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Summary:

AT&T’s solid second quarter results were driven by wireless, but its wireline business was nearing growth again — a success for the carrier as it nears the completion of its U-Verse deployment. But amid the cheering for U-verse, the DSL network was getting kicked to the curb.

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AT&T’s solid second quarter results were driven by wireless, but its wireline business was nearing growth again — a success for the carrier as it nears the completion of its U-Verse fiber to the node deployment. But amid the cheering for U-verse, the backbone of AT&T’s network, copper DSL, looked like it was getting kicked to the curb with 4G wireless broadband seen as the heir apparent.

On the results call Thursday morning an analyst asked what happens to the AT&T service areas that don’t get upgraded to U-Verse and whether the business in those areas was falling off or stable? John Stephens Senior Executive Vice President and CFO, replied, “We are seeing some challenges in those markets and the long term response will be what Wayne [Watts] was talking about … “

Wayne Watts is AT&T’s general counsel and was on the call to say how great the AT&T merger with T-Mobile was, and how the deal was on track to close by the second quarter of next year. Stephens elaborated on his comment and said that once the approval on T-Mobile has been achieved and AT&T builds out LTE over 97 percent of the country it will then be able to provide LTE service to people in the areas where AT&T doesn’t have U-Verse. “That’s our longer term answer,” Stephens concluded.

This fits with what Verizon is doing for the DSL lines it sold off to other service providers, and it also fits with the idea that hard-to-reach-areas can be served by mobile broadband from a speed perspective. Except that because of net neutrality rules, caps and general constraints of wireless service, LTE isn’t as good a solution when compared with wireline broadband.

But perhaps more chilling, is that AT&T seems willing to cede between 20 percent and 40 percent of its customers to a broadband backwater. In May executive John Stankey said that AT&T would deploy ADSL (which is slightly faster) to about 20 percent of the remaining non U-verse markets and left the fate of the remaining DSL up in the air. AT&T isn’t alone. Verizon is slowing down its fiber to the home build out and won’t end up covering its entire footprint anytime soon.

This effectively will create a different levels of broadband access in the country whereby a few people won’t have access to any; another level will have access to mobile LTE or DSL; a third will have access to cable, DSL and mobile LTE, and a fourth will have real competition between faster fiber-based technologies and cable’s DOCSIS 3.0 options. And while 100 million homes may fall into the category of having a real choice between faster telco wireline broadband and faster cable wireline broadband as per the National broadband plan, it looks like millions in the country will really only have the choice between cable broadband and slow DSL or expensive LTE — which is an unattractive choice indeed.

Image courtesy of Flickr user Eddie~S

  1. ATT is effectively saying they do not want to be a wirelines communications company, and they would prefer to sell only wireless services to consumers and small businesses. That is ok, except that they shouldn’t be allowed to block other companies and municipalities from entering into the wired (fiber) communications business.

    Their exit from this industry will create a golden opportunity for the nation to invest in building out a modern communications infrastructure. ATT seems to be focused on a communications solution that provides the lowest level of service, because that is the path they are choosing. No matter how fast they believe LTE will operate at, it can not come close to fiber speeds when everyone in a neighborhood is using it for broadband access. An LTE-based network will not make the US competitive with countries who have gigabit speed Internet connections. Getting the nation to invest in deploying fiber to the home will have the same result that investment in the 90s in deploying long distance fiber had – it will not only create short term jobs for the buildout, but it will leave us with a modern communications infrastructure that will allow new business models which depend on fast, efficient communications.

    So I say to ATT, good riddance. But please don’t take T-Mobile with you.

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    1. I agree with KenG. I further believe that thier love of wireless is based on thier need for more money. In the area I live in fios has not come in yet. Even thou in the next county over with a smaller population already has fios, verizon is trying to push it’s mobile wireless internet service like it was going out of style – why? becuase it cost a whole lot more in the long run. Say what you want about DSl but I would rather have unlimited slow internet service than expensive limited service.

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      1. Completely with you, William. Recently left AT&T U-verse because the cost exceeded the value. I tried to re-sign for DSL and essentially learned I was getting a “lite” version of U-verse. I had to purchase a modem (already had a DSL modem) to run the U-verse. . . I feel like I lost.

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  2. The other 20% of coverage referenced by Mr. Stankey is actually ADSL2+ which supports speeds up to 18M. Considering that is a 300% increase over ADSL, I think “slightly faster” was a poor choice of words by the author.

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  3. This is not even remotely a shocker — AT&T and the other telcos are only introducing broadband where they can optimize profit. And while there are plenty of places they could reap additional profit, they seem to favor the combination of low-hanging fruit (eg, heavy population centers) and competition (eg, if you can get a wired connection from one carrier, you probably have one or two others available at the same address).

    I live in rural southern New Jersey.. not exactly Montana or Idaho, and yet, I can’t get wired broadband. There’s cable in the two three miles West, and cable in the town five miles East, and in the fairly rural burbs five miles to the North. But my options are cellular (with the low speeds and very small data caps, and at that, only AT&T or Verizon, since Sprint or T-Mobile work at too high frequencies to get through our trees well) or very expensive satellite.

    It’s not even an issue of wiring. About a year after I moved in, late 1990s, Verizon put in a new local node… I can see it from my driveway. When they switched us over to it, dial-up went to the maximum. So where was the DSL? According to one of the local installers I spoke to, the local node across the street would accept the DSL boards (he knew the model and the software revision), and he told me they’d never offer us DSL, regardless.

    That was around the time that cable systems had started offering voice along with TV and internet, and apparently, Verizon was in a frenzy to deliver FiOS to locations already served by DSL, before the DSL users decided to switch over to cable. And sure enough, I’ve been told ever since that we can’t get DSL. Or cable. Much less FiOS.

    LTE sounds like a nice idea, technologically. Of course, it probably won’t be until 2013 until we get LTE coverage here… that’s when Verizon claim they’ll have upgraded all of their cells. The frequencies are great for rural coverage, Verizon runs in the 700MHz band, so will AT&T once they get online with LTE (unless they jump on the 1700/2100MHz spectrum currently used by T-Mo for 3G, but they have bought quite a bit of 700MHz spectrum). The problem is that these companies are pricing this for low use mobile, not as a fixed wire replacement. $30 per month for 2GB of data… hello? At least on satellite, I’m getting 500MB per day (before being FAPed) for $110 per month… LTE could easily beat that and still make a profit, but the telecoms are particularly greedy when it comes to wireless.

    If AT&T is serious about offering LTE as a price/feature replacment for DSL, I’d be there in a heartbeat. But I’m not going to hold my breath.

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  4. LTE will not become a replacement for home broadband unless they remove the caps and charge below $50. Otherwise I don’t see anyone paying $80+ for 10gigs of data per month.

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  5. LTE speeds are way over stated. Wireline is still going to be around for a long long time. The telcos want to get rid of wireline because of the hugh infrastructure costs.

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