AT&T Citizenship and Sustainability Report 2007/2008

Connecting for a
Sustainable Future
 Our Vision

Connect people with their world,

everywhere they live and work,
and do it better than anyone else.

Contents

I. Letters
Letter From Randall Stephenson
Letter From Charlene Lake

II. Citizenship and Sustainability at AT&T

What’s New
What’s Next

III. Six Strategic Focus Areas

Strengthening Communities
Investing in People
Leading With Integrity
Minimizing Our Environmental Impact
Connecting People and Business
Leading Innovation and Technology

IV. Materiality Analysis

V. Reporting

For ease of reading, AT&T Inc. is referred to as “we,” “AT&T,” or the “company” throughout this report, and the names
of particular subsidiaries and affiliates providing services have been omitted. AT&T Inc. is a holding company and
does not provide communications services. Its subsidiaries and affiliates operate in the communications services
industry both domestically and internationally. Before the Nov. 18, 2005, acquisition of AT&T Corp., the company
was known as SBC Communications Inc. This report includes certain activities of AT&T Corp. prior to the acquisition.

2 I Six Strategic Focus Areas

AT&T Citizenship and Sustainability Report 2007/2008

Letters

Six Strategic Focus Areas I 3

“I take this
commitment
seriously, and I’m
very proud of the
progress we’ve
made. We’ll work
hard to do even
more, embracing
this with the
same passion and
leadership that we
bring to every part
of our business.”

4 I Letters
AT&T’s business is to connect people with their world, everywhere they live and
work. We’ve been doing that for more than 100 years, and we work very hard to
do it better every day.

Our approach to citizenship is a natural outgrowth of that commitment. It’s a responsibility that’s woven into
our DNA. We’ve always been committed to our people, our communities and our planet. But we recognize the
need to strengthen that commitment. That’s why I felt it was important for AT&T’s Board of Directors to expand
the responsibility of its Public Policy Committee and take on greater oversight of citizenship and sustainability.
I’m pleased that accountability is now at the very highest level of our company.

Under the leadership of Charlene Lake, Vice President of Public Affairs, Corporate Citizenship and Sustainability,
we’re taking deliberate and positive steps to integrate citizenship and sustainability into our daily business
operations. These steps reflect our desire to be a force for positive change — one that will contribute to the
long-term sustainability of the world we serve.

I take this commitment seriously, and I’m very proud of the progress we’ve made. We’ll work hard to do even
more, embracing this with the same passion and leadership that we bring to every part of our business.

We appreciate the enthusiasm that our customers, employees, shareholders and other stakeholders have
demonstrated as we work to build a better company … and create a better world and more sustainable future.

Sincerely,

Randall Stephenson
Chairman, Chief Executive Officer and President

Letters I 5
 We’ve titled this report Connecting for a Sustainable Future - because that’s exactly
what we’re doing. We’re making connections, in ways that are meaningful and relevant
to both our business and the communities we serve. The title also reflects our commitment
to connect innovation to solutions that make our company, our customers and our
communities more sustainable.

This report explains the progress we’ve made to align the six strategic focus areas of our citizenship and
sustainability program with our business principles. While all the areas are key to our mission, we’ve chosen
here to document our progress in three of them:
>m inimizing the environmental impact of our operations.
>u sing innovation and technology to enhance people’s lives.
>a nd connecting people and businesses worldwide in ways that help them reduce their own environmental impact.

As part of our progress, we’ve transformed how we approach citizenship and sustainability internally. In the
first quarter of 2008, we created a Citizenship and Sustainability Steering Committee comprised of officers
from across the company. This committee is accountable to the Public Policy Committee of the AT&T Board
of Directors, which has oversight for all AT&T’s citizenship and sustainability.

We’ve also worked with a nonprofit organization, Business for Social Responsibility, to conduct a companywide
materiality analysis. This process helped us better prioritize our citizenship and sustainability issues and develop a
strategic framework for our program.

In short, we’ve made a lot of progress, but we know there is more to do. We view this as a journey — and we
commit to continuous improvement in integrating our commitment to our communities with our business
and long-term growth strategies.

We recognize that the dedication, passion and support of our employees makes our progress possible. And
we’re grateful to our partners and stakeholder organizations who have supported and guided us this year.
We look forward to strengthening those partnerships as we continue this exciting work.

Sincerely,

Charlene Lake
Vice President of Public Affairs, Corporate Citizenship and Sustainability

6 I Letters
AT&T Citizenship and Sustainability Report 2007/2008

Citizenship and
Sustainability at AT&T
 We’ve taken significant steps to better integrate and
align our citizenship and sustainability initiatives with
our business and long-term growth strategies.

What’s New
Since our last citizenship report in 2006, we’ve taken significant steps to better integrate
and align our citizenship and sustainability initiatives with our business, culture and long-
term growth strategies. Accountability for citizenship and sustainability now resides at the
very highest levels of our company and is further embedded into our everyday operations.

Governance
We’ve taken concrete steps to elevate the importance of citizenship and sustainability and to strengthen
the management of related issues throughout our company. In 2008, AT&T’s Board of Directors expanded
the responsibility of its Public Policy Committee to include oversight in this crucial area. We appointed a
senior executive to coordinate our citizenship and sustainability program. And in the first quarter of 2008,
we put in place a Citizenship and Sustainability Steering Committee made up of officers from across the
company. The committee meets quarterly to provide direction to expert teams within the business that
manage specific citizenship and sustainability initiatives on an ongoing basis. Expert teams report regularly
to the Steering Committee members on these initiatives.

Citizenship and Sustainability Steering Committee

Michael G. Antieri, Senior Vice President-Consumer Marketing Tim Harden, President-Supply Chain and Fleet Operations
William M. Archer, Chief Marketing Officer-Business Randall Hargraves, V ice President-Global Internet
Henry Arnold, V ice President-Operations, Data Centers Operations
Advertising and Publishing Kaveh Hushyar, S enior Vice President-Network
Planning and Engineering
Dorothy Attwood, S enior Vice President-Public Policy
and Chief Privacy Officer Charlene Lake, V ice President-Public Affairs, Corporate
Terry D. Bailey, S enior Vice President-Mass Markets Citizenship and Sustainability
Operations Support Paul Mancini, Senior Vice President and Assistant General Counsel
Cindy Brinkley, S enior Vice President-Talent Development Brooks L. McCorcle, Senior Vice President-Investor Relations
and Chief Diversity Officer Shawn McKenzie, Senior Vice President-Corporate Real Estate
Keith Cambron, P resident and Chief Executive Officer-AT&T Labs Roman Pacewicz, S enior Vice President-Regional
David Christopher, Chief Marketing Officer, Mobility Business Markets Marketing
Rick Felts, S enior Vice President-Information Larry Solomon, Senior Vice President-Corporate Communications
Technology Operations Carol Tacker, Senior Vice President-Compliance

8 I Citizenship and Sustainability

Citizenship and Sustainability Governance Structure

Public Policy Committee of the AT&T Board of Directors (Oversight)

Citizenship and Sustainability Steering Committee (Cross-Functional Business Unit Representation)

Led by Vice President-Public Affairs, Citizenship and Sustainability

Citizenship and Sustainability Team

Social Community Energy Supply Waste Product Diversity Innovation

Policy Engagement Consumption Chain Management Stewardship

Business Unit Expert Teams

Citizenship and Sustainability I 9

 Materiality Analysis
Concurrent with our strengthened governance structure, we aligned our initiatives more closely with our business
goals. This process, called a materiality analysis, is described on page 48 of this report. The analysis helped us
better prioritize our citizenship and sustainability issues and develop a strategic framework for our program.

Strategic Focus Areas

Strengthening Communities

We strengthen our communities by providing good jobs, donating our time and talents, supporting
underserved populations and promoting education programs that create economic opportunity.

Investing in People

We strive to be a great place to work, to be respectful and supportive of our diverse workforce and
inclusive culture and to recognize the benefits of our diverse suppliers, customers and business partners.

Leading With Integrity

We demand the highest standards of ethics, integrity and responsibility in our operations.

Minimizing Our Environmental Impact

We strive to minimize our environmental impact in ways that are relevant to our business and
important to the communities we serve.

Connecting People and Business

We efficiently connect people and businesses everywhere with innovative and sustainable
products and services.

Leading Innovation and Technology

We lead the way in innovation and technology and apply developments to make a sustainable
difference in society.

10 I Citizenship and Sustainability

Of our six strategic focus areas, three — Minimizing Our Environmental Impact, Connecting People and
Business and Leading Innovation and Technology — represent areas of growing importance and priority
at AT&T. For that reason, this report focuses on those topics, including recent activities, challenges and
plans for each. We also provide a brief snapshot of the major highlights in our other three focus areas.
Our 2009 report will provide more depth on all six strategic focus areas, including performance data,
goals and metrics.

What’s Next
As a next step, we’ll focus on advancing two internal elements of our citizenship and
sustainability program — employee engagement and key performance indicators to
measure our progress in all six of our focus areas.

How we plan to engage our employees to help us be a better corporate citizen:

Our citizenship and sustainability efforts reflect the work of many expert teams across the company. But our more
than 300,000 employees also have a vital role to play in realizing those efforts in the communities we serve.

