AT&T Now Serves More Than 4 Million Residential Local Service Customers

Local phone competition continues to bring consumers greater savings and higher quality.

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Thursday, January 22, 2004; 12:00 AM

BEDMINSTER, N. J. - AT&T today announced that it now provides local residential phone service to more than 4 million customers in 28 states.

"Local phone competition has delivered clear benefits to consumers," said Kevin Crull, senior vice president, AT&T Consumer. "We offer consumers outstanding value, choice and service. In addition, when we enter new markets, the local Bell monopolies reduce prices, enhance offers or introduce promotions - something they didn't feel compelled to do before the advent of competition."

The company offers a variety of both stand-alone local plans and local-long distance bundles, such as its industry-leading AT&T One Rate USAý calling plan. AT&T also offers a package of local, long-distance and DSL high-speed Internet service to customers in 11 states.

According to a report issued January 7, 2003, by the Competitive Telecommunications Association, consumers could save up to $9.24 billion annually if local phone service competition was allowed to flourish in all 50 states.

Crull noted that state commissions must take such consumer benefits into account when making decisions about the wholesale rates the Bells must provide competitive providers.

"Regulators so far have resisted enormous pressure from incumbent monopolies to scuttle federal Telecom Act provisions that are just now allowing us to bring more choice and new services to residential customers. Consumers win with competition," said Crull.

"The FCC's Triennial Review decision in February 2003 found that the existing rules still are necessary for competition to exist. We're banking on regulatory decisions at the state level that will continue policies allowing consumers a competitive choice for local phone service. They will be critical to the future of competition," he said. "Americans clearly want a choice of local phone companies and we'd like to be able to give them that choice everywhere," he added. "All we need are wholesale rates that are fair and encourage competition."

Crull noted that the ability to use elements of the Bell companies' networks is a necessary step toward facilities competition. He drew a parallel to the long-distance business, where it took more than a decade to achieve facilities competition. "Because the Bell companies have used a variety of delaying tactics, the industry has only experienced about two full years of real competition," he said. "There are promising technologies on the horizon that will only be deployed if competitors are able to build scale the way the Telecommunications Act outlined -- by purchasing network elements at fair wholesale rates from the Bell and packaging those elements into a competitive offering that adds greater value than what the Bells currently sell."

In addition to offering local service to residential customers in 28 states, AT&T provides a full range of local voice and data services to businesses in 90 cities across the United States. Company-wide, AT&T has more than 8 million local access lines in service.

According to a study by the Phoenix Center, the incumbent Bell telephone companies are investing more heavily in their networks in states where competition is most intense -- even as an economic slowdown has caused total telecom investment to decline. On average, net investment by BellSouth, SBC and Verizon has increased $759 per year per competitive access line, or about $5.2 billion in 2002. As such, on average, competition adds about 6.4 percent a year to Bell company investment.

Competitive entry has forced the Bell companies to respond -- an unmistakable benefit of local phone competition. Competitive pressures prompted SBC to cut consumer phone rates an average of 33 percent in Michigan and lower and simplify rates in Illinois. In California, SBC lowered its rates by 20 percent after AT&T entered its territory -- a direct result of competition. Also, in response to the California Public Utility Commission's order lowering wholesale rates in its California territory, Verizon lowered its rates by about 15 percent.

"The fact that we now have more than 4 million local customers clearly proves that the 1996 Telecommunications Act can work," said Crull. "We're hopeful state regulators and the Federal Communications Commission will continue to make decisions that enable more consumers to benefit from a choice for local phone service."

The company's progress in residential local service is part of its aggressive plan to expand its portfolio of consumer services beyond long distance to include high-speed Internet, wireless and other services. By the end of 2004, depending on pro-competitive, consumer-friendly regulatory decisions, AT&T will offer local residential service in virtually all of the continental United States.

AT&T 'Safe Harbor'

The foregoing are "forward-looking statements" which are based on management's beliefs as well as on a number of assumptions concerning future events made by and information currently available to management. Readers are cautioned not to put undue reliance on such forward-looking statements, which are not a guarantee of performance and are subject to a number of uncertainties and other factors, many of which are outside AT&T's control, that could cause actual results to differ materially from such statements. For a more detailed description of the factors that could cause such a difference, please see AT&T's filings with the Securities and Exchange Commission. AT&T disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. This information is presented solely to provide additional information to further understand the results of AT&T.

About AT&T
For more than 125 years, AT&T (NYSE "T") has been known for unparalleled quality and reliability in communications. Backed by the research and development capabilities of AT&T Labs, the company is a global leader in local, long distance, Internet and transaction-based voice and data services.

For more information, reporters may contact: Bob Nersesian 973 326-3643 nersesian@att.com Janet Wyles 973-326-5378 wyles@att.com