AT&T warming to FWA as fiber subscriber growth pace slows

AT&T's interest in fixed wireless access (FWA) options took on a more positive tone today as the company's pace of fiber subscriber growth remained relatively solid in Q1 2023, but slowed a tad because of "significantly lower move activity."

AT&T added 272,000 new consumer fiber subs in the quarter, raising that grand total to 7.48 million. Analysts were expecting AT&T to add about 291,000 fiber subs in Q1. Fiber average revenue per user (ARPU) climbed 9.1%, to $65.92.

AT&T added about 600,000 new fiber locations in the quarter, extending that total to 19.7 million. AT&T CEO John Stankey reiterated that the company remains comfortable with a goal to build fiber to 30 million locations by 2025 as supply chain and labor-related issues continue to dissipate. "That's not the thing that's taking my time or keeping me up at night," he said.

Figure 1: Click here for a larger version of this image.
(Source: AT&T Q1 2023 earnings presentation)

Despite a slower pace in fiber subscriber adds, Q1 still marked the thirteenth-straight quarter in which AT&T exceeded 200,000 fiber subscriber net adds, Stankey said.

AT&T notched fiber service penetration of 38% in the quarter, up from 37% in the year-ago period.

With a loss of -295,000 non-fiber consumer subscribers included, AT&T shed 23,000 consumer broadband subscribers in the period, and -41,000 overall. AT&T's DSL footprint continues to melt down – the company lost 27,000 DSL subs in Q1, ending the period with 284,000 DSL subs compared to 403,000 in the year-ago period.

With everything rolled together, AT&T ended the quarter with 13.73 million consumer broadband connections – 7.48 million fiber and 6.24 million non-fiber. AT&T's weaker fiber subscriber adds in Q1 – despite a 16% increase in its addressable base – raised some concerns among the analysts at New Street Research about a broader slowdown.

AT&T's Q1 result "reinforces our view that industry adds will be down 20-30% y/y," New Street Research explained in a note issued after AT&T posted Q1 results. Despite those concerns, the New Street analysts remain "reasonably confident" that Frontier Communications, another telco being aggressive with fiber network upgrades, will meet consensus fiber adds of +76,000.

On BEAD and the GigaPower fiber JV

As for future fiber expansion activity, Stankey also reiterated a stance that AT&T will go after funding set to be allocated via the $42.45 billion BEAD (Broadband Equity, Access, and Deployment) program.

"We plan to actively pursue BEAD funding to support the transition of our wireline footprint, and expect to be a significant participant in public private partnerships," he said.

Stankey said AT&T also is nearing the close of its GigaPower joint venture with BlackRock Alternatives. Announced late last year, the JV is focused on building fiber to an initial 1.5 million locations outside AT&T's legacy wireline footprint.

The JV deal is expected to close "imminently," but the GigaPower project has already gone live with its first customers in a market, Stankey said.

Warming (a little) to FWA

AT&T's FWA strategy is nowhere near as aggressive as it is at Verizon and T-Mobile. However, the company appears to be warming to its use in certain scenarios, including areas where it has excess wireless capacity today and might consider following up with a fiber network buildout.

Stankey said AT&T recently introduced a consumer FWA product (Light Reading intends to shed more light on that offering soon).

"We are in the process of scaling up so that we make sure that we do it the right way. And we are going to use it where we think we can offer a customer a better set of services than what they currently have," Stankey said.

But he said AT&T will be measured in its approach with FWA and apply it where the wireless network possesses "underutilized capacity" and in areas with no fixed infrastructure. And AT&T does see a role for FWA/mobile bundles. "There are certain consumer segments where that's durable, but it's not most consumer segments, in my view."

Meanwhile, AT&T's primary home broadband focus will stick with fiber.

"I don't want to spend empty calories for something that, 18 months from now or 24 months from now, just looks like a boat anchor," Stankey said of FWA.

Still, AT&T's less disparaging commentary about fixed wireless did get some attention. AT&T's "narrative [on FWA] seems to be shifting slightly," New Street Research pointed out.

But the analysts don't expect any shift in AT&T's thinking to have a big impact on the broader FWA market. "We have no way of quantifying this, but from AT&T's comments it sounds small," New Street added. "At this stage, we would stick to our view that FWB [fixed wireless broadband] will top out at 8-10% of the broadband market."

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— Jeff Baumgartner, Senior Editor, Light Reading