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DSL/vectoring/G.fast

AT&T Wireline 'Good News' Not All That Good

AT&T Inc. (NYSE: T) this morning touted its first year-over-year growth in total wireline consumer revenues in more than two years, and said it saw a 30 percent increase from consumer IP service revenues, including U-verse and broadband.

AT&T also talked about improving wireline revenue trends which, coupled with cost-cutting, increased wireline operating income margins.

While those numbers sound encouraging, to a great extent they underscore how the consumer wireline business, in particular, continues to spiral down. Overall, wireline revenues were off 3 percent and revenue-producing consumer connections declined by 2 million in the past year.

And that highly touted revenue growth was a whopping 0.2 percent, as AT&T added 236,000 U-verse subscribers in the quarter to reach 2.7 million total. The net add figures were worse: only 148,000 for the quarter, once churn is factored in. The only bright side was that this limited universe of customers is paying more for service: ARPU grew 14 percent as U-verse TV subscribers now pay about $160 a month for their service.

How limited is the U-verse universe? By contrast, Comcast Corp. (Nasdaq: CMCSA, CMCSK), the largest cable operator, has 24.6 million subscribers, and Dish Network LLC (Nasdaq: DISH), the weakest of the satellite-TV players, has more than 14 million subs. AT&T is closest to Verizon Communications Inc. (NYSE: VZ), whose FiOS TV is closing in on 4 million. That means AT&T remains a very small blip on the pay-TV landscape.

And while U-verse is adding 900,000 subs in a year, the total number of AT&T consumer connections producing revenue is dropping by 2 million, from 45.7 million to 43.7 million over the same period.

The glass-half-full version of AT&T's outlook is that U-verse is highly rated, being chosen as the best paid-TV offering in the J.D. Powers consumer satisfaction surveys, where it's available. But as the U-verse rollout begins to wind down, can AT&T really drive penetration numbers up enough to challenge cable and satellite competition, ahead of the flood of OTT video? (See AT&T, Verizon Top JD Power TV Ratings.)

To date, the overall penetration rate is only 14 percent, although that goes up to 22 percent in areas where U-verse has been available for 30 months. The service today reaches 26 million households.

All of those numbers prove why AT&T's consumer wireline outlook continues to revolve around cost-control to maintain margins. To that end, AT&T trimmed 15,000 jobs and continues its integration of the wireline and wireless operations into creation of one AT&T, senior EVP and CFO Rick Lindner told analysts.

"We have a commitment to operation as one AT&T and as we consolidate and integrate our internal operations there will be continuing opportunities for greater efficiency," Lindner says.

His response to a question about the point at which operating a wireline and wireless business stopped making sense stressed the role of the wireline network in supporting wireless, being the network backbone to all those cell sites, and enabling the rapid uptick of mobile data bandwidth.

Mobile devices are "the way people want to access the network," Lindner says. "In order to provide the bandwidth and to provide the capacity and the kind of service experience you want, you have to drive that traffic as quickly as possible into a wired infrastructure which improves service quality and provides significantly more bandwidth."

AT&T's business silver lining
If there was any real good news on the wireline side of AT&T, it lay on the business side of the house, where the company saw modest 3.7 percent growth in strategic business revenues from $1.155 billion to $1.2 billion, and business IP data were up 8 percent. Even here, Lindner admits, the struggling economy continues to put pressure on voice revenues, which are now less than 40 percent of AT&T's total business sale.

But business customers are investing again, he says, and the move to more managed services and cloud-based offerings holds promise.

"It is becoming a business driven by data, by IP-based services, managed services, and increasingly as companies move more of their applications and content into the cloud -- then hosting [and] cloud computing becomes more important as well as facilitating applications through mobile devices," he says. "We are positioned well in all areas of the business."

— Carol Wilson, Chief Editor, Events, Light Reading

spc_markl 12/5/2012 | 4:20:29 PM
re: AT&T Wireline 'Good News' Not All That Good

We will have to agree to diasagree.  I enjoyed the debate.


Mark

paolo.franzoi 12/5/2012 | 4:20:30 PM
re: AT&T Wireline 'Good News' Not All That Good

Well, if you are talking about this since 2006 - you are only 3 years late.  Way to self-promote.


You are completely mistaken about many topics here.  Let's start with that FiOS spent the first 4 years in the suburbs not the cities.  So, city proximity does not matter.  There were 2 basic reasons for this - Aerial plant and ability to pay.


Also during the early build, the population growth in AT&T territories dwarfed that in traditional Verizon properties.  So, AT&T had a chance at new customers where Verizon did not.


FiOS does not share plant with FTTB, so there is no regulatory gain there.  AT&T has had an FTTB strategy for a very long time (and I have gotten products into that build as well).  One thing you missed is that we got the BellSouth FTTC buildout approved as the same as FTTP for regulatory purposes.