People enjoy working for and with a company that is a good corporate citizen and a responsible steward of
the environment, and we’re working hard to live up to that expectation. That’s why we’ve long worked to
engage our employees in our citizenship and sustainability activities and why we continue to do so.

We strive to communicate with our employees on a regular basis and involve them on a personal and professional
level. We have developed a comprehensive employee engagement program to make communication
relevant, frequent and easily accessible. A key milestone toward this commitment will be the launch later
this year of an employee Web site specifically focused on our citizenship and sustainability efforts. In addition
to engaging employees through interactive components of the Web site, our program involves employees
through our volunteer organization, the AT&T Pioneers, and our annual Champions of the Environment
awards, which honor individual employees and teams that make contributions to the environment.

Citizenship and Sustainability I 11

 We recognize the need to fully understand our existing
impacts and to better position our company for the
transition to a carbon-constrained economy by reducing
our reliance on carbon-intensive energy sources.

How we’ll measure our performance and report on both the progress and the
challenges we face:

We’ve gone through a number of recent mergers and acquisitions, and we’re continuing to integrate four
companies, each with its own operations, systems, history and policies. As we manage these changes and
move forward as the new AT&T, we’re committed to continuous improvement and increased transparency
in communicating our progress. We’re taking concrete steps to define and establish measurements for our
citizenship and sustainability performance.

We’re still in the initial stages of establishing measures that will help us better manage our business and be
relevant and understandable to stakeholders. We’re paying particular attention to energy consumption and
greenhouse gas emissions. We recognize the need to fully understand our existing impacts and to better
position our company for the transition to a carbon-constrained economy by reducing our reliance on
carbon-intensive energy sources. As a first step, we’re focusing on measuring our energy consumption.
In the interest of securing and providing detailed and meaningful data, we are actively pursuing a
comprehensive, three-step process:

Identifying sources, establishing reliable data access and storage processes and consolidating
1 responsibilities for managing the multitude of data sources related to our energy consumption that
existed in the companies merged to create the new AT&T.


2 Assessing the metrics that will enable us to effectively manage our energy consumption while providing
meaningful insight to interested external stakeholders.


3 Ensuring that quality assurance processes exist and are operating effectively to maximize the accuracy
and reliability of the results we produce.

This process will take time, but it will produce information that will be most useful for our business and
meaningful for stakeholders. Our 2009 report will include a more thorough discussion of performance
data, goals and metrics, not just for energy consumption but for all six of our strategic focus areas.

12 I Citizenship and Sustainability

 AT&T Citizenship and Sustainability Report 2007/2008

Six Strategic Focus Areas

 Six Strategic Focus Areas
14 I Strengthening Communities
15 I Investing in People
15 I Leading With Integrity
16 I Minimizing Our Environmental Impact
32 I Connecting People and Business
38 I Leading Innovation and Technology

It’s our hope that the information contained in this section will foster an ongoing
dialogue — one that will continue to guide our journey in citizenship and
sustainability. We pledge to maintain this dialogue and to be transparent in reporting
the progress we make and the challenges we face toward achieving our goals.

Strengthening Communities Learn more about our work in this area online.

Our Commitment: We strengthen our communities by providing good jobs, donating our time
and talents, supporting underserved populations and promoting education programs that create
economic opportunity.

>O
 ur jobs offer competitive pay, excellent benefits
and opportunity for training and advancement.
Of our total global workforce — 310,070 employees
— about 60 percent is union represented.
>A
 T&T and the AT&T Foundation have together
provided more than $1.9 billion of charitable
commitment to communities across the
country during the course of our history.
>A
 T&T Aspire, a $100 million philanthropic
program launched in 2008, focuses on
student success and workforce readiness
to combat the U.S. high school dropout crisis.
>T
 he AT&T Pioneers is one of the largest
industry-sponsored volunteer organizations
in the country, with nearly 365,000 AT&T
employees and retirees. In 2007, the AT&T
Pioneers donated more than 10 million hours
of personal time to community outreach
activities — worth more than $187.7 million
in salaried time.

14 I Six Strategic Focus Areas

Investing in People Learn more about our work in this area online.
Our Commitment: We strive to be a great place to work, to be respectful and supportive
of our diverse workforce and inclusive culture, and to recognize the benefits of our diverse
suppliers, customers and business partners.

>W
 e spend more than $5.5 billion annually for employee and retiree health care, providing coverage
for 1.2 million people. AT&T also spent $200 million on employee-training programs and $26 million
on tuition assistance last year.
>T  oday, 44 percent of our U.S.-based employees are women and 39 percent are people of color.
> In 2008, DiversityInc included AT&T among its Top 50 Companies for Diversity for its commitment
to diversity in the workplace and marketplace.
>W  e have 10 Employee Resource Groups that are open to all employees. These groups support AT&T’s commitment
to diversity and inclusion through their efforts in the workplace, the marketplace and the community.
>W e have a 40-year legacy as a pioneer in supplier diversity, and we’re one of only 13 companies that spend
more than $1 billion annually with women-, minority- or disabled veteran-owned businesses. In 2007, AT&T
spent $5 billion with diverse suppliers, representing more than 12 percent of our procurement budget.

Leading With Integrity Learn more about our work in this area online.
Our Commitment: We demand the highest standards of ethics, integrity and responsibility
in our operations.

>W
 e are committed to the highest standards of ethics, integrity, personal and corporate responsibility
and adherence to laws and regulations that govern our business. We’ve gained and retained the public’s
trust and confidence for more than a century through our dedication to these corporate values. In keeping
with this commitment, we’ve adopted a number of processes and policies that guide our employees in
upholding the integrity of the AT&T name.
>S
 pecific to our citizenship and sustainability commitment, the AT&T Board of Directors’ Public Policy
Committee has oversight for corporate policies and practices related to citizenship and sustainability.
The Citizenship and Sustainability Steering Committee, made up of officers from across the company,
works in concert with the Board and the Citizenship and Sustainability Team.

Six Strategic Focus Areas I 15

 Minimizing Our Environmental Impact
Our Commitment: We strive to minimize our environmental impact in ways that are relevant
to our business and important to the communities we serve.

Overview
This section highlights the initial steps we’ve taken to become more energy efficient and
to reduce our own environmental impact. Our recently revised environment, health and
safety policy is designed to help us do just this — to responsibly use energy and other
natural resources. It’s our policy to operate and to provide products and services in
a sustainable manner.

As we take these steps, we’ve found many challenges and uncertainties. Some of these include price volatility
and uncertainty of various energy sources, the absence of competitively priced alternative-fuel technologies
for the type of vehicles we require, rapid increases in data center energy use and mounting electronic waste
as the speed of innovation delivers more options. To combat these challenges and others, we’ll continue to
work with industry and policymakers to create a business and regulatory environment that enables us to
further accelerate efforts to reduce our environmental impact.

Managing Energy
Effective energy management is crucial to the competitiveness of our business and the reliability of our service
to customers. That’s why it’s our policy to conduct our business in a cost-effective and energy-efficient manner.
A concerted effort to improve energy efficiency is a responsible corporate practice — one that not only saves money
but also helps reduce the risks of adverse environmental effects.

For these reasons, we’ve recently taken two important steps:

>W e developed an energy policy to improve and optimize energy efficiency, while maintaining or improving
the quality, reliability and competitiveness of our services. Going forward, we’ll implement this strategy by
developing specific goals and metrics as well as improved management systems.
>W e formed an Energy Council made up of key executives from all business units that directly consume energy in their
operations or that design, develop or specify energy-consuming equipment. The Energy Council is responsible
for advancing our energy strategy within the company by identifying and assessing ways to operate more efficiently.

16 I Six Strategic Focus Areas

Operating More Efficiently
We work hard to enhance energy efficiency in our buildings, information technology systems and networks.
In 2007, we completed 335 comprehensive energy audits at our top energy-consuming locations to identify
opportunities to improve energy efficiency. Consolidating operations has allowed us to shed unnecessary
building space, and actions taken from the audit findings have resulted in annualized energy savings
of more than 230 million kilowatt hours (kWh). This is equivalent to the average annual electricity use of
approximately 19,200 households, according to the U.S. Environmental Protection Agency (EPA) Greenhouse
Gas Equivalencies Calculator.

We work across functional units to identify ways to reduce energy consumption in buildings, including:
> Installing high-efficiency lighting and identifying lighting retrofit opportunities.
>A  dding automated controls such as motion sensors and temperature controls.
>U  pgrading heating, ventilating and air conditioning equipment.
>O  ptimizing building occupancy to reduce heating/cooling for underused locations.
>U  sing variable frequency drives to start large motors such as chillers, hot and cold water pumps
and air-handling units.
>T  urning down network equipment components that are no longer required, are obsolete or have reduced need.
>U  sing air economizers, which allow AT&T to use outside air on mild days to help cool data centers.
>R  e-commissioning our existing buildings to optimize infrastructure and controls.

In addition, two of our administrative buildings — one in Georgia and one in Tennessee — received ENERGY
STAR certification from the EPA in 2007. We’re exploring opportunities to get more buildings certified.

Data Center Strategy

Part of our work to responsibly manage the energy consumption of our own business operations includes
managing our data center operations. These are the centralized facilities that provide storage and
management of server, network and computer equipment. The industry’s data center electricity use has
been growing rapidly in recent years. In fact, energy consumed by the industry’s data center servers, cooling
equipment and infrastructure more than doubled worldwide from 2000 to 2005, according to a February
2007 study conducted by Jonathan Koomey, a consulting professor at Stanford University and a staff scientist
at Lawrence Berkeley National Laboratory.

