AT&T Execs Say Some Changes May Be Due


Los Angeles -- With its upgrade schedules on track,
AT&T Corp.'s two top executives said the next step will be to begin deployment of
interactive services, but they added that as AT&T moves forward in its video, voice
and data strategy, organizational changes may be in order.

AT&T chairman C. Michael Armstrong and AT&T
Broadband & Internet Services president Daniel Somers spoke with a small group of
reporters at the Western Show here last week, reiterating the company's position
concerning the rollout of digital services -- it expects to end the year with 1.9 million
digital customers.

Data services are also on track to reach 175,000
subscribers by the end of the year, and AT&T expects to have between 400,000 and
500,000 telephony customers by the end of next year.

Armstrong likened the advent of interactive services to IBM
Corp.'s rollout of its personal-computer product. That launch was criticized until
spreadsheet applications were developed that created incredible demand for the product.

"That is what is going to happen in interactive
TV," Armstrong said. "What will be the spreadsheet application, the killer
application? I have no idea. But they will happen and they will unfold."

Somers agreed that interactive TV will drive digital
offerings in the future, adding that he is assembling a team that will keep AT&T at
the forefront of the industry.

"There are a lot of solid folks I have worked with
over the last few years," Somers said. "We just brought in a new CFO [chief
financial officer] who has lots of cable and systems experience. And we have a lot of good
partners. My commitment is to put together a management team that rocks and rolls, and we
will do that over the next six months. The commitment we made at our analyst meeting is
that we're walking into the year 2000 with scalability in all of our products."

Somers would not comment on what that could mean for
existing AT&T employees, but he added that a lot of the management talent he is
looking for is already within the company. However, he said, AT&T should begin to
shift its focus to field operations, rather than corporate headquarters.

"The battle is being won on the streets of America. It
isn't getting won in Englewood, Colo., at the corporate headquarters," Somers said.
"My greatest need is an operational team, sort of like the Navy SEALs. That starts
with very strong market management in places like Chicago, Boston, Dallas, San Francisco,
Seattle and Denver. We need front-level operational talent there, and we've got a lot of
that already in place."

But Somers added that those front-line troops will also be
required to show an ability to execute. "If I give them that responsibility, with
that comes execution," he said. "They have got to deliver against that."

Somers continued, "My responsibility is to create a
culture that isn't AT&T, isn't TCI [Tele-Communications Inc.], isn't MediaOne [Group
Inc.], but is an AT&T [Broadband] culture committed to operational excellence and
rolling out products."

AT&T is also making progress on the telephony front,
and it is in active negotiations with Time Warner Cable and other MSOs, Armstrong said.

Although AT&T and Time Warner did enter into a
preliminary telephony agreement in February, Armstrong said, AT&T's pending purchase
of MediaOne forced both companies back to the negotiating table. MediaOne owns a 25
percent stake in Time Warner Entertainment.

"We are in negotiations today with Time Warner,"
Armstrong said. "We did do a Time Warner deal on the basis that we had no equity
relationship with them. [The decision to buy MediaOne] rendered the prior memorandum of
understanding obsolete."

However, he added, two things had to happen before both
companies could go back to the bargaining table: Federal attribution rules that limit the
number of subscribers a single cable operator can had to be set, and MediaOne's
shareholders had to approve the purchase. With those two conditions met, the companies are
back in talks.

Armstrong said he hoped a deal with Time Warner could be
reached around the time of the closing of the MediaOne acquisition, slated for the first
quarter of next year. Somers said the company is talking with other MSOs besides Time
Warner about telephony agreements, but he declined to identify them.

"We're not talking to all of them," Somers said.
"We have a team talking to a number of them and looking at a variety of different
propositions. We will end up with relationships that are good, solid and robust, but it's
very hard to predict when and with whom."

Despite the prospects of cable telephony, Somers said,
AT&T is not ignoring its core video business. He added that in the combined
AT&T/MediaOne, video represents about $8.5 billion in pro forma revenue.

"Think of what we can do to enhance our basic core
business and make it better and more competitive," he added. "We can layer on
all of the services, and then move it into a world of interactivity."