The way I figured all this out is that I had products (OLTs and ONTs going into FiOS and Fiber Terminals into AT&Ts FTTB).  So instead of pontificating and wondering, I was doing.


That's how.


seven


 


 


 


 

spc_markl 12/5/2012 | 4:20:30 PM
re: AT&T Wireline 'Good News' Not All That Good

I am not going along anymore with this obnoxious argument.


Mark

Stevery 12/5/2012 | 4:20:31 PM
re: AT&T Wireline 'Good News' Not All That Good

You said:


> My business partner worked at Verizon for 28 years and I can tell you point blank that this plan for FTTB was in place since the 1980s.


So far we have established that


1. your partner did not work at Verizon for 28 years,


2. his mythical FTTB plan was not at C&P from the 1980s.



And you want me to present why your statement (How this mythical FTTB plan transformed into FIOS) is true?  Huh?

spc_markl 12/5/2012 | 4:20:32 PM
re: AT&T Wireline 'Good News' Not All That Good

Really, the onus is on you.  Since we are talking about the 1980s, Bell Atlantic is where we need to start.  Perhaps you can demonstrate how the GTE culture and mindset had any impact on the "Verizon' game plan.  And then you can explain why so many telecom veterans should not have been using "Verizon" and" Bell Atlantic" interchangeably all of these years.


Mark

Stevery 12/5/2012 | 4:20:32 PM
re: AT&T Wireline 'Good News' Not All That Good

In reverse order:


> you are right he started with C&P of Maryland.


And the rest?  What *exactly* were the fiber plans from this regional telephone company, and how did they evolve?


> You can do better than that --


You're right, there are others.  I just chose the one that most interested me.


Stevery 12/5/2012 | 4:20:33 PM
re: AT&T Wireline 'Good News' Not All That Good

> My business partner worked at Verizon for 28 years


Impressive feat, since Verizon incorporated in 2000.


> and I can tell you point blank that this plan for FTTB was in place since the 1980s.


The inexactness of the first part of your sentence makes me question the exactness of the second part of your sentence.


spc_markl 12/5/2012 | 4:20:33 PM
re: AT&T Wireline 'Good News' Not All That Good

Hey Stevery,


You can do better than that -- you are right he started with C&P of Maryland.


Mark

bollocks187 12/5/2012 | 4:20:35 PM
re: AT&T Wireline 'Good News' Not All That Good

Verizon and those that worked on Fios Planning where and still are a bunch of dud heads.- silly GPON.


 


ATT and its silly Uverse are the same - a copper play for IP Triple play residential - old SBC.


 


 

Duh! 12/5/2012 | 4:20:35 PM
re: AT&T Wireline 'Good News' Not All That Good

"Glee is the same on all 3 media."


Unless you happen to be in Cablevision's footprint.






spc_markl 12/5/2012 | 4:20:35 PM
re: AT&T Wireline 'Good News' Not All That Good

The difference is Verizon took advantage of the fact that it would not have to unbundle the business fiber if the buildout was done in concert with FiOS.  How else do you justify the huge FTTH expense? The only other explanation I ever heard was that the Verizon people were nuts.  If and when AT&T ever does FTTH in a big way, it will probably do likewise, as long as the FCC ruling does not change. 


Another big difference is that AT&T was not blessed wtih all of its major cities packed together -- and will not achieve the same economies from either a business or a residential point of view.  AT&T has known all along about Verizon's FTTH/FTTB strategy, it just had for the longest time too many old Bellheads that believed copper could do just about everything.


We have been talking about this matter publicly since 2006 (and my business parter, Sam Greenholtz, gets all of the credit for realizing what the RBOC was doing) and the only calls we ever got from Verizon people were about -- how did you figure out the FTTB angle?


Mark


 


 

paolo.franzoi 12/5/2012 | 4:20:36 PM
re: AT&T Wireline 'Good News' Not All That Good

 


Uh....so the problem with all of what you are talking about is that we are talking about today's strategies and the difference between FiOS and U-verse as strategies.  Both AT&T and Verizon have had fiber to the large business strategies for a long time.  So, that is not a difference.


seven


 

spc_markl 12/5/2012 | 4:20:36 PM
re: AT&T Wireline 'Good News' Not All That Good

Seven,


I could not agree with you more -- FiOS and U-verse are residential plays.  However, it was not a coincidence that the fiber build-out passed as many business parks, office buildings, etc. as possible along the I-95 corridor -- about 30 miles out on each side from Boston to Richmond.  That is where a lot of Fortune 2000 businesses are located.


The key point all along was that especially at the beginning, it made no financial sense to do FTTH -- there was a bigger overriding goal -- essentially FTTB subsidized FTTH.


