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AT&T's fiber expansion could reach beyond 30 million locations

AT&T could consider raising its fiber buildout beyond 30 million residential and business locations by 2025, under the right circumstances, according to company CEO John Stankey.

In fact, Stankey claims to have put that up as a challenge to the company's management team. The only thing standing in the way of going beyond 30 million locations is "execution and performance," Stankey said Tuesday at the Goldman Sachs Communacopia Conference.

As AT&T fills in more market pockets with fiber and scales up that part of its broadband business, "we might be able to go in and say, there's more that we could possibly attack," Stankey. "I've love to be in that position to do that."

He hinted that AT&T could raise the buildout ceiling by tweaking its buildout and service models, suggesting that AT&T could maybe partner with third parties in some areas that generate a larger financial return.

Stankey wouldn't say how the proposed US infrastructure bill might also alter AT&T's outlook in a way that encourages the company to explore a buildout that goes beyond 30 million locations.

"There's a degree of uncertainty there," he said of the bill. "But in its current form [and if] it does actually make its way into law, that's going to change the landscape of the broadband business in this country … It will also change my posture and point of view on where we should be playing as a company."

Meanwhile, fiber-based broadband has clearly established itself as a growth engine for AT&T, which added another 246,000 fiber subs in Q2 2021, ending the period with 5.43 million. With about 80% of new fiber subscriber additions new to AT&T, overall broadband revenue growth at the company has finally surpassed declines in its legacy, non-fiber-to-the-premises (FTTP) broadband business.

AT&T is enjoying 35% penetration in those FTTP markets, but anticipates extending that to about 40%, and possibly more. "We're on that march," Stankey said.

But AT&T's fiber plans aren't devoid of hiccups. Company EVP and CFO Pascal Desroches warned last month that supply chain constraints had forced AT&T to cut back its 2021 FTTP buildout to about 2.5 million homes, down from an original 3 million.

Stankey said the issue largely stemmed from a slowdown in the supply of fiber assemblies that are pre-spliced and put together before it gets into AT&T's hands, along with reduced access to certain raw materials. However, deliveries over the past 30 days have tracked with AT&T's expectations.

"But the supply chain is fragile on all levels," he said, noting that AT&T missed a target for power backups at cell sites because of a shortage of a resin-based connector.

He expects the overall supply chain situation to remain choppy and bumpy. "I don't know what next week brings," Stankey said.

Handset promos likely to stay

With respect to mobile, it appears AT&T will continue to use handset promotions to help drive its recent wave of mobile service growth.

"There's nothing wrong with that strategy right now. I'd say it's a great strategy," Stankey said.

But he also believes it's important for AT&T to differentiate beyond that, hinting that the company is implanting software and "rebuilding" its product engine in a way that doesn't necessarily hinge on aggressive handset promotions.

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— Jeff Baumgartner, Senior Editor, Light Reading

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