in a later interview with the Boston Globe whether AT&T is concerned about eating into its own long-distance business, which has 40 million residential customers, he said: "It's being cannibalized anyway."

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Mr. Dorman speaks with Chad Gifford of FleetBoston.

In other comments, Dorman said he believes consolidation in the telecom industry is inevitable, although he had no comment on reports AT&T and BellSouth discussed merging last month. Referring to FleetBoston chief executive Chad Gifford's planned $47 billion merger with Bank of America, Dorman said. "If I could do a deal just like Chad Gifford did, it'd be damned important. He's my new hero."

Dorman called "unsustainable" the current lineup of seven large US landline phone companies and seven major wireless carriers. "If we maintain that market structure, it will be very difficult for anyone to make any money," Dorman said.

And on the issue of scandal-tarred MCI potentially emerging from Chapter 11 bankruptcy protection this winter with a deeply reduced debt load and ability to start a new price war, Dorman said, "We welcome them back as an honest competitor . . . " Measured by revenue per employee, cash flow, and net debt load, AT&T can still compete strongly, Dorman said, and MCI chief executive Michael D. Capellas "seems to be really committed to playing at the highest level of ethics and governance. That couldn't be better for AT&T because that is not the company we were competing with" when it was known as WorldCom and was committing over $9 billion in accounting fraud.

Adapted from an article by Peter Howe of the Boston Globe, November 20, 2003.