At AT&T, we manage 24 Enterprise Data Centers (EDCs) and 38 Internet Data Centers (IDCs). With rising
power costs and increased need for data center power, managing our data centers in an efficient way is

Six Strategic Focus Areas I 17

 ”EPA is very pleased to have AT&T’s support for the development
of the ENERGY STAR rating for data center infrastructure. It is
only with the active involvement of industry leaders like AT&T
that EPA will be able to provide the data center industry with
the information it needs to most effectively improve the energy
efficiency of these critical facilities.”
— Mike Zatz, manager of EPA’s ENERGY STAR Commercial Buildings Program

a significant challenge for us. That’s why we’re aggressively working to refine our energy-saving practices,
sharing information among groups responsible for AT&T’s internal data centers and our commercial IDCs.
Data centers will always be heavy users of electricity, but we’re working to make incremental improvements
that will lead to improved power efficiency. Through constant process refinement and infrastructure tuning,
combined with server virtualization programs, we strive to get as much computing power as possible out of
our electricity consumption. We do this through five strategies:
>C  onsolidation: Understanding that data centers have very clear economies
of scale, we work to close smaller and less efficient data centers.
>O  ptimization: We work to improve the utilization and efficiency of resources
in our data centers, including cooling, power, space, processors and storage.
>A  pplication Rationalization: We work to unify business applications
and eliminate redundant solutions whenever practical.
>S  upplier/Partner Integration: We work to integrate our sourcing
strategy, suppliers and partners into the company’s energy
conservation initiative process.
> Industry/Government Collaboration: We participate in forums,
committees and commissions to further identify, understand
and promote the adoption of best practices and innovation.

Industry Collaboration
We believe that active involvement in collaborative industry
efforts is essential to promoting and advancing energy-efficient solutions.

To further improve energy efficiency in the data center industry, the EPA launched a data collection initiative
to develop an ENERGY STAR rating for data centers. As support for this effort, AT&T has committed to monitor
and collect performance data for four data centers — two EDCs and two IDCs — and to submit energy
data to the EPA from July 2008 to July 2009. This new rating will help data center operators assess the
energy performance of their buildings’ infrastructure and identify buildings with the greatest opportunity for
improvement, allowing them to capture the financial and environmental benefits of improved energy efficiency
in their facilities. When fully in place, this initiative will assist industry data center facilities in earning ENERGY
STAR certification for superior energy efficiency.

In 2008 we joined The Green Grid consortium, a global group that is dedicated to advancing energy
efficiency in data centers and business computing ecosystems. The Green Grid works to provide

18 I Six Strategic Focus Areas

industrywide recommendations and best practices on metrics and technologies that will improve energy
efficiency in data centers around the world. We’re taking an important role in cooperating with other
leading companies in this effort.

“The Green Grid is proud to welcome AT&T as a

Contributor Member of the consortium. AT&T brings a
breadth of knowledge and experience in the field of
communications. The Green Grid is looking forward to
collaborating with AT&T and leveraging its expertise to
help further the organization’s mission.”
— Mark Monroe, director of The Green Grid

AT&T also chairs the Alliance for Telecommunication Industry Solutions (ATIS), a technical planning and
standards development organization that works to develop and promote worldwide technical and operations
standards for the communications industry and related information technology fields.

We’re a chair of the ATIS Network Interface, Power and Protection-Telecommunications Energy Efficiency
(NIPP-TEE) committee. The first goal of the NIPP-TEE is to develop a standardized method of measuring and
reporting energy efficiency as a function of power consumed versus performance delivered for new equipment
and technologies introduced into the network. This will be presented as the Telecommunications Energy
Efficiency Rating (TEER). The rating will be the equivalent of the ENERGY STAR ratings for consumer appliances.

The TEER will be used to compare like equipment types during the evaluation and selection process.
An industry standard will do two important things — enable better comparison among equipment choices
and allow equipment manufacturers to focus their research and development on improvements driven by
a common measure.

Working with industry bodies like ATIS allows suppliers and users of telecommunications equipment to coalesce
around a widely accepted approach to measuring and improving energy efficiency. In the end, we believe this
approach will provide lower-cost solutions and broader benefits for all key stakeholders across our entire industry.

Six Strategic Focus Areas I 19

 “We applaud AT&T in its initiative to help reduce our city’s
carbon footprint and encourage others to follow suit.
AT&T has been a strong corporate citizen in the Austin
community and becoming a Corporate Champion is
another way the company is showing its commitment
to the sustainable growth of our city.”
— Roger Duncan, general manager, Austin Energy

Investing in Alternative and Renewable Energy Sources

Our energy policy balances our business need for affordable supply with the need to identify alternative
and renewable forms of energy that have less impact on the environment. That’s why we continue to
research and adopt new approaches to how we operate our businesses.

We’ve begun to use solar power and wind power as alternatives to standard energy sources. These efforts will
help us learn about the benefits of renewable energy for our business and help us make educated decisions
as we pursue the future use of alternative forms of energy.

In early 2008, we signed an agreement with Austin Energy to participate in the utility’s GreenChoice®
renewable energy program. Through this program, 10 percent of the electricity purchased for all AT&T
facilities in Austin, Texas, will come from wind power. That’s equivalent to avoiding 7.2 million kWh of
fossil-generated electricity. It’s also enough renewable energy to power 600 average homes in Austin
for a year, according to Austin Energy.

This places us among the Top 20 GreenChoice subscribers. And it classifies us as a GreenChoice
Corporate Champion based on annual energy purchased. More importantly, it’s an opportunity for
us to support sustainable growth in Austin by helping reduce the city’s carbon footprint and by
encouraging other companies to follow suit.

This fall we also began work to install a 1 megawatt solar power system on our facility in San Ramon, Calif.,
one of our largest campuses in the United States. Scheduled for completion in late 2008, the solar power
system, which will include nearly 3,700 solar panels, is expected to generate more than 1.6 million kWh
of electricity a year and replace the building’s normal power consumption by more than 4,300 kWh per day.
That’s equivalent to the electricity required to power more than 165 homes each year, according to the
EPA’s Greenhouse Gas Equivalencies Calculator. The system will generate 5.5 percent of the facility’s annual
electricity consumption, but during peak periods of the day, it will average up to 25 percent.

20 I Six Strategic Focus Areas

“I want to congratulate everyone who contributed
to this forward-looking project around clean,
renewable power. California should continue
providing incentives for companies like AT&T
to invest in alternative power sources.”
— California Senator Tom Torlakson

Improving Fleet Efficiencies

Each day, AT&T maintains extensive telecommunications networks that connect nearly 300 million people
around the world. That requires a lot of service and support — in terms of our fleet, it means operating
about 85,000 vehicles.

Reducing fuel consumption and emissions is a priority and constant challenge for AT&T and the world.
Our long-term goal is to reduce dependence on fossil fuels by optimizing our fleet operations and exploring
new automotive technologies.

Because we require a fleet with multiple vehicle types, no single technology fits all situations. In fact, for
a relatively large number of our service vehicles, there are currently no alternative-fuel vehicle choices
available from U.S. manufacturers. But, we can’t simply wait for these vehicles to become standard – we’re
encouraging suppliers to develop solutions that will work for our business.

Six Strategic Focus Areas I 21

 ”More and more fleets are recognizing that hybrid trucks
can deliver significant reductions in greenhouse gas
emissions and fuel costs. AT&T’s investment in these more
efficient vehicles will benefit the environment and the
bottom line.”
— Victoria Mills, project manager at Environmental Defense Fund

Rolling Out Alternative-Fuel Vehicles

Deploying alternative-fuel vehicles is an important way that AT&T is reducing the environmental impact of our
operations, while improving our efficiency. In June 2008, we started to deploy a fleet of 105 alternative-fuel vehicles.

The ultimate transition to an economy with dramatically reduced reliance on fossil fuels requires that we
learn how to operate our business, particularly our fleet, in fundamentally different ways. We’re using our
initial deployment of alternative-fuel vehicles as a learning tool. We want to better understand what types
of vehicles work best in our business operations. We want to know the logistics involved with providing
alternative fuels, such as Compressed Natural Gas (CNG), to the vehicle. And we want to learn how to
maintain the vehicles in peak condition so we can continue to deliver superb customer service. This
deployment will help us learn and adapt — which then allows us to further expand our use of alternative-
fuel vehicles in places where they’ll continue to generate benefits.

We selected three types of alternative-fuel vehicles to roll out, after careful research of available technologies:
>2
 5 CNG vans
>6
 5 electric hybrid vehicles — Ford Escapes and Toyota Priuses
>1
 5 electric hybrid conversion work trucks

We estimate that our use of these alternative-fuel vehicles will cut fuel consumption by
nearly 34,395 gallons a year, reducing carbon dioxide emissions by more than 300 metric
tons. That’s equivalent to taking 56 passenger vehicles off the road each year, according to
the EPA’s Greenhouse Gas Equivalencies Calculator.

More specifically, the CNG vans are expected to emit approximately 30 percent less greenhouse gas
emissions than traditional gasoline-powered vans. The electric hybrid original equipment manufacturer
vehicles are expected to offer a 39 percent improvement in fuel economy and to reduce greenhouse gas
emissions by 29 percent. The electric hybrid conversion work trucks are expected to offer a 38 percent
improvement in fuel economy compared with similar gasoline-powered vehicles and reduce greenhouse
gas emissions by 28 percent.

