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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 (s vz) 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.