MEMO TO:C. Michael ArmstrongFROM:Peter Bart It’s always fascinating to observe the behavior of moguls when their companies head into troubled waters. As chief of AT&T, Michael, you’re a prime example: Despite the billions you’ve spent on acquisitions, AT&T has hit major speed bumps lately. Rival corporate hierarchs with whom you must do business have gotten pissed off at you. And many of the customers of your giant company — remember them? — also are testy over instances of dishonesty and corporate thuggery. What’s going on, Michael? You were providing inspired leadership when you took over AT&T in 1997 but, of late, inspiration seems to have given way to desperation. The core of your problem, Michael, is that your basic objective was misguided. In taking over AT&T, you decided to allocate $115 billion to re-invent your company by integrating cable, wireless and long distance. The market’s reaction: AT&T is selling at a historic low. The reasons are complex: The technology has proven more expensive than predicted. Merger partners like British Telecom have backed away and corporate rivals have put up a stiff fight, as have Baby Bells. Time Warner, for example, is impatient with you for trying to make open access deals with independent Internet service providers. Rival cable companies are reluctant to lease part of their broadband spectrum to AT&T. Mindful of these obstacles, you’ve been forced to make some quick adjustments. For example, you’ve instructed your troops in the field to flog digital TV to help reverse the downward cash flow from the cable business. Well, if Wall Street has been discomfited by some of your financial moves, Michael, let me tell you what it’s like to deal with AT&T at the grassroots level. I happen to be an AT&T customer, both for phones and cable (thanks to AT&T’s acquisition of MediaOne, the cable company which serves portions of Los Angeles). I can tell you this, Michael: Viewed from the bottom up, your company looks like a study in corporate chaos. Here, in brief, is what it’s really like to deal with AT&T on digital TV. STEP ONE:A salesman calls from AT&T Broadband offering “free installation” of digital TV at a “very modest” monthly increase in cable charges. The sell: Digital TV offers over 250 channels, plus a better picture than satellite without any possibility of service interruptions. I am curious. I say “yes” and make an appointment. STEP TWO:A technician arrives at my house and, under questioning, acknowledges that there is a substantial charge for installation for each TV set (I have six) plus a hefty increase in the monthly cable bills. “I hope you didn’t believe that phone pitch,” he said. “They’re lying about price and quality and most of the homes I visit tell me to get lost.” I tell him to get lost. STEP THREE:Noticing that the picture quality of my TV channels was fading quickly, especially the network channels, I call AT&T Broadband and, after investing considerable time plowing through the phone menu, manage to reach a service representative who readily acknowledges that my picture quality may have been deliberately diminished. “Why?” I ask. “Because you failed to go digital.” In short, I am being punished for not falling for the sales pitch — a dubious threat, but who knows what’s possible in the digital age. “How can I get my picture back?” I ask. The answer, “Re-dial and start over on the menu until you find a customer service representative.” He seemed disinterested in my complaint that this would represent a two-hour investment in time. The upshot: I’m still paying $92 a month for cable service, for a snowy picture, but still have no intention of joining the digital revolution, where I would be paying considerably more. Some friends have signed on, I’ve discovered. Daily Variety’sTV editor Josef Adalian became a digital TV customer only to be told by the technician that he could not provide guidance on how to use the service because he himself had received no training. He was merely a freelancer hired by AT&T in its rush to “sell digital.” Joe’s reception still isn’t as clear as his pre-digital picture. Now, TV aside, Michael, none of this is a pretty picture. I’m not going to hold you responsible for the behavior of your troops in the field, but this sort of utterly dishonest behavior reflects a company in trouble — indeed, desperate trouble. It’s one thing to have Time Warner and the other corporate monoliths angry at you, but what happens when all of those invisible people called customers also get pissed off? What happens when they start communicating with local and federal regulatory agencies? Not long ago you said that the decline in AT&T’s long-distance business would mean that other businesses “would have to grow twice as fast.” Well, I’ve got four words for you, Michael: Not on my dime.