22 I Six Strategic Focus Areas

The vehicles, which initially will be deployed in more than 30 cities across 17 states, join four Ford Escape
hybrids that we deployed in California in late 2007. We’ve marked our alternative-fuel vehicles with a Green
Technology insignia to make them easy to identify on the road.

As we incorporate the alternative-fuel vehicles within our fleet, we’ll track fuel efficiency, greenhouse
gas emissions, operating costs, performance and driver satisfaction of each vehicle.

Six Strategic Focus Areas I 23

 Perspectives

Q&A with Jerome Webber,

vice president of Fleet Operations

What made AT&T decide to add We recognize the importance of reducing our environmental footprint. And we
alternative-fuel vehicles to its know that doing so makes sense from both a business and an environmental
perspective. Really, I think it comes down to three principal reasons why it’s a
fleet? What are the benefits? good investment:
> It reduces our operating costs per vehicle.
> It helps reduce our dependence on fossil fuels.
> And it helps reduce emissions to the environment.

What is most unique about First, AT&T’s total corporate fleet is unique. For example, unlike many companies
your new fleet? with large fleets, we don’t have large centralized depots. And, we typically travel
short distances to neighborhoods in the communities we serve. We require a fleet
with multiple vehicles types, and we recognize that one alternative-fuel technology
doesn’t fit all situations. That’s why we decided to explore multiple fuel-saving and
emissions-reducing solutions suited for diverse driving situations and locations.

Given that many alternative-fuel vehicles are geared for companies with high-
mileage fleets that make many stops, we placed our electric hybrid vehicles in
locations where there is a lot of stop-and-go traffic. We wanted the technology
to be used most effectively.

Another example of our tailored approach was in looking at the infrastructure

needed to support certain types of alternative-fuel vehicles. We wanted to
deploy CNG vehicles, but CNG vehicles require an infrastructure of refueling
stations. That’s why we’re rolling out those 25 vehicles in California, which has
more CNG refueling stations than any other state in the country.

What kinds of challenges As we make this change, our main challenge is to understand the ability of
have you encountered? alternative-fuel vehicles to perform in uses much different than those when
used by a private customer. We have to understand the logistics involved with
providing alternative fuels to the vehicle, and we need to maintain them in
peak condition. This initial deployment of alternative-fuel vehicles is a learning
tool that will guide how we move forward in this area. It would be unwise for
us as a business to make a large-scale purchase without a better understanding
of what it takes to run a fleet of alternative-fuel vehicles.

What steps toward creating Our deployment of alternative-fuel vehicles is an important step in the
a greener fleet do you foresee right direction. As alternative-fuel technologies evolve, we’ll explore those
technologies to determine if they’re right for our company. Long term, our
in the future? goal is to develop and implement an alternative-fuel strategy that contributes
to a cleaner and more ecologically friendly environment, reduces our
dependence on fossil fuels and lowers our vehicle operating costs.

24 I Six Strategic Focus Areas

 Daily Fleet Management
Making real changes to our fleet means more than just putting alternative-fuel vehicles on the road.
It also means improving how we manage our fleet on a daily basis. We’ve developed practices to efficiently
manage our fleet, and we continue to explore new ways to reduce fuel use and drive fewer miles.

For example, we’ve completed extensive process work to allow broadband installations to occur
1 without the need for a premises dispatch. That resulted in reduced fuel consumption and greenhouse
gas emissions. We’re also exploring an idling-reduction policy.

In addition, we encourage our drivers to avoid fast acceleration and hard breaking, to keep tires properly
2 inflated by checking them frequently, to reduce the weight of loads carried and to avoid unnecessary idling.

Even the smallest improvements in fuel use and efficiency, when applied across our corporate fleet,
3 can make a significant impact on the environment and on our business. That’s why we’re committed to
identifying smart ways to improve the efficiency of our fleet, now and down the road.

Managing, Recovering and Recycling Waste

Conducting our business in an environmentally responsible
way also extends to the waste we produce in our day-to-day
operations, our network and our products. We reuse and
recycle materials needed to run our business and sell our
products. This ultimately helps reduce the resources we
consume and delivers results back to our bottom line.
This goal extends to our customers as well, as we help
them dispose of our products in a more sustainable way.

Six Strategic Focus Areas I 25

Case Study
Cell Phones for Soldiers
Earth Day Challenge

“Having more
helping hands to
drive our mission
to recycle for the
troops — and
reduce e-waste
— is something
that makes a huge
impact on our On Earth Day 2008, we announced an expansion of our work
with Cell Phones for Soldiers (CPFS), a nonprofit organization
ability to reach that uses funds from recycled cell phones to buy prepaid phone
people and, in cards for active duty military members so they can call home.
the end, send Between Earth Days 2007 and 2008, CPFS collected more than
900,000 phones. We have pledged to help bring in more than
more free calls 1.8 million devices by Earth Day 2009 — double the number
to the troops.” collected the year before.

In addition to providing our stores as drop-off locations for recycling wireless

devices, the AT&T Pioneers — a network of more than 300,000 active and
retired AT&T employee volunteers — assisted with a national donation drive
to support CPFS. During the donation drive, which ran from April through July
2008, the AT&T Pioneers collected more than 23,000 wireless devices. We
also worked with CPFS to launch an online donation drive “starter kit.” This
tool includes environmental tips, planning help and camera-ready artwork to
get donation drives started in offices, apartment buildings, places of worship
and other community centers.

“We run our charity from home, and we rely on volunteer support to collect
phones for recycling,” says CPFS co-founder Brittany Bergquist. “Having more
helping hands to drive our mission to recycle for the troops — and reduce
e-waste — is something that makes a huge impact on our ability to reach
people and, in the end, send more free calls to the troops.”

In addition to the work of the AT&T Pioneers, the company supports CPFS by
providing recycling bins in more than 2,000 of our stores across the country,
which serve as drop-off points for those seeking to recycle their wireless
devices throughout the year.

26 I Six Strategic Focus Areas

Wireless Device Recycling
Every day, millions of our customers use their wireless devices to
connect to their work, family and friends. They can watch TV shows,
listen to music, share live video of themselves and even navigate
their way through cities around the world using GPS — all through
the power of their wireless handsets.

But as customers buy new, innovative devices, the electronic waste

left from their old phones continues to mount. As the pace of innovation
becomes more rapid and the life cycle of phone technology becomes
shorter, this problem increases. According to the EPA, industry e-waste
is growing at a rate three times faster than household trash.

We’re working to keep these wireless devices from landfills — either

by finding a new life for them or by extracting their plastic, copper
and other metals for reuse. In 2007, we recycled almost 3.9 million
phones, as well as more than 911,000 pounds of accessories and
batteries. While this is a small percentage of the industry’s estimated
wireless devices in service, it’s a start — and we’re dedicated to finding
ways to do more.

We collect used wireless devices and accessories in a number of ways, including through our employees,
retirees, company-owned retail stores, other national retailers, dealers and agents, resellers and other
avenues. We also use an Exchange-by-Mail handset warranty program, which collects phones in a centrally
located warehouse, evaluates them for future use and proceeds with either reusing or recycling them.

We were the first wireless carrier to join the EPA’s Plug-In To eCycling program, an initiative the agency has
with consumer electronics manufacturers, retailers and service providers. AT&T and other companies have
pledged to help the EPA increase use of current recycling programs, teach the public about the benefits of
recycling and work in communities to host cell phone collection drives.

Six Strategic Focus Areas I 27

 We execute efficient delivery operations with an eye
toward conservation. We strive to print quantities that
meet, not exceed, market demand. We also accept and
act on consumer requests for alternatives to books,
minimize the number of directories we print and provide
electronic options such as YELLOWPAGES.COM,
RealYP.ATT.com, RealPagesLive.com and CD-ROMs.

Directory Recycling
We continue to offer our customers the most complete and accurate directory information through our AT&T
Real White Pages and AT&T Real Yellow Pages directories. At the same time, we assume accountability for
responsibly managing our natural resources such as paper. That’s why we actively work to reduce the impact
on our environment in paper sourcing, production, distribution and recycling.

We require our paper suppliers and printers to adhere to rigorous standards that promote environmentally
responsible and sustainable practices. For example, we ask our suppliers to:
>P ractice renewable, sustainable resource management of the forests they use. This includes identification
and protection of forestry areas of high conservation value, replanting and renewal programs and
harvesting procedures that promote sustainable forestry.
> Comply with all governmental regulations of their industry for the fiber they use.
>P roduce paper from residual fiber, made from the remnants of other wood-production processes. AT&T Real
Yellow Pages directories contain paper made from post-consumer fiber consistent with reasonable availability
and product performance, with the remainder made from residual fiber, such as sawdust, wood chips and other
fiber that otherwise goes unused. Also, many of our paper suppliers power their production facilities by burning
residual leftovers created during manufacturing in a high-efficiency, low-carbon process.
> Avoid using elemental chlorine bleach in their production processes.
> Use inks that contain soy oils, which are friendlier to the environment.
> Recycle printing process byproducts, such as printing plates, paper trim waste and packaging materials.

