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Here’s AT&T’s $14B plan to kill its copper network and leave rural America behind

AT&T is done with its copper telephone network and copper DSL business, according to its CEO and chairman Randall Stephenson, who spoke Wednesday at an analyst conference in New York City. The company believes that an all-IP network is the path to more profitable future.  Given the millions of subscribers that are dependent on the copper telephone lines and copper DSL products, AT&T has offered a $14 billion fringe benefit for those customers and the regulators who will likely balk at the idea of AT&T stopping its investment in copper.

AT&T said it will invest $14 billion in its networks over the next three years, with those dollars going into wireless, business services and the fiber-to-the-node U-verse product. Those three product lines make up 81 percent of AT&T’s revenue and collectively are growing at 6 percent a year. AT&T expects to spend $8 billion for wireless initiatives and $6 billion for wireline initiatives. Total capital spending is expected to be approximately $22 billion for each of the next three years. (Several people are noting that U-verse is copper-based at the last mile, which is true, but I’m referring to the stand-alone DSL product as opposed to U-Verse, which AT&T is clearly investing in.)

For those worried about losing their access to communications, AT&T said with the new investment, its LTE network will reach 300 million people or 99 percent of the U.S. , while its wireline U-Verse network will expand to cover 75 percent of the current customer locations — or 57 million people.

The premise being that the remaining 25 percent of its customer territory will subscribe to LTE broadband, which comes at a much higher cost and has onerous caps that DSL access and AT&T phone lines do not have.

Essentially those living in rural areas are screwed when it comes to broadband, with Stephenson saying that he believes that in an IP age, wireline broadband will still be profitable in markets of “reasonable density.” He further went on to say that “The best service is delivered through an IP-only service with a streamlined product set,” which clearly doesn’t include copper telephone lines and DSL.

This news will have huge ramifications for Americans in rural areas as well as those who still rely on their wireline copper-based telephones for burglar alarms, emergencies and fire alarm systems. Competitive local exchange carriers in many regions will also woke up this morning wondering how they will continue to offer their products over AT&T’s copper pipes. Instead AT&T will use its fiber network and LTE to deploy broadband to smaller cities and towns. These decisions also mean the end of network upgrades to the copper network, although it’s not clear how exactly Ma Bell will back away from copper from its network, and it will have to do so with regulatory approvals.

But it’s clear that AT&T is running from copper like I’d run from a PR person waving a social media pitch, so now it’s up to the Federal Communications Commission to take a hard look at what the loss of copper means for consumers and for the marketplace.

From AT&T’s perspective this is a good move financially, because it will eliminate a high-cost product that delivers low revenues, while also allowing it to streamline its network and reduce the complexity of both the applications and networks it operates. I can’t blame the company for taking these steps, and it’s at least trying to engage the FCC on the regulatory front as opposed to selling off its DSL business as Verizon has done, but as it moves forward we need to look at who is left behind.

39 Responses to “Here’s AT&T’s $14B plan to kill its copper network and leave rural America behind”

  1. Phillip Temple

    The other thing that most folks are missing is: How will these new networks perform during a natural / man-made emergency? Sunspot activity? Satellite goes down/hit by debris?
    I can tell you that during the Loma Prieta earthquake, ALL the cel nets went down.
    ALL of them. They shut down- as everyone was trying to call everyone else at the same time. The only mode of person-to person communication was the telephone landline. Even that was taken over by emergency services, but calls could still come in to phones; long distance calls were out. Cel phones didnt come back until days afterwards. HAM radio ops had the only reliable comm during the emergency. I could be wrong, but I don’t think the “new” networks have any more flexibility/capability built into them, even now.
    If anyone knows how the nets are to be used in an emergency, please speak. Most VOIP
    providers tell you there are important differences between calling 911 on a landline and dialing 911 over VOIP. The time to consider the differences between a landline and celphone/wireless services performance during an emergency is now, and not in the middle of the emergency.
    My 2 cents…

  2. I’m no fan of AT&T but even as a resident of a rural area I don’t think many people will be hurting if they abandon their DSL business. In my area the local cable company offers 50mbps service; Verizon has 25mbps LTE. AT&T offers 1.5mbps DSL and some flavor of “4G” (not LTE). They’re barely competitive in rural areas as it is.

  3. What about wired broadband data caps imposed on customers? I was hoping to see it disappear but seems like they have no plan for it yet. As customers we should do something about it.

  4. Scott Yeager

    I live in a rural community of 2K people. When I moved here, the only internet available was 1.5 Mb wireless. 3 years later I now have 100Mb broadband from Charter. Rural communities are being upgraded. Would have been interesting to seen the actual numbers of rural consumer who will be left without options. And yes, more expensive 4G should be considered an acceptable option. A choice was made to live in a rural area and that choice should not cost anyone other than the consumer.

    • Jonathan McRaney

      “A choice was made to live in a rural area” <—- what a crock. A rural area that once wasn't a rural area, but thanks to economical conditions, businesses shuttered and left…
      Why should ANYONE be charged more for where they live or be left in the cold because some board and chairpersons decide that dialing 10 digits and talking to a person should cost someone $40+ a month?

      If this was electricity, I bet you wouldn't say that if they changed the way it came to your house and was moved to underground lines…and you couldn't get underground lines in your area…and the power company wanted you to pay for some other method of getting you electricity, and each month your bill was 30% higher because of this method.
      Internet, with how it's used in this generation, should be seen as a utility, NOT a convenience. If I don't have working internet, then my cell phone's Femtocell doesn't give me cell service, and my VOIP doesn't work either….so my internet is required in order for my necessities (a phone is a necessity otherwise the federal government wouldn't have ever started up the Lifeline service to give people a free cell phone with 250 minutes/month)

    • jose stucco

      Finally somebody gets it. If you choose to live out in the boonies, don’t expect city amenities. You chose the benefit of wide open spaces. Some of us prefer the benefits that are only financially feasible where population densities are greater.

