SBC outlines plan to cut 11,000 jobs

Financial Times ^ | 9/27/02 | Peter Thal Larsen

[Tumbleweed_Connection]

SBC Communications is to cut an additional 11,000 jobs as the "Baby Bell" telecommunications group struggles to adjust to the sharp decline in its traditional fixed-line telecoms business.

Announcing the cuts on Thursday, Ed Whitacre, SBC's chairman and CEO, launched a bitter attack on the regulatory regime which he said "could threaten the viability" of the company's telecoms networks in many states.

Mr Whitacre lashed out against regulations which allow rival operators to offer telecoms services over SBC's network at deeply discounted prices, arguing that the rules had contributed to the loss by the company of almost 3m retail lines in the year to the end of August.

All three large Baby Bells have been losing retail customers in recent years as they face competition from cheaper rivals, cable operators and improving wireless services. Meanwhile their efforts to offer long-distance telephone services to existing customers have been slower than originally expected.

SBC said that if wireline revenues continued to decline at their annual rate of 6 per cent, SBC would lose another $2.3bn in revenues over the next four quarters.

The job losses, most of which will occur in the next three months, are on top of the 10,000 jobs which SBC has already cut so far this year.

The Baby Bells have become increasingly vocal in recent months about what they see as unfair competition imposed on them by US telecoms regulations.

Under the current regime, rival operators are encouraged to use the incumbent carriers' network infrastructure to offer rival services. But the Baby Bells argue that they are not properly compensated for the costs of maintaining the network.

The string of recent high-profile telecom collapses has also left the Baby Bells with liabilities in the form of unpaid bills.

"Under this pricing scheme, a century of regulatory policy has been turned on its head," Mr Whitacre said. "Instead of subsidising prices for average consumers, we now subsidise competitors who in turn siphon revenues out of the market."

SBC did not say to what extent it was losing customers to cable operators and wireless operators, which do not rely on the Baby Bells' infrastructure. Analysts said the US economic slowdown would also have contributed to the loss of fixed-line revenues.

Next year, SBC expects to spend $5bn-$6bn on its network, significantly lower than in recent years.

[Karsus]

"Mr Whitacre lashed out against regulations which allow rival operators to offer telecoms services over SBC's network at deeply discounted prices, arguing that the rules had contributed to the loss by the company of almost 3m retail lines in the year to the end of August. "

Wrong. When I had a DSL line thru August.Net the cost for the physical 1500k/128k DSL line was between 32.00 and 35.00 per month. This did not include internet access. Internet access was an additional $40-50 per month for 12GB of transfer, 5 static IP, direct (no proxy, no restricitons on servers). During thie same time frame sbc was offering a DSL line plus Internet for $39.95. This was in the Euless, Texas are about 5000 feet from the co.