Mark

paolo.franzoi 12/5/2012 | 4:20:37 PM
re: AT&T Wireline 'Good News' Not All That Good

 


They may have had an FTTB plan....but FiOS was a residential play.  I worked directly on it for years.


 


seven


 


Let me give you some direct info.  They originally requested us to build a unit that supported a T-1.  We built it and a DS3 card to terminate it in the CO onto a DACS.  They then realized the OSS environment would not be able to provision the T-1s.  So, they cancelled that and have been using Adtran T-1 over Ethernet for those customers.  We built large voice port count units for business.  Again, cancelled.  Built nrt-VBR for data support...eh nope the Vz network could not support.  Comparing the SONET network buildout and calling that FTTB and then comparing it to FiOS and U-verse is not even in the same domain.

spc_markl 12/5/2012 | 4:20:37 PM
re: AT&T Wireline 'Good News' Not All That Good

Seven,


My business partner worked at Verizon for 28 years and I can tell you point blank that this plan for FTTB was in place since the 1980s. 


Mark

paolo.franzoi 12/5/2012 | 4:20:38 PM
re: AT&T Wireline 'Good News' Not All That Good

 


As I worked for AFC/Tellabs at the start of FiOS, I can tell you point blank that residential was the focus.  Same with NTT.


Those are the world's 2 large scale FTTH projects.


seven


 


 

spc_markl 12/5/2012 | 4:20:38 PM
re: AT&T Wireline 'Good News' Not All That Good

The consensus at AT&T is over future direction -- not only the benefits of fiber.  There has been tremendous infighting over the years on this issue.


You are correct that FTTH is expensive.  But while many would prefer to believe that Verizon executives have been out of their minds all of this time -- the first priority was always to get fiber to the Fortune 2000 customers -- taking advantage of the fact that the FCC ruled that unbundling was not required in providing fiber to the home.  Despite all of the talk about FiOS, the first priority has always been FTTB -- that is where you will find the margins.  In fact, in the final analysis, Verizon would love to dump all of its residential wireline traffic.

paolo.franzoi 12/5/2012 | 4:20:38 PM
re: AT&T Wireline 'Good News' Not All That Good

U-verse and FiOS are only in a small handful of properties in common.  That is in North Texas.


The reason the penetration is small is that the 1 feature you have touted only matters to a few customers.  What has been shown to cause switching is....price.  If you look into the past, the big upswing for satellite was Sunday Ticket.


So, you get some penetration as the 3rd player (because Cable and Satellite are everywhere).  But the reality is that the product presented - THE CONTENT - is basically the same.  Glee is the same on all 3 media.  And its the same on OTT video.  Same, same, same.


That is the basic issue.  The whole thing is commoditized.  So, why add lots of "features" that buy you no market share?


As to a consensus about FTTH in AT&T.  If you are implying there is a consensus that FTTH is a better technical solution than DSL, then heck EVERY carrier has that consensus.  What is NOT a consensus is whether it matters enough to do.  Compare take rates (and rentention rates) of FiOS and U-Verse.  Then, compare the costs.  Do the math.  Is FTTH a good deal?  Is it a better deal than doing more wireless?  Is it a better deal than more business services?


seven


 

spc_markl 12/5/2012 | 4:20:39 PM
re: AT&T Wireline 'Good News' Not All That Good

Well, if you want to talk about strategy, there is finally a consensus internal to AT&T that FTTH is the way to go.  Whether AT&T moves substantially in any wireline broadband direction is dubious for now.

paolo.franzoi 12/5/2012 | 4:20:40 PM
re: AT&T Wireline 'Good News' Not All That Good

 


Uh, I don't know that video over copper "does not work".  I spent about 5 years in the early 2000s working with carriers on installing it and turning up customers.


It has its plusses and minuses.  The claim that it is a "lot better than cable" is also highly dubious.  In fact, if you felt like it you could run U-verse over cable.


I would say all the technologies have their tradeoffs.  I find the strategy questions much more interesting.


seven


EDIT:  And btw, compare U-verse penetration to satellite....22% ain't bad.

cnwedit 12/5/2012 | 4:20:40 PM
re: AT&T Wireline 'Good News' Not All That Good

What is a lot better than cable right now is what U-verse can offer, namely multi-room DVR capability. And AT&T can roll out new features easily on the platform without upgrading the consumer equipment, which is something cable can't do. The service was ranked far superior to cable in customer satisfaction ratings done by J.D. Power & Associates. Everywhere U-verse is offered, it's ranked number one - even above FiOS.  That's why the penetration rates don't make sense to me.

cnwedit 12/5/2012 | 4:20:41 PM
re: AT&T Wireline 'Good News' Not All That Good

Phil makes a good point - AT&T is incredibly sensitive to the cost of serving up U-verse, and it may be that they are finding some neighborhoods more expensive to serve with the current generation of technology than they are willing to risk. Newer compression techniques are also in the pipe, although they are already squeezing more onto the copper last mile links than once thought possible.