We execute efficient delivery operations with an eye toward conservation. We strive to print quantities that meet,
not exceed, market demand. We also accept and act on consumer requests for alternatives to books, reduce
the number of directories we print and provide electronic options such as YELLOWPAGES.COM, RealYP.ATT.com,
RealPagesLive.com and CD-ROMs.

Finally, we endorse and adhere to sound principles of recycling. We produce directories that are recyclable, and
we publish a phone number in our directories that provides recycling drop-off locations. Directories can be
recycled into a variety of useful products, including animal bedding, insulation, bathroom tissue, cereal boxes and
roofing shingles, in addition to new phone books. We also sponsor, manage and invest in recycling initiatives, such
as our award-winning Project ReDirectory recycling program and our involvement with Keep America Beautiful.

While we strive to minimize environmental impact in every step of our directory operations, we still face
challenges. According to the EPA, phone directories make up just 0.3 percent of the municipal solid waste
stream generated each year. Nevertheless, recycling old phone directories remains an important action in

28 I Six Strategic Focus Areas

 the effort to keep unnecessary paper out of landfills. Understanding that effective recycling depends on
more than just our own efforts, we continue to explore partnerships with city and government agencies and
local community groups to create recycling programs and awareness activities to promote recycling of old
directories (see case study below).

The directory industry has long worked with suppliers to source paper that contains high levels of recycled
content, while operating within the constraints of availability and product performance. Our AT&T Real
Yellow Pages directories have reached a level of approximately 40 percent post-consumer recycled content.
The remaining 60 percent is made from residual fiber, such as sawdust, wood chips and other fiber that
otherwise goes unused. Because of print quality production issues, 40 percent post-consumer recycled
content is reaching the maximum of recycled content we can use in telephone directories. An additional
pressure that affects our ability to maintain this percentage of post-consumer recycled content is an emerging
shortage of post-consumer fiber availability, particularly in certain geographic areas where demand is high.

In March 2007, we joined the community of Kern County, Calif., and

Community Clean Sweep to develop a school phone book recycling challenge. Case Study
To kick off the program, 1,064 phone books were placed upright in the Kern County Directory Recycling Challenge
Administration building to compete for the world’s largest telephone book domino
set in the Guinness World Records. The phone books were later distributed to
the offices of Kern County, and the event helped draw attention to the need for
recycling. Sixteen locations throughout Kern County were set up where residents
could recycle their phone books, and local schools collecting the highest number of
books received cash awards.

In 2008, we joined the Kern County Waste Management organization and

Community Clean Sweep again to promote phone book recycling. The 2008 event
offered the public the opportunity to bring its outdated AT&T Real Yellow Pages
phone books to the Extreme BMX racing event, which featured regional BMX bike
racing champions and provided participants with an opportunity to win prizes.
Through the event, we collected more than 4 tons of directories in four hours.

Six Strategic Focus Areas I 29

 Network Reclamation
As one of the largest telecommunications providers, we own an expansive network that connects more than
300 million people each day. This network comprises both wired and wireless infrastructure, all of which
is rapidly evolving.

To help reduce waste as we continue to improve our network, the AT&T Investment Recovery group, which
is part of our Supply Chain organization, follows an industry best-practice hierarchy for the disposal of
company assets. Working in our 22-state landline footprint, the group studies ways to reuse network
assets within the company, return products, sell components and trade or donate materials when needed.
Ultimately, a landfill is only used as the last resort — helping us reduce our impact on the environment.

In our Southeast region, the Investment Recovery group has developed a real-time system for inventorying
and ordering surplus items. This allows our employees in the field to place online orders for materials at no
cost, which are then shipped from central hubs using transportation routes already in place for delivering
other materials. Since 2003, thousands of users in the Southeast have placed more than 60,000 orders for
more than 100,000 individual items — and avoided spending more than $18 million to buy new equipment.
We’re able to repurpose computer systems and even take time to consider how things like screws, anchors,
cables and other basic construction material can gain new life.

Our national program focuses on recycling. In 2007, this approach helped keep more than 72 million pounds
of “scrap” from our 22-state wireline operations out of landfills, and it helped bolster our business. In addition
to other materials, our Investment Recovery team received, processed and recycled:

> Copper and copper cable: 34.1 million pounds

> Lead and lead-acid batteries: 8.6 million pounds
> Central office equipment: 6 million pounds
> Steel: 5.9 million pounds
> Plastic: 1.9 million pounds
> Aluminum: 353,000 pounds

As a result of these initiatives, less than 3 percent of the total materials collected were disposed of as trash
and sent to a landfill. Moving forward, we’ll continue to look for ways to expand this system.

30 I Six Strategic Focus Areas

Engaging Our Suppliers
With assistance and thought leadership from suppliers, we can reduce energy consumption and cost without
sacrificing performance, features and overall supply chain resilience. We expect our suppliers to respect
our values when it comes to energy management and efficiency and waste-stream reductions. And we’re
working to engage suppliers in proactive strategies to create substantive quality and process improvements.

We’re committed to leveraging our purchasing power to drive this kind of systemic change, innovation and
improvement. The improvements realized by our suppliers because of the sustainability requirements we
demand will benefit not only AT&T but all of the customers who purchase our suppliers’ products or services.

We’re also collaborating with leading industry associations as participants and contributors in forums
designed to establish standards for energy efficiency, environmental impact reduction, adoption of
sustainable technologies and other aspects of sustainability.

Our supply chain process is a critical enabler for sustainability, and we encourage our suppliers to integrate
sustainable business practices. We’re currently developing sustainable supply chain management guidelines
and working to determine how to systematically incorporate sustainability into the products and services
we buy from our suppliers.

Six Strategic Focus Areas I 31

 Connecting People and Business
Our Commitment: We efficiently connect people and businesses everywhere with innovative
and sustainable products and services.

Overview
Information and Communication Technology (ICT) products and services enable
people and businesses to make more energy-efficient choices and reduce their own
environmental impact. A recent report by The Climate Group, on behalf of the Global
e-Sustainability Initiative, indicates that ICT could deliver carbon reductions five times
larger than the total emissions from the entire ICT sector in 2020.

The ICT industry is uniquely positioned to respond to this opportunity. However, we recognize that meeting
the increased demand for innovative products and services also means our industry’s own footprint will
increase. That’s why we’re working hard to be part of the solution by reducing our environmental impact.
And, we’re looking forward to working with our supply chain, business partners, customers and policymakers
to create the market and regulatory conditions needed to promote greater adoption of ICT products and
services in the future.

Understanding and Promoting Sustainable Solutions

We know that the opportunity for our industry — to harness the power of ICT to enable others to improve
energy efficiency and reduce emissions — brings with it responsibility. To better understand the role our
products and services can play in helping customers live more sustainably, we joined Cisco and the Economist
Intelligence Unit in early 2008 to explore how customers view ICT as a potential solution to reduce their own
carbon emissions. Of the 345 top-level executives polled for the survey, 18 percent said their companies have
a carbon-reduction strategy and 39 percent said they’re in the process of developing one. Yet of those
that have a carbon-reduction strategy or are developing one, nearly half said that the role of ICT was not
mentioned in their strategy. By getting involved in research efforts such as this, we’re working to better
understand our customers’ views about the role ICT products can play in reducing their own carbon footprint.

32 I Six Strategic Focus Areas

At the same time, we’re viewing our own products and services more closely through this lens, so that we
can better quantify the energy efficiencies, cost savings and greenhouse gas emission reductions that our
products can provide to our customers.

For example, in April 2008 we worked with Cisco to launch the AT&T Telepresence Solution, a new video
conferencing service, which combines rich audio with High Definition video to create unique “in-person”
experiences among people in different places. We’re currently collaborating with Cisco to determine the
specific greenhouse gas reductions that our customers are achieving by using Telepresence in place of
unnecessary travel. We plan to report our specific findings in the coming months to help educate customers
on the role ICT products can play in reducing their own carbon footprints.

According to an October 2007 study by the American Consumer Institute, if video conferencing substituted
for 10 percent of business air travel, it would reduce carbon emissions in the U.S. by some 35 million
tons annually. At AT&T, we use new technologies such as Telepresence to reduce travel and improve the
potential of employees to work anywhere and anytime. And, we’ve recently developed a new policy that
supports telecommuting as an option when it meets the needs of our employees and our business.

Telepresence is just one of several products that have the potential to

deliver economic and environmental benefits for our customers. With our
network-based Virtual Private Network (VPN), customers can connect
from multiple locations with voice, video and data applications on a single
network. Our customers can get globally consistent access to corporate
information inside the office, as well as to mobile and remote workers.
By using the AT&T Global Network Client, end-users control their form of
access and businesses control who gains access to specific applications.
In addition to the efficiency of using one network for multiple applications,
network-based VPNs offer our customers a secure means to enable
remote access for virtual office and telecommuting programs.

Six Strategic Focus Areas I 33

 We also offer a broad portfolio of wireless solutions, including the new iPhone 3G, that integrate mobile
workers with their businesses. These devices help employees remain productive while they’re away from
corporate locations and reduce consumption of natural resources.

In addition, AT&T is probably the largest U.S. wireless provider for commercial truck and van fleets. Our products
and services, including powering GPS-enabled devices over our network to provide 24/7 visibility, help our
customers maximize vehicle dispatching and routing efficiency, which can help reduce fuel consumption.

