Consumer Consumer
AT&T

Intro

Converging communications and entertainment services to keep consumers always connected from virtually any device and bundling those services are keys to our success. Broadband is the foundation for our vision of creating an anywhere, anytime world for our customers.

Broadband is the access line of the future, the gateway not only to the Web and e-mail but also to video, new phones that use Wi-Fi when you're at home and the cellular network when you're on the road, different types of messaging and more. The transformation to an IP-based world presents new business opportunities for AT&T, and we are moving quickly to capture them.

AT&T leads the industry in deploying DSL broadband technology, with 7 million lines in service — more DSL lines than any other company in America. Last year AT&T added more new high speed Internet customers than any broadband provider.

The consumer market now represents 24 percent of AT&T's total revenues, including our 60 percent proportionate share of Cingular Wireless revenues. Already 68 percent of our consumer customers subscribe to discounted bundles that may include local and long distance service plus broadband, satellite TV through AT&T | DISH Network or wireless through Cingular.

We have found that when customers add broadband to a basic package, they are 40 percent less likely to switch to another provider, and average revenue per customer jumps nearly 120 percent. If you add both broadband and joint-billed Cingular Wireless to the bundle, customers are more than 60 percent less likely to switch, and revenue jumps more than 350 percent. The success of our bundling strategy was evident in 2005 results: Consumer revenue grew 3.6 percent year over year, and revenue per customer increased 7.3 percent.

We see even more opportunity to grow revenue and reduce customer churn as we roll out advanced IP-based services like AT&T U-verse TVSM and other new technologies and solutions that make these services work in concert.



AT&T U-verse TV is a state-of-the-art, IP-based video service that allows a complete home entertainment experience. Today, the service features more than 200 channels, crystal-clear video quality, a growing video-on-demand library, picture-in-picture channel guide and fast channel change. We began offering U-verse services in December 2005 in a controlled market entry, and we expect to expand to more markets, with new features, starting in mid-2006.

AT&T HomezoneSM is another next-generation service that debuts this year, integrating our existing satellite TV and broadband services to create a new entertainment experience that goes well beyond anything offered today.

With Homezone, customers can access TV and movies via AT&T | DISH Network, download movies, listen to music and view photos from the Internet via AT&T Yahoo!® High Speed Internet and see caller ID on their TV screen — all from the comfort of their living room.

We also plan to introduce enhanced landline phones that incorporate many popular Internet and wireless features. For example, with AT&T's broadband phone, users will be able to make regular landline voice calls via an AT&T local line as well as communicate via methods normally reserved for the PC or a wireless phone. Users will also be able to send text messages and access other personalized network-based content such as address books, weather and stock quotes.

Looking ahead, VoIP is destined to be the voice technology for the future, delivering local, long distance and international calling, as well as features that smaller businesses and consumers want most like Do Not Disturb, Locate Me and Call Filtering. AT&T already is a leader in VoIP for larger businesses, and our AT&T CallVantage® Service for consumers and small businesses is available now on a limited basis. Later this year in our traditional 13-state region we'll bundle AT&T CallVantage with stand-alone DSL and target younger, tech-savvy consumers. We'll also encourage them to add AT&T | DISH Network and Cingular Wireless service. AT&T is well-positioned to lead the industry in IP-based technology, providing savings, convenience and feature-rich innovations for consumers.