I just don't find 14% to 22% penetration all that compelling for a product that is significantly better than current cable service.

DCITDave 12/5/2012 | 4:20:41 PM
re: AT&T Wireline 'Good News' Not All That Good

I think seven's got the right idea. AT&T is about paying a dividend, not investing in wireline growth.


Also, we should note that the U-verse product is genius because they can continue to add features, capabilities, etc. to existing subscribers at very little cost (per subscriber). My guess is they wait for pair-bonding to work its way through their network before they turn on any new cities or locations with U-verse.

spc_markl 12/5/2012 | 4:20:41 PM
re: AT&T Wireline 'Good News' Not All That Good

The problem is that video over copper does not really work.

spc_markl 12/5/2012 | 4:20:42 PM
re: AT&T Wireline 'Good News' Not All That Good

Carol,


The problem is that AT&T has become Ma Bell again.  It will not make a substantial move in wireline or wireless unless it is absolutely necessary.


Mark

paolo.franzoi 12/5/2012 | 4:20:44 PM
re: AT&T Wireline 'Good News' Not All That Good

tera,


That point about profits is where I think you are wrong.


Residential services are highly commoditized.  The reality is that U-verse costs a lot of money to build - even if it is less than FiOS.  Depending on what the retention rate for customers is, then they can figure out if it is a good investment or not.


Think of it this way.  For POTS (the telephone kind), they have done all the investment they have to.  They can make the price pretty much anything they want.  If they wanted to make it lower priced, they can with the stroke of a pen.  And yet, they allow cable and voip providers come in at a lower price point.


Instead of lowering the POTS price, they are putting a boatload of money in wireless.  This is where they are emphasizing (they being AT&T).  Verizon is doing just the opposite.  They are dumping non-FiOS properties as fast as they can (Fairpoint - Frontier).  They have done a massive wireline investment.


We get to sit on the sidelines and see the two strategies play out.  But the one thing I don't think, is that these moves are unintentional.


 


seven


 

cnwedit 12/5/2012 | 4:20:45 PM
re: AT&T Wireline 'Good News' Not All That Good

Well, two million people cut the AT&T cord entirely, and while we don't know how many of those went to cable and how many just decided to give up their expensive voice lines and relatively slower DSL service, those are still two million customers lost.


And I think you are right - AT&T doesn't seem to care.

opticalwatcher 12/5/2012 | 4:20:45 PM
re: AT&T Wireline 'Good News' Not All That Good

My guess is that they are cash cowing the voice service, getting what DSL they can and calling it a day.  If you switch to cable, they actually don't care.


 


Yes, I told them on the phone that I had no choice but to switch, and they clearly didn't care.



That's my point, they are thinking short term and giving up the potential for very high long-term profits.


It reminds me of when Sprint was in a severe cost-cutting mode. They cut the most in their customer service, and started losing millions of customers. They, too, didn't care, until their short-term thinking caught up with them and their CEO was replaced.

paolo.franzoi 12/5/2012 | 4:20:45 PM
re: AT&T Wireline 'Good News' Not All That Good

 


The reality is that unless there is a lot of folks they are going to be able roll this out to at a low enough cost (metro size is important) or a neighborhood is likely to grab enough take rate, the very high speed buildouts are not going there.


The difference between AT&T and Verizon is that Verizon is selling the properties that they are not keeping.  AT&T is not.  My guess is that they are cash cowing the voice service, getting what DSL they can and calling it a day.  If you switch to cable, they actually don't care.


seven


 

opticalwatcher 12/5/2012 | 4:20:46 PM
re: AT&T Wireline 'Good News' Not All That Good

You have to wonder about their approach to wireline--basically stopping their Uverse buildout. I would have loved to have Uverse, but they stopped building it in my neighborhood. My neighbors and I have been abandoning AT&T to cable in droves.


If they wait until after the recession to start building again they are going to find that the faster moving and more savy cable companies have already snapped up all their customers.


They've given up long term profits in favor of short term savings. Meanwhile they are relying on profits due to a soon-to-end monopoly on Apple wireless products. You have to wonder about the future growth potential of a company that thinks like that.

cnwedit 12/5/2012 | 4:20:46 PM
re: AT&T Wireline 'Good News' Not All That Good

It is surprising that AT&T isn't ratcheting up U-verse more than they are - this was supposedly their wireline product of the future. I think it reflects the fact that they are predominantly a wireless company now.


Out of curiousity, in what city do you live?

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