The Promise of Broadband

Broadband — technology that allows high speed data transmission — is quickly becoming one of the most
important tools to connect people and businesses to sustainable and innovative products. This technology
allows people to communicate more rapidly than ever, more securely and with less environmental impact.

Today, AT&T’s network is carrying record volumes of Internet traffic. In the past two years alone, consumer
broadband traffic on our network has doubled, and our consumer broadband customers use 40 percent
more bandwidth each year. Our network carries more than 16 petabytes of data traffic on an average
business day to nearly every continent and country — that’s more than 400 times the digitized contents of
the Library of Congress. This dynamic growth in Internet use will shape our broadband future, bringing faster
connections, robust infrastructure, new investment, innovative services and more sustainable lifestyles.

By allowing people to communicate anywhere they are, broadband has obvious environmental benefits.
With broadband capabilities such as Web browsing, e-commerce and online local search, customers can
reduce their need for travel, which may also help lower energy consumption.
>O  nline booksellers use 14 times less energy to sell $100 worth of books than a traditional store, the
American Consumer Institute estimates.
> J ust a 7 percent increase in broadband adoption could result in $6.4 billion per year in mileage savings
from unnecessary driving and 3.2 billion fewer pounds of carbon emissions in the United States, according
to Connected Nation estimates in February 2008.
>W  idespread adoption and use of broadband can reduce carbon emissions by more than 1 billion metric
tons, according to an October 2007 study by the American Consumer Institute.

34 I Six Strategic Focus Areas

An Economist Intelligence Unit (EIU) report published this spring,
co-sponsored by AT&T and Cisco, found that video and audio
Case Study
EIU Study Explores Role of ICT
conferencing can be used to save on business travel, which in
in Tackling Carbon Emissions
turn reduces the potential of carbon emissions from airplanes,
cars and other modes of transport.

In the same report, 43 percent of respondents surveyed selected increasing

the use of virtual meetings as the biggest contribution in reducing their carbon
footprint. And with 39 percent of companies surveyed having a green strategy
in the pipeline, corporate chief information officers are uniquely positioned to
demonstrate the benefits that ICT can bring to their companies.

Case Study
Saving Energy While
Watching TV

As consumers look for ways to reduce their environmental

footprint and save on energy costs, we’re committed to helping
them do so by providing energy-efficient products and services.

As the first video service provider to participate in the U.S. EPA’s ENERGY STAR
program for video set-top boxes, we’re providing our U-verse TV customers with
set-top boxes that meet energy-efficiency criteria set by ENERGY STAR. We’re
actually exceeding the EPA requirements with 100 percent of our deployed
U-verse TV receivers being ENERGY STAR compliant. The EPA estimates that if
all set-top boxes sold in the United States meet the ENERGY STAR requirements,
the savings in energy costs will grow to about $2 billion each year and
greenhouse gas emissions will be reduced by the equivalent greenhouse gas
emissions from about 2.5 million vehicles annually.

Six Strategic Focus Areas I 35

 Services delivered through broadband and Internet Protocol (IP) technology empower our customers to
reduce their own environmental footprints at work and at home. With choices such as teleconferencing,
video conferencing and Web conferencing, our customers can connect with colleagues across the world
without unnecessary travel. Our music and video downloading also helps reduce environmental impacts and
waste commonly attributed to CD/DVD packaging, manufacturing, transporting and disposal. A 2007 study
from the Consumer Electronics Association estimated that 180 million gallons of oil could be saved and
1.3 million metric tons of carbon emissions could be prevented if just half of all current video/DVD rentals
transitioned to video on demand.

“We applaud AT&T for their commitment to deliver ENERGY

STAR qualified set-top boxes to their AT&T U-verse TV
customers. Their efforts will bring a new level of energy
efficiency to home entertainment, helping households
reduce greenhouse gas emissions and save money.”
— Robert Meyers, principal deputy assistant administrator for EPA’s Office of Air and Radiation

Broadband also enables advanced applications such as telemedicine and distance learning.

Telemedicine has the potential to deliver improved health care to every American, including those who
live in underserved and remote communities. That’s why we’re working hard to design the specialized ICT
infrastructure and applications that can deliver health care far and wide. As an example, in February 2008
AT&T and the state of Tennessee announced a major initiative to deliver the country’s first statewide health
information exchange. The Tennessee Information Infrastructure eHealth Exchange Zone will transform
how health information is accessed and delivered by the Tennessee care-giving community and, ultimately,
enable increased patient safety, reduced spending and improved quality of care for the state’s 6 million
residents. This new patented health information exchange is AT&T’s Healthcare Community Online solution,
and it features a secure online collaboration center designed to safely and securely enable health care
applications such as e-prescribing.

36 I Six Strategic Focus Areas

 Enabling distance learning can help institutions
reach students anytime and anywhere.

Through distance learning, broadband allows children living in rural areas to have access to the same
educational resources as children in urban areas. Enabling distance learning can help institutions reach
students anytime and anywhere. As one example, in April 2008 we announced a five-year, $50 million
contract with the Corporation for Education Network Initiatives in California (CENIC), a nonprofit corporation
that supports more than 250 educational and research entities across the state, to increase broadband
connectivity. The contract will serve every segment of the state’s public education system, enabling
telepresence and video conferencing, distance learning and large collaborative projects.

Both telemedicine and distance learning provide alternatives to eliminate unnecessary travel, providing
our customers with additional opportunities to reduce their environmental impact.

Through services such as e-billing and consolidated billing, our

customers can reduce unnecessary paper and other waste products.
Case Study
Going Paperless
More than 3.26 million of our customers do their AT&T billing with us online,
which allows them to view and pay bills in seconds, cutting down on mail,
checks and paper records. The PayItGreen Alliance estimates that if 20 percent
of households switched to online billing, they would avoid producing 1.96 tons
of greenhouse gas emissions annually, the equivalent to taking more than
325,000 cars off the road. That’s why we’re committed to actively educating
our customers about the positive environmental benefits of choosing electronic
payment options instead of paper. As part of this effort, we established the Web
site “How do you live green?” Customers can register for an online account,
enroll in paperless billing and set up automatic payments. They can also submit
their own “Living Green Tips” and view previously submitted tips.

Six Strategic Focus Areas I 37

 Leading Innovation and Technology
Our Commitment: We lead the way in innovation and technology and apply developments
to make a sustainable difference in society.

Overview
Our legacy of innovation is rooted in AT&T Labs — our research and development arm —
and began in 1876 with founder Alexander Graham Bell’s invention of the telephone.
Over the years, AT&T Labs has produced groundbreaking technologies and innovative
products and services that have changed the way people live, work and play. With seven
Nobel Prizes and thousands of issued and pending patents worldwide, our researchers
have invented some of the world’s most advanced technological innovations, including the
first solar cell, the laser, fiber optic communications, cell phones, satellite communications,
machine translation, automatic speech recognition and network fraud detection.

Formerly known separately as SBC Laboratories, BellSouth Laboratories and AT&T Laboratories, the combined
AT&T Labs is the driving force behind innovation and exploration at the new AT&T. Our researchers continue
to file an average of two patents a day and continue to pioneer new technologies, products and services
that contribute to our mission of global connectivity.

AT&T Labs fosters a work environment and culture that encourages our more than 1,100 scientists and
engineers to apply their work to pressing social and environmental challenges. We also support their efforts
to teach at leading research universities across the country. This culture has helped produce groundbreaking
technological advances that have benefited not only our business but also society.

38 I Six Strategic Focus Areas

Innovation is the engine that will continue to improve the quality of life in today’s fast-changing global
economy. And while our work in innovation, research and development is focused on the communications
industry, we never lose sight that our innovation has an impact beyond our company’s own business needs.
That’s why we’re harnessing our technology and innovation to develop forward-looking technologies
that meet social and environmental needs in truly unique ways. We’re working to apply technological
advancements developed for our business in ways that one might not associate with AT&T — to tackle global
issues, such as climate change through work on species migration and energy efficiency.

The internal governance changes we’ve made will also ensure that AT&T Labs has an increasingly prominent
and integrated profile inside our company, enabling us to further drive innovation throughout our business,
our products and services and our communities. We look forward to collaborating with stakeholders, leading
universities, policymakers and customers to identify the next generation of breakthrough technologies that
will help make our company and the communities we serve more sustainable.

AT&T Labs fosters

a work environment
and culture that
encourages our
more than 1,100
scientists and engineers
to apply their work
to pressing social
and environmental
challenges.

Six Strategic Focus Areas I 39

 AT&T Innovation
Technology Timeline

1876
1800s 1910s early
1920s1900s 1930s 1940s 1920s 1950s

1876 The Telephone 1933 S tereo Recordings, 1951 First Direct-Dial Transcontinental
Radio Astronomy Telephone Call, Microwave
1936 Synthetic Speech Radio-Relay Skyway
1939 T he Digital Computer, 1954 The Solar Cell
1915 First Transcontinental Telephone Call High Frequency Radar 1956 Transoceanic Telephone Cables
1917 The First Air-to-Ground and 1958 The Laser
Ground-to-Air Radio Communications

1924 Fax Service, Electrical Sound Recording 1940 Complex Number Generator
1926 Sound Motion Pictures 1941 Touch-Tone Telephones
1927 Negative Feedback, The Wave Nature of 1946 First Mobile Telephone Call
Matter, Long Distance TV Transmission, 1947 The Transistor
Trans-Atlantic Phone Service 1948 E
 rror Correction,
1929 Broadband Coaxial Cable, Information Theory
The Artificial Larynx
1959 1970 2000

40 I Six Strategic Focus Areas

 Over1876
the years, AT&Tearly
Labs1900s 1920s
has produced groundbreaking
technologies and innovative products and services that
have changed the way people live, work and play.

