Reorganizing AT&T: From Vertically Integrated to Customer-Centric Organization (B)

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The Telecommunications Act 1996 (Refer Exhibit III) led to the deregulation of local telephone business. The act allowed the local telecom providers offer video services and sell long distance communication services out of their region if the providers allowed other local/long distance exchange carriers to operate in their region. The act also allowed long-distance phone companies and cable companies to sell local phone services. The deregulation of local phone business meant that AT&T was free to enter any of these markets. In spite of the act, however, the local telephone market continued to be largely controlled by the RBOCs, and GTE. Competitors like AT&T found it tough to enter, mainly because the local companies refused to provide interconnections to their networks. On the other hand, the RBOCs and GTE were well positioned to move into long-distance services...

According to the plan, AT&T would be reorganized into four independent publicly-held companies - AT&T Wireless, AT&T Broadband, AT&T Consumer and AT&T Business. Each company would function under the "AT&T" brand name.

AT&T Wireless would be among the rapidly growing wireless companies in the US; AT&T Broadband would be the largest cable TV and broadband services company;

AT&T Consumer would function as a leading consumer communications company; and AT&T Business would be a major enterprise communications and networking company. According to Armstrong, the new companies would be more responsive to customer needs, while still providing the benefits of one-stop shopping and bundled services through inter-company agreements. Justifying the restructuring move, Armstrong commented, "We believe that we have announced the foundation and the path for creating long-term shareholder value and will enable these companies to be even more performance, market and customer-focused, faster in their response and more competitive in their offerings...

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