Rumors Roll Over AT&T

And now, after a brief stabilization in the business services industry, a new price war has broken out in the wholesale market, thanks to the likes of low-cost restructured outfits WilTel (WTEL) and ICG.

Making matters worse for AT&T, outsourcing firms like EDS (EDS) and IBM have plunged into the service management business, taking a slice out of Ma Bell's high-margin sales. These outsourcers are hired by large companies to integrate various communications services. Given their expertise and scale, the outsourcers are often able to lower the overall costs for clients and take a cut of the proceeds.

With telecom still in turmoil, and once-failed now debt-free rivals returning to the battlefield, AT&T's fortunes don't seem to be improving.

"The best thing to do, if they really have something in the works, is get it done soon," says Forrester Research analyst Lisa Pierce, who does telecom consulting for a number of phone companies and business clients.

"Do it now and spare us and your customers the uncertainty," Pierce advises.

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