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AT&T's Allen Looks at 10 Years of Flux

Ma Bell breakup brought both expected and unforeseen challenges

WHEN the United States split up the family of Ma Bell 10 years ago last month, skeptics wondered whether American Telephone & Telegraph Co. - Ma Bell, herself - could compete in the demanding marketplace of telecommunications.

AT&T made mistakes along the way: false starts in the computer business, a recent series of embarrassing network glitches, and letting its rivals grab a third of the domestic long-distance market. But the question is no longer whether AT&T can compete, but how it will compete in an era when the distinctions between computing and telecommunications are disappearing.

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AT&T chairman Robert Allen talked about these trends in an interview last week.

What's been AT&T's biggest success since divestiture?

The best thing is really the evidence ... that the marketplace works. The whole concept here was to separate the competitive business from the monopoly business. It has not been easy for AT&T to make the transition.

But I think the transition has been worth it. And I think people will look back on that event sometime in the future and say: That was the right thing for this country.

What's been your biggest disappointment?

The great promise was that this company, which would be fully competitive, would in effect be deregulated. The long history of governments at the state and federal level trying to protect the consumers from large monopoly companies - that has not disappeared. So we operate in a competitive environment with a lot of handicaps today. Progress has been made but it's very slow.

I ought to mention one other disappointment. We in effect planted flags on the shores of the US and said to everybody: "Come on in. This is going to be an open and free market. Everybody's permitted to play." And we did not get any kind of reciprocal opportunity [in foreign markets].

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What kind of regulatory handicaps are you talking about?

We still have to file a tariff for approval on every new idea, service offering, pricing scheme we have in mind. There's something wrong with that. Often our customers are ... prohibited from receiving these in a timely fashion because we have to wait for the regulatory process.

Do you see a backlash against deregulation?

There are those who say the deregulation of the airline industry was not the right thing to do. But I think the facts show that the consumers have been served pretty well by it.

As a matter of fact, one [piece of] evidence to the contrary today is that there is a fairly high percentage of people in this country who want to have choice with respect to public education. That to me is the continuation of the trend.

Why has AT&T failed repeatedly to make itself into a computer powerhouse?

Frankly, we were all naive in the way we went about trying to realize that dream. But I think in retrospect the timing doesn't look too bad now in the sense of how computing and telecommunications is coming together in the minds of customers.

Naive in what way?

We knew we were building computers in our own communications systems. They worked very well. They were highly reliable. We probably had the mistaken belief that the world would come running to such reliability if we put out a product that said "computer" instead of "switching equipment."

We therefore came at the customers from a technology point of view. What I hear today is much more on target in terms of looking at ... a customer's need.

Last year you bought your way into the computer business by acquiring NCR Corporation. How's that merger going?

I'm very pleased with the merger. The physical merger and the people merger is essentially complete. We haven't lost anybody in the process. [Only three of NCR's 31 senior managers have left since the merger.] We've now set about to really get at some of the strategic synergies and play off them.

What role should government play in promoting this synergy between computers and telecommunications?

If we can create an environment that demonstrates the capacity [of the technology] and breaks down some of the traditional infighting that takes place over jurisdiction, then I think government can help. But in the final analysis, we have got to be able to sell the customer on the merits [of this new technology].

This technology is not going to be cheap, is it?

It depends on how we amortize the investment on fiber[-optic cable].... I can't prove that fiber's going to be the savior. But it would be interesting to make that investment some place and turn creative people loose and see what happens.

Will the convergence of these technologies create huge companies that dominate both industries?

I don't have a very good crystal ball. I think that what's happening will continue to happen for a very long time.

We're always going to need small firms, creative people who can move quickly to bring an idea to market, grow a business, get acquired, consolidate.

Then there'll be some rationalization in the industry just as there has been in the computer industry.

Will AT&T compete directly against IBM in 10 years?

Sure. IBM and AT&T will be competitors in many respects, if we're right about where the marketplace is going and if we're both capable. But this country needs a strong IBM and a strong AT&T. So it's not as if one of us has to disappear. If we make the market grow the way it's forecast to grow and make use of this technology that's already available, we'll be all right.