A CHAT WITH C. MICHAEL ARMSTRONG
Just days before C. Michael Armstrong was scheduled to lay out his grand vision for fixing AT&T on Jan. 26, he spent two hours talking with BUSINESS WEEK telecommunications editor Peter Elstrom over sea bass and salad. The following are excerpts from that conversation:
On satisfying expectations:
There are very high expectations. I think that kind of motivated the team. AT&T, including the executive team, has really been kicked the last year or two. Now, people are starting to have some confidence in them. We need to rise to the occasion. There's nobody that wants to let the investor down--or give the money back.
On costs at AT&T:
I have not seen a cost structure like this since IBM in the days of the mainframe. It has to change. We don't have a strategy if we don't have a cost-competitive company. It's just the underpinning of everything we go out to do. That will be addressed.
Bringing a sense of urgency to AT&T:
One of the real fundamentals we're working on is getting our cycle time down and improving our decisiveness. We've changed from three forums for decision-making to one. And we've changed from meeting monthly to meeting weekly. We're focused on time to market and accountability.
Why AT&T pulled the plug on reselling local phone service from the Baby Bells:
I've called it a fool's errand. It's just not economically viable. For every customer we were able to secure, we lost $1.50 to $2 a month minimum. And there was no way out of that on scale. We concluded it won't work for us, won't work for the market, won't work for the industry, won't work for the country.
On the possibility of offering local phone service over cable instead:
I think the cable industry is a very interesting opportunity. But it's long term. When you look at all the reports of the deployment of the digital set-top box over time, it'll be three or four years.
Why the residential customer is not going to hear from AT&T for a while:
The fact is, there's only one wire. If the Baby Bells are not encouraged, motivated, or forced to define an economical means to resell that wire, there will be no competition.
On whether AT&T will lose market share when the Bells enter long distance:
Sure, we'll lose some market share in long distance, and they'll lose some market share in local. It's inevitable. We'll all work like hell to make it a growth business. And both markets will be more competitive than they were before.
Why the Internet and WorldNet, AT&T's Net-access service, are key:
It's not only WorldNet per se, but it's Internet services. I think there will continue to be a growing number of Internet services. So a company like AT&T has multiple interests. From an infrastructure standpoint, that is a good application of bits to go over our network. So as a provider of facilities, we're interested in the Internet.
Second, as our core business--telephony--relates to other businesses, such as wireless, local, or Internet, I believe that customers will increasingly see that they can source those from a single company. Not only for the simplicity of putting it on a single bill but for ease of use. Whether we do that simply with WorldNet or we find a way to do that in a broader way is the debate we're having today.
His goal for the Jan. 26 analysts' meeting:
I think it's important that we communicate how customer-driven and customer-focused we're going to be--that that's not just a throwaway line. We mean it. I think it's important that when [analysts] see an executive team, when we make a commitment, they can count on us. I'm not so sure we have a history, but we're going to have a future of having a commitment culture.
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