TOUGH CALLS AT&T and the Hard Lessons Learned from the Telecom Wars Dick Martin AMERICAN MANAGEMENT ASSOCIATION NEW YORK • ATLANTA • BRUSSELS • CHICAGO • MEXICO CITY SAN FRANCISCO • SHANGHAI • TOKYO • TORONTO • WASHINGTON, D.C. ..........................10940$ $$FM 09-03-0414:59:04 PS PAGEi SpecialdiscountsonbulkquantitiesofAMACOMbooksare availabletocorporations,professionalassociations,andother organizations.Fordetails,contactSpecialSalesDepartment, AMACOM,adivisionofAmericanManagementAssociation, 1601Broadway,NewYork,NY10019. Tel.:212-903-8316.Fax:212-903-8083. Website:www.amacombooks.org Thispublicationisdesignedtoprovideaccurateandauthoritative informationinregardtothesubjectmattercovered.Itissoldwiththe understandingthatthepublisherisnotengagedinrenderinglegal, accounting,orotherprofessionalservice.Iflegaladviceorotherexpert assistanceisrequired,theservicesofacompetentprofessionalperson shouldbesought. LibraryofCongressCataloging-in-PublicationData Martin,Dick,1946– Toughcalls:AT&Tandthehardlessonslearnedfromthetelecomwars/ DickMartin. p. cm. Includesbibliographicalreferencesandindex. ISBN0-8144-7243-5 1. AT&T—History. 2. Telecommunication—UnitedStates—History. I. Title. HE8846.A55M37 2005 384(cid:1).06573—dc22 2004018451 (cid:1)2005DickMartin. Allrightsreserved. PrintedintheUnitedStatesofAmerica. Thispublicationmaynotbereproduced, storedinaretrievalsystem, ortransmittedinwholeorinpart, inanyformorbyanymeans,electronic, mechanical,photocopying,recording,orotherwise, withoutthepriorwrittenpermissionofAMACOM, adivisionofAmericanManagementAssociation, 1601Broadway,NewYork,NY10019. Printingnumber 10 9 8 7 6 5 4 3 2 1 ..........................10940$ $$FM 09-03-0414:59:05 PS PAGEii Tomywifeandpartner,Ginny. Shemakesliarsofthose whosaybeautyisonlyskindeep. ..........................10940$ $$FM 09-03-0414:59:05 PS PAGEiii This page intentionally left blank Contents Acknowledgments vii Introduction 1 1. Don’tDancetotheMusicofYourOwnBuzz 11 2. UnderstandthePowerofSymbols 31 3. TakeControl 53 4. CompletetheCEO 69 5. ExpecttheDumbingDownofReality 85 6. WorkInsideOutTowardYourCustomers 103 7. Don’tLetPluggingLeaksBecomeanObsession 121 8. CastingIsEverything 139 9. PayAttentiontothePoweroftheFew 155 10. Don’tConfusePoliticsandPublicRelations 169 11. SayGood-ByetotheRah-RahBrother-andSisterhood 183 12. StayOfftheTreadmillofExpectations 197 13. It’sOkaytoChangeYourMind 211 14. CredibilityBreaksAllTies 227 15. ReimagineYourCompany’sMission 241 16. PracticeAmbidextrousLeadership 257 Appendix:SelectiveChronology 269 Notes 273 Index 287 ..........................10940$ CNTS 09-03-0414:59:09 PS PAGEv This page intentionally left blank Acknowledgments Partsofthisbookhaveappearedinsomewhatdifferentforminthe Harvard Business Review, The Public Relations Strategist of the Public Relations Society of America, and The PR Encyclopedia, scheduled to bereleasedbySagePublicationsin2004. Several of my former AT&T colleagues, especially Sue Fleming, Sheldon Hochheiser, and Bruce Brackett, searched their files and memoriestohelpmekeepdates,names,andeventsstraight.PatPol- lino,who startedatWestern Electricwith meseveraldecades agoand today holds an impressive position at Mercer Management, provided the outside enthusiasm that I needed in order to get serious about thisproject.Mostimportantly,heintroducedmetoPaulHempatthe Harvard Business Review, who convinced his colleagues that a PR guy from AT&T, of all places, might have something interesting to say— andthensawtoitthatIdeliveredthegoods. Paul and his colleague Andy O’Connell taught me the value of good editors. Ellen Kadin, at AMACOM, picked up where they left off, patiently helping me shape a bookthat would appeal to a broader audiencethanIfirstthought. Several friends offered constructive comments and suggestions as I developed my manuscript. Ed Block provided the perspective of his owncareerdirectingpublicrelationsforAT&T.GershonKekst,oneof the wisest PR counselors practicing today, helped me calculate the true meaning of my experience. Michele Tringali, who once handled public relations for AT&T’s consumer long-distance business, helped me to better understand its intricacies and dynamics. Adele Ambrose andBurtWolderhelpedmereinterpretseveralofthemoresignificant experiencesweshared. Molly Dowd and Magda Guillen of Kekst and Company were par- ticularly insightful ‘‘civilian’’ reviewers of the first draft and offered many helpful comments and suggestions. Jack Johnson gave me the ..........................10940$ $ACK 09-03-0414:59:17 PS PAGEvii viii • Acknowledgments benefit of his experience in both the legal and investment banking professions and proved to be a sharp-eyed editor in addition. Andy Black providedsome ofthe financialanalysis. AlSolecki, myattorney and friend, kept me on the right side of my responsibilities to my formeremployeraswellastomynewreaders.JohnKeller,whoisno longeraworkingjournalist,wasgenerouswithhistimeandthoughts, as were several current journalists and former colleagues who, for theirownreasons,prefertoremainanonymous. Mike Armstrong played no role in the writing of this book, al- though he saw a draft. He disagrees with my interpretation of some eventsandwithmanyofmyconclusions.ButImustacknowledgehis role in this story. I discuss his mistakes as well as my own in these pages. But no one should overlook the fact that he took on one of the greatestchallengesinAmericanbusinessatatimeinhislifewhenhe could have coasted into retirement in the glow of decades of achieve- mentatIBMandHughesElectronics. Armstrong served his new company with integrity and courage. Thesamecannotbesaidofallthepeopleuponwhomhedepended.I believe history will show that he had the right plan for AT&T and that,whilesomeofthedealsheapprovedwere‘‘fullypriced,’’orbadly structured, he might still have recovered if the company’s biggest competitor had not engaged in three and a half years of fraud that distorted the markets and robbed him of the one thing he needed most:time. Finally, I never would have finished this book were it not for the encouragement, patience, and prodding of my wife, Ginny, and my children, Christopher, Elizabeth, and Juli, as well as my daughter-in- law, Laura, and my cousin Marcel, all of whom gave me the courage to approach this story with candor and a degree of introspection that does not comenaturallytome. Mygrandson,Sky,arrived aroundthe same time as the first draft, so he has only had excerpts read to him. But I hope that someday this book will give him an idea of what ‘‘Gramps’’wasuptointhedecadebeforehewasborn. ..........................10940$ $ACK 09-03-0414:59:18 PS PAGEviii