1960s 1970s 1980s 1990s 2000s .....

1959 1970 2000

1960 Communications Satellites 1983 Cellular Phones, C++ 2000 Network Fraud Protection
1962 Satellite Transmission 1989 HDTV, The Speech- 2001 H
 ow May I Help You?, Natural
1965 The Echo of the Big Bang Driven Robot Videos, Next Gen Network Tools
1969 UNIX and the Internet 2002 Privacy Bird, CNI
2003 Tomo-Gravity, Gigascope
2004 Maui, Internet Protect
2005 Traffic Analysis Service (TAS)
1970 Picturephone
1976 Epitaxy Microchips, First Digital
Electronic Switching
1977 Fiber Optic Communication
1992 T he Instant Language Translator,
Fault-Tolerance Software
1993 The Computer Videophone
1997 a2b Music
1998 Phone Web
1999 Quantum Computing

Six Strategic Focus Areas I 41

 Applying Innovation to Address Environmental Challenges
As a global communications company, we’re dedicated to creating a better, more resilient Internet. And we
want to help create a better, more sustainable world. The integration of these two goals defines both our
commitment and our approach. Thanks to our relentless devotion to innovation and our commitment to
encouraging the personal research of our team members, software developed by AT&T Labs researchers is
now being used to promote a more sustainable world.

How can a telecommunications company help protect lemurs, frogs and geckos on the other side of the earth?
By applying the same software used to maintain resilient telecommunication networks, Labs researchers are
making the environment more resilient and helping protect rare animals. This “Machine Learning” software,
which is available online at no charge for nonprofit and research use, has been downloaded thousands of
times — from about 60 different countries — for conservation efforts around the world. In addition to helping
animals in Madagascar, other techniques for designing reliable communications networks are helping protect
rare vegetation from the impacts of climate change. Labs researchers are also helping to design safe migratory
corridors for rare mountain plant species in South Africa that are threatened by global warming.

Applying Innovation to Address Social Challenges

As we develop new technologies and innovations progress, we identify opportunities to apply our innovation
to better society. One such area is health care — improving health care delivery and reducing health care
costs. This is not only good for the communities where we operate, but it also is good for our business.
As a company, we spend approximately $5.5 billion in health care for our 1.2 million employees, dependents
and retirees each year.

AT&T shepherds innovative improvements to help

patients by delivering medical results faster and
with more accuracy and security.
Through research, philanthropic support and products and services, we’ve brought technology solutions
and strong, dependable information networks to the nation’s health care institutions, doctors, nurses,
pharmacists, technicians and countless others who provide patient care. Working collaboratively in health
and university settings, AT&T shepherds innovative improvements to help patients by delivering medical
results faster and with more accuracy and security. We also strongly support the Regional Health Information
Organizations that are encouraged by the federal government.

42 I Six Strategic Focus Areas

Perspectives

Q&A with Steven Phillips,

lead researcher, AT&T Labs
A few years ago, I was doing some volunteer programming for the Center for How did you get involved
Biodiversity and Conservation at the American Museum of Natural History.
in conservation biology and
Some ecologists there were modeling species distributions from museum
collection records, and I realized that this modeling task offered an opportunity developing software for mapping
to do computer science research and contribute to conservation efforts at the endangered regions and species?
same time.

As a researcher at AT&T Labs, I have the luxury of setting my own research How do you make the jump from
agenda. I generally work on algorithms and optimization — finding efficient working with telecommunications
ways to solve large problems, such as designing and managing continental-
scale telecommunications networks. However, it was clear to me that networks to creating software
developing a new approach to species distribution modeling entailed research that could save wildlife in
in machine learning, and I hadn’t worked in that area before. So, I walked Madagascar?
into the office of Rob Schapire, a star researcher in AT&T Research’s machine
learning group at the time. I described the modeling task to him and asked his
advice, and without any hesitation he suggested using a “maximum entropy”
approach. We’ve been working together on Maxent ever since, together with
Miro Dudik, who was Rob’s first Ph.D. student after Rob moved to the computer
science department at Princeton. I’ve gotten to learn about machine learning
along the way and learn some ecology, too.

The first version of the software was ready in just a couple of months, but we’ve How long did it take to develop
continued working on it for about six years, refining it and adding new features. this software?
Biodiversity data is very challenging to work with — the most important
species for conservation are often the rarest and hardest to find,
so there are very few records to use for modeling, and the records have strong
geographic collection biases reflecting the difficulty of reaching and working
in some of the areas where the species live. This makes the modeling task
challenging and has led us to a number of interesting theoretical questions
in machine learning. We’ve made perhaps a dozen software releases, with the
new features deriving both from our theoretical research and from requests
from ecologists using the software.

Six Strategic Focus Areas I 43

 Perspectives (continued)

Q&A with Steven Phillips,

lead researcher, AT&T Labs
How does the program work? Maxent uses a collection of locations where a species has been found, together
with environmental conditions (such as rainfall and temperature) across the
study area, to produce an estimate of the species’ distribution in the study
area. It does this by inferring a set of constraints on the species distribution,
based on environmental conditions at the presence locations. For example, if
most of the presence locations have annual average temperatures above 20
degrees Celsius, we infer that the species likes warm conditions, so most of its
distribution should be above 20 degrees. Among all possible distributions that
satisfy the constraints, Maxent finds the largest, most spread-out distribution,
i.e., the distribution of maximum entropy. Because we maximize entropy, we
get a prediction that shows the full extent of areas with similar environmental
conditions to the places where the species has been found.

Did you have an interest in Absolutely. I feel very strongly about conservation of wildlife, because
Madagascar or wildlife before my generation has an extraordinary responsibility — a quarter of all species
on earth are likely to be driven to extinction during our lifetimes, and we
working on this project? can’t just stand aside and watch. Madagascar is of particular interest, both
because it is arguably the hottest of the hot spots (areas of the world with
a high concentration of rare and endangered species) and because there is
political will to protect Madagascar’s biodiversity. President Ravalomanana
has committed to protecting 10 percent of the land area in national parks,
up from 2.8 percent in 2003.

What other projects related to We’re using an approach widely used to optimize flows of data through
the environment are researchers telecommunications networks to model flows of organisms across a
landscape. We’ve applied it to the proteas, a family of about 300 beautiful
in AT&T Labs working on? flowering plants species in South Africa, to determine how much land we
would need to conserve to allow all species to migrate through protected
areas in response to climate change. We used integer programming to
optimize the configuration of ponds and salt marshes in the South San
Francisco Bay, where former evaporative salt ponds are now being managed
for bird conservation. This summer, a student on an AT&T graduate fellowship
has been working at the Labs on applying optimization methods to
“irreplaceability,” a way of measuring the relative importance of potential
sites to purchase for conservation.

44 I Six Strategic Focus Areas

 Need Photo

Telemedicine is one of the areas in which AT&T’s technological advances are shaping the industry. A 2007
study at Stony Brook University in New York found that telemedicine cuts the cost of managing congestive
heart failure by 41 percent. It also reduced the number of physician office visits by 43 percent, emergency
room visits by 33 percent and hospital visits by 29 percent. Telemedicine has the potential to deliver
the highest quality care to every American, including those who live in underserved and remote
communities. That’s why AT&T is working hard to enhance America’s communications networks and also to
design the specialized information technology infrastructure and applications that can deliver health care
across the country and across the globe.

AT&T’s innovations with in-home health monitoring also are helping families monitor older relatives or family
members with chronic illnesses who are living alone. Our technology allows remote monitoring that reduces
the need for extended hospital stays and makes it easier for patients to maintain their independence
while ensuring that their safety is never compromised. According to a study by Robert E. Litan of the
Brookings Institution, broadband-based remote monitoring for all chronically ill patients could reduce U.S.
health care expenses by 25 percent — or more than $350 billion in total savings — over the next 25 years.

AT&T has begun a trial project in Texas aimed at an independent living facility, supported by several lab
research centers, to measure the value of remote monitoring systems and develop extensions to make them
even more effective.

Fostering Innovation at Leading Universities

Innovation at AT&T will continue to move beyond the traditional confines of the laboratory to working with
groups throughout the company and by continuing our tradition of collaborating with some of the world’s
finest academic institutions.

For a number of years, we’ve been teaming up with top universities because collaboration enhances our ability
to deliver innovative products and services. We work with researchers at Carnegie Mellon University, Rensselaer
Polytechnic Institute and Georgia Tech on joint research ventures. And we fund educational expenses of
students at top universities who are working on their Ph.D. dissertations in areas of interest to AT&T through
our Virtual University Research Initiative. We know that collaboration is vital to our success. We applaud this
with the annual AT&T Labs University Collaborations Symposium. Here, AT&T Labs researchers and university
professors and interns gather to discuss current joint research projects, share progress and make plans for
future endeavors.

