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AT&T'S Dorman Says IP Is Driving Telecom Growth

CHICAGO -- After weathering the burst of the investment bubble and the indictment of former executives, the telecom industry is transforming and growing again, AT&T chairman and CEO David Dorman said here Tuesday at Supercomm.

The growth, Dorman said, all comes from new technologies, like IP, wireless and Internet services, while traditional telephone services continue to decline.

Dorman linked the decline in part to the Telecommunications Act of 1996, which fueled investment and speculation in competitive carriers. Prior to the enactment of the law, carriers spent about 10 to 15 percent of revenues on capital expenditures, Dorman said. In the late 1990s, that figure grew to
more than 40 percent for four consecutive years.

With those investments came the pressure to perform for Wall Street, which in some cases (most notably at WorldCom) led to financial fraud. Five of the largest financial frauds in history were in the telecom industry, Dorman said. When the capital spigot turned off, the industry lost $3 trillion in market
capitalization and 100,000 jobs.

But there have been enormous strides since then as proposed corporate
combinations, like SBC and AT&T and Verizon and MCI, and new industry
offerings, like Internet services and VoIP, supplant older services like
long distance.

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