AT&T’s Plan for the Future: No Landlines, Less Regulation

Residents and business owners in Carbon Hill (AL) got a surprise in letters from AT&T in February. The company said the town, where signs welcome visitors to "the city with a future," could usher in one of the biggest technological changes since Alexander Graham Bell's first telephone.

AT&T and Verizon are racing to replace their phone networks with new technology. The change is supported by the federal government, but smaller phone and Internet service sellers say the two giants are trying to escape regulations that promote competition. If regulators approve, AT&T customers would eventually have to switch to wireless or high-speed service. New customers wouldn't be allowed to sign up for traditional, landline-based service at all.

AT&T's top executive in Alabama, Fred McCallum, wrote that the proposed changes are an "exciting opportunity for our customers and for our company." But Carbon Hill City Clerk Janice Pendley says some people in the former mining town are apprehensive. "Some of them like their landline, and they like it just the way it is," she says.

Nearly 40% of US households now have no landline phone, and there are more wireless devices than people. "Revolution is all around us," says Federal Communications Commission Chairman Thomas Wheeler. An all-Internet protocol network could lead to better products, lower prices and "massive benefits" for consumers, he says.

AT&T says no one will lose old-fashioned phone service until the carrier proves it can provide those customers with "an alternative." The revolution is about to get a nudge from the federal government. AT&T is seeking approval to launch a series of changes that would start with not letting new customers in Carbon Hill and a section of Delray Beach (FL) sign up for traditional, landline-based service. AT&T wants new and existing customers to eventually use broadband service, mobile phones or a conventional phone that connects to a router-like box.

In Carbon Hill, AT&T wants to go ahead even though the carrier is unsure how it would provide broadband service to about 4% of residential customers because they are too far away from the center of the sparsely populated area. In Delray Beach, there is a different challenge: About half of the people are at least 65 years old, the age group slowest to embrace new phones, according to the FCC.

Smaller phone and Internet service providers say it isn't fair for AT&T and Verizon to escape oversight by shifting to a different type of network. Those rivals depend on access to the giant carriers' networks -- and fear it could be threatened as chunks of the traditional phone network are shut down. That could lead to fewer phone and Internet-service choices -- and higher costs for businesses and consumers, the smaller companies say.