BellSouth to cut 5,000 jobs, blames regulators

The buck stops somewhere over there

ComputerWire: IT Industry Intelligence

BellSouth Corp, the incumbent local carrier in nine US states, said Friday it is to lay off between 4,000 and 5,000 employees, up to 6% of its workforce, blaming pricing and competition concerns.

The company hinted that recent regulatory action was a cause of the move, much the same excuse given by SBC Communications Inc, another ILEC, when it announced 5,000 layoffs earlier last week.

"We face a fiercely competitive marketplace, and we must continue to reduce our cost structure in order to compete," said BellSouth CEO Duane Ackerman. "We also must continue to deliver our products and services at competitive prices to meet the increasing demands of our customers."

The company added in a statement that "regulatory pricing pressures" and the slow economy were also to blame. The reason was similar to that given by SBC on Tuesday, when it announced 5,000 jobs would go this quarter due to "the continued poor economy and a burdensome regulatory environment."

SBC President William Daley said at the time: "The soft economy - and regulations which our competitors don't face - have combined to force us to cut expenses and jobs."

"Policymakers could provide this industry and the U.S. economy with a boost by creating rules which provide an incentive for companies to invest and create jobs," Daley said. "As the rules stand now, SBC is discouraged from investing in new infrastructure or new jobs. These rules are not economically rational and they are uncertain at best."

A day earlier, Monday last week, the US Supreme Court ruled that interconnect rates set by the Federal Communications Commission, which are lower than ILECs would like to charge their competitors to access their networks, are enforceable, bringing to an end over five years of legal wrangling sparked by the 1996 Telecommunications Act.

The FCC would have a pricing scheme based on "total element long-run incremental costs". TELRIC determines prices that ILECs such as SBC, BellSouth and Verizon Communications must charge competitors for access to their networks. ILECs say the method does not compensate them adequately for infrastructure investments they make.

BellSouth said its layoffs will come from management and non-management positions, and will cause a $250m to $300m after-tax charge to be recorded in the current quarter.

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