AT&T; to Freeze Hiring, Halt Local Service Expansion

AT&T; Corp. said Friday that it is freezing hiring and halting its effort to expand into local telephone service in an aggressive drive by new Chairman C. Michael Armstrong to cut costs and buoy the company’s stock price.

AT&T;’s decision to halt its foray into local service is the latest sign of trouble with a federal law that was supposed to nurture new competition in local markets that would drive down phone rates for consumers.

AT&T; says it has spent up to $4 billion trying to break into the local phone market this year and has yet to make money because the regional phone monopolies have made it too difficult. The company will continue to sell local service to the 400,000 customers it now serves in six states: California, Connecticut, Georgia, Illinois, Michigan and Texas.

AT&T; had initially planned to sell local service to customers in a dozen states by the end of the year.

Long-distance carriers, including Sprint and MCI Communications Corp., complain they’re losing money because the regional phone companies created by the 1984 breakup of the Bell System are dragging their feet in opening their lucrative phone markets to new rivals. The carriers say regional phone companies have been reluctant to fulfill customer orders for competing local service or to resell their services at reasonable rates.

Court rulings have dealt further setbacks. A St. Louis court has thrown out a federal regulation that would have forced local phone companies to give their competitors’ customers the ability to make telephone calls without dialing extra numbers. The government is challenging that ruling.

Even MCI, which has built its own high-tech networks to sell local phone service to businesses in 31 markets, over the summer pulled back from the more difficult job of selling local phone service to homes. Supplying local phone service to businesses is easier because large companies tend to be concentrated in smaller areas that can be easily serviced by local networks.

“Frankly, the [Baby Bells] are dragging their heels so much, it became impossible to continue the marketing efforts we had in place,” said MCI spokesman Brad Burns.

MCI has agreed to merge with WorldCom Inc. in a deal that would more than triple MCI’s presence in markets for local phone service to businesses.

AT&T; says it plans to redirect its spending into alternate ways of selling local service.

The hiring halt generated speculation of job cuts beyond the 17,000 already announced, though AT&T; declined to comment. AT&T; has 133,000 workers.

AT&T; hopes to slash about $4 billion a year from its $45 billion in annual expenses. The company is considering a range of cuts, from fewer meetings outside the office to hiring fewer outside consultants.

AT&T; shares rose $2.19 to close at $61.31 on the New York Stock Exchange.