Six Strategic Focus Areas I 45

 Our collaborations also are helping advance the development of environmental-related research. For the past
14 years, we’ve teamed with universities to inspire innovative industrial ecology research — a multidisciplinary
science that investigates how the economy and the environment can coexist. Established in 1993, the
AT&T Industrial Ecology Faculty Fellowship provides awards of $25,000 to three academic research teams
at universities across the country. These grants are helping universities produce faculty and students who
can contribute to solving global and regional environmental problems and help shape environmentally and
economically efficient strategies (see case study below).

Case Study >C

 arnegie Mellon University, for a project titled “The Role of Information and
Communications Technology in Carbon Risk Management.” The research team
Fostering Industrial Ecology will analyze the impact of information and communications technology (ICT) in
Research helping other industries manage the risks associated with carbon emissions.
>A
 rizona State University, for a project titled “Virtual Activity Fulfillment:
In 2008, AT&T awarded Mapping the Shift From Transport to ICT Infrastructure” and a second titled
“Multiple Functionality and Personal Digital Infrastructure: Substitution Versus
grants to support the Complementarities.” The first research team will study how an expanded virtual-
research projects of three reality realm is changing the way commerce is conducted, how workplaces
academic research teams function and how public infrastructure systems are used. The second team will
research the environmental implications that are associated with the growth
through the company’s of multifunctional electronic devices, such as accumulation of e-waste, and
Industrial Ecology Faculty how the telecommunications industry can help address such implications.
Fellowship program: >G
 reen Mountain College, Clark University and Oregon State University,
for a project titled “Understanding Business and Environmental Value
Opportunities in the Global Supply Chain of China’s Information and
Communication Technology Industry.” The research team will investigate
and document how the ICT sector can achieve business and environmental
value opportunities within a changing policy landscape in China.

46 I Six Strategic Focus Areas

AT&T Citizenship and Sustainability Report 2007/2008

Materiality Analysis
 In 2008 we embarked on a process to identify the most material, or important,
citizenship and sustainability issues to our company. No company has sufficient
resources to address every business opportunity and problem it faces. It must make
difficult decisions about where it can direct its resources and realize maximum
benefit. Citizenship and sustainability initiatives are not exempt from this reality.

In light of this, we recognized that we needed a process for our citizenship and sustainability programs that
assures we focus on the issues that combine business relevance, stakeholder importance and the ability
to act in a meaningful way. We worked with a nonprofit organization, Business for Social Responsibility
(BSR), to help us undertake a materiality analysis in early 2008. This analysis was designed to meet three
objectives:

1 Identify a comprehensive set of corporate citizenship and sustainability issues for the company.

Prioritize the opportunities based on their importance to stakeholders and their relevance to
2 our business operations.

3 Help inform and optimize subsequent decisions regarding which issues to pursue and the level of activity.

To better understand the relevance of specific issues to AT&T, we conducted in-depth interviews with senior
executives across the company. We also conducted interviews with the people most directly responsible
for oversight and implementation. The interviews helped us assess the degree to which citizenship and
sustainability issues interact with business operations.

To better understand issue relevance to stakeholders, we reviewed reports, public information and position
statements published by governments, media, peer companies, socially responsible investors, customers,
nongovernmental organizations and experts in the field. The information sources we analyzed are consistent
with the guidance accompanying the materiality principle in the GRI Guidelines.

48 I Materiality Analysis
After reviewing the public domain information and internal interviews, we created a list of 53 issues with a
fairly high degree of relevance to our business and stakeholders. The issues on this list were a balanced mix
of both risks and opportunities.

Each issue was then given a short definition to clarify its meaning and relevance to our company. A small
team of diverse subject-matter experts representing our various business units met and discussed each of
the 53 issues. Each issue was given a ranking that guided us in prioritizing the issues into three categories.

We recognize this process is a snapshot in time and that priorities can and will change. As such, the process
we used is both robust and replicable — allowing us to re-evaluate our focus periodically and adapt to new
priorities as they emerge.

es R
su Key issues that are the primary focus of AT&T’s
an
Is

citizenship and sustainability efforts

if y

Iss
Ident

ues

Larger set of issues that are managed, measured

and referenced in public reporting

Issues deferred for future action or excluded altogether

g

nf
I

in or
Mak mD
ecision

Materiality Analysis I 49
 Materiality Outcomes
For purposes of this report, the issues that ranked as being most material received high scores on three
criterion: significant impact on the company, significant concern to stakeholders and AT&T’s ability to act
in a meaningful manner.

You’ll notice that some of the issues in the chart on page 51 are not covered in this report, which focuses on
the areas in which we are intensifying our attention. Our 2009 report will provide more discussion on all of
our citizenship and sustainability issues. The key material issues resulting from our materiality analysis that
we highlight in this report are:

> Energy consumption

> E-waste and recycling
> Supply chain stewardship
> Information and communication
technology (ICT) products and services
> Innovation

The outcome of our assessment is a materiality matrix, which plots each of the 53 issues we identified.
All issues charted below are important; those issues in the upper right of the matrix represent the issues
we identified as most material – at this point in time – in importance to our business and stakeholders.

50 I Materiality Analysis
 Materiality Matrix

Products Recycling (e-waste)

Network Recycling Inclusivity for Underserved GHG Emissions Company Energy Use
Waste Reduction Inclusivity for Supply Chain Standards Privacy and Data Security
Developing Markets Supplier Performace Employee Diversity
Economic Development Products That Enable Innovation
Law Enforcement Environmental Benefit
Online Risks and Safety User Access Controls
Protection of Minors
Freedom of Expression
Increasing Importance to Stakeholders

Bribery and Corruption Content Standards Supplier Diversity Network Reliability

Intellectual Property Rights Hazardous Materials Outsourcing/Off-Shoring Disaster Response
Obsolescence Clarity of Pricing and Billing Education Customer Satisfaction
Freedom of Association Restructuring and Downsizing Inclusivity based on age,
Comp and Benefits ability, language
Enabling Work-Life Balance

Product Safety Health Care

Giving Local Environmental Impacts
Volunteerism Talent Acquisition
Raw Materials Usage
Responsible Marketing
Occupational Health
Paper Use
Visual Impact

Packaging
Water Usage
Ozone Depleting Emissions
Mobile Theft

All boxes in this

assessment comprise
the equivalent to the Increasing Influence on Business Success
top right box in a
traditional four box

Materiality Analysis I 51
 Perspectives

Note From Business For

Social Responsibility

AT&T joined BSR at the end of 2007 and immediately asked us

“We’ve been to guide them in establishing strategic priorities and creating
impressed by a governance and management plan — steps we believe are
critical to leadership in sustainability.
AT&T’s desire
To this end, BSR worked with AT&T to undertake a series of investigative and
to focus on top planning activities during the first half of 2008, including:

strategic priorities, >E

 ngaging in a series of in-depth interviews with senior executives and issue
and we commend experts within AT&T.
>P
 roviding our view on where AT&T’s sustainability approach is currently weak
the company for or strong in comparison with its peers and with stakeholder expectations.
>U
 ndertaking a materiality exercise (described on page 48) to identify the
the care it has sustainability issues of greatest significance to AT&T and its stakeholders.
taken to make the >E
 stablishing, from the materiality exercise, a set of sustainability priorities
for AT&T and an organizational structure to drive change in the company.
greatest positive >C
 reating an approach to responsible supply chain management
(described on page 31).
difference ...” >P
 roviding counsel on the establishment of energy management and climate
change targets that are both ambitious and operationally achievable.

We’ve been impressed by AT&T’s desire to focus on top strategic priorities,

and we commend the company for the care it has taken to make the greatest
positive difference, especially in addressing energy consumption arising from
AT&T’s vast network and the opportunities to innovate in the use of information
and communications technologies to address climate change.

Looking forward, we hope that AT&T will continue to manage its approach to
sustainability with ambition that is commensurate with the size of the company
and the sheer scale of challenges we face today as a society. Sustainability
requires leadership, and companies such as AT&T — which has a history of
driving transformation in its own industry — are well placed to provide it.

Eric Olson
Vice President - Advisory Services,
Business for Social Responsibility

52 I Materiality Analysis
AT&T Citizenship and Sustainability Report 2007/2008

Reporting
 Reporting
Scope of This Report
The information included in this report is for AT&T’s U.S. operations. At this time, our system for collecting
and reporting reliable performance data and anecdotal information is still in development and does not
encompass our global operations. We’ll explore ways to expand the scope of our reporting and plan to
include more global data in future reports.

This publication covers the years 2007 and early 2008. The performance data are primarily for 2007,
unless otherwise noted.

Future Reporting
Moving forward, we plan to produce an annual citizenship and sustainability report with updates on our
progress and performance. The topics covered in this current publication, plus additional information on
progress in our six strategic focus areas, will be included in future reports. We’re committed to continuous
improvement and increased transparency in our reporting. As noted on page 12, we’re establishing key
performance measures that we consider most relevant to our business and stakeholders. We’ll define those
measures and track our progress against them in future reporting.

Feedback
We’re proud of the initiatives contained in this publication. But we realize that being a responsible
corporate citizen is an ongoing and evolving process. In this spirit, we’re constantly looking for ideas
on how to continue to improve our programs and reporting. We welcome your feedback on this report
through our online survey.

54 I Reporting
AT&T is proud to be affiliated with or recognized by a number of citizenship and sustainability
organizations and programs, including:

Reporting I 55
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