  5. Jonathan McRaney

    What does this mean for people who currently get DSL but don’t have an IPDSLAM giving them broadband? I live nextdoor to the AT&T hut for my area, which has fiber powering it…but I have copper bringing me 6meg DSL..will they switch the DSLAM over to one that’s an IPDSLAM?

  6. John Barnhill

    Stacey, so 243M users not going to Uverse. Do you understand that essentially all of these subscribers get transitioned to wireless, or only the less populated with poor wire density?

  7. Roger Entner

    Customer are not being left behind, but provided with 4G LTE which is 10 to 20 times faster than DSL. All the consumers want is fast internet service, they don’t care how it is being delivered as long as it is fast. That’s why more than 50% of Americans exclusively use their cell phone for making or receiving calls, and about 30% have completely cut the wire. In addition, DSL is not competitive against cable modem internet service, not to mention the technical problems of extending it to rural areas. Why invest in a technology that consumers do not want? Should we also bring back telegraph service? Progress means that we are leaving behind old and obsolete technologies and replace them with new technologies. Some people apparently need to be dragged out of the past and into present day America.

  8. Telco Engineer

    The article does have some facts that are correct however there is a hint of bias that leads one to be concerned that AT&T is abandoning it’s existing copper network. That is simply false! All existing copper facilties will stay in place, doing what they are doing now. This new investment does not place new facilities in lieu of existing networks, it is in addition to those networks. No, the plan for U-verse does not appear to pass 100% of households, so if you live 15 miles down a dirt road and can’t get ADSL now, there is a chance, that’s the scenario you may be stuck with. Investors and stockholders expect companies to make sound business decisions and frankly, some locations have such limited return on investment that they become too expensive to pass with these advanced services. Realistically, this investment announcement represents a commitment to expand advanced services footprints and I for one am completely in favor of that!

      • Richard Bennett

        The essence of AT&T’s plan is to upgrade all PSTN lines to either ADSL or VDSL+ (AKA U-verse.) Why would any sane person insist on keeping the PSTN service going when you have DSL on the same wire?

        Some of these “public interest advocate” people have lost the plot.

    • some dude

      Google has no intention of building their own network- do they really want a fleet of trucks, field techs and call centers? It’s no picnic. Their single buildout was a grandstand play.

      • Non-techie Talk

        Google is the largest buyer of dark fiber going. The infrastructure was already built but was laying dark, underutilized by the telcos who built it.

        Fleets do not scare Google – they ran fleets of camera cars for Google Maps street view.

        I may be misinterpreting what Google’s longer term vision is, but I’m convinced the play was no one-off grandstand. Do keep in mind that Google’s bread and butter is people who have access to online content – anything they can do to increase access for people is in their strategic and long-term best interest.

        And if the telcos are determined to neglect the rural areas, Google can play Robin Hood hero and bring hi-speed to them. Their loyalty to the Google brand = Google conquest, market share, increased demand for what they supply.

        Do you really think a $20 billion company “just does things out of the blue” with no bigger strategy? (forget HP for now, I’m talking about good $20 billion companies).

  9. The FCC has been deploying much rhetoric in support of broadband providers delivering on 4G and wired broadband services. They can’t tout global competitiveness on the one hand while asking a carrier to subject itself to legacy regulations and technology.

  10. fiberguy

    At least any pretence at “platform competition” will slowly dissapear for those areas. Now is the time for massively rural states to really think about the modalities of government intervention…

  11. Why do you act like AT&T running from copper is a bad thing? Google was praised for their roll out of google fiber but then we diss another company for trying to step it up? This article was obviously written with bias.

    • The issue is that these regions contain a lot of cities that will likely never be viable to have fiber deployed there. The rural cities have copper because it was either heavily or totally subsidized.

    • It’s a smart move for AT&T financially, but the we have to make sure that people aren’t left behind as it transitions to an all-IP network, and that those people don’t end up paying more for less. I am waiting details on AT&T’s home phone product that uses LTE to understand it’s costs to AT&T wireless subscribers as well as the cost to users who don’t have AT&T wireless. As they expand that to broadband will it have caps?

  12. Christopher Mitchell

    Running from copper? Only if you buy into the idea that U-Verse is not copper. It is. It is better than crap-DSL, but only barely. What AT&T is running away from is any accountability. It is moving to less regulated technology and gutting regulations in states where they are dumb enough to listen to AT&T lobbyists.

    That was more harsh than it should have been – the vast majority of this story is obviously correct, but I hate to see them get away with claims that U-Verse is somehow not copper. Regardless, consumers need better options than what AT&T offers.

    • Chris – You should only comment on things that you know about. U-verse *is* Fiber AND VDSL based, and to say that it’s only barely better than so-called “crap-DSL” shows your ignorance on the technology. Get a clue.

      • Uverse is only fiber to the vrad in most cases. Once it leaves the vrad it is running on old copper lines that are not being replaced. They are being re conditioned. Which means contant maintenance which is costly to the AT&T. That is why if you live in a rural area and do not have Uverse, you will never see it.

      • elfonblog

        See, Joe, “crap-DSL” is also “fiber based”. It’s just that uverse places the fiber a little closer to the customer’s home in their sidewalk boxes. This is not new technology, just an improved topology which is necessary to deliver faster speeds in many areas with deteriorating copper wire. It’s not a new paradigm in high speed internet, despite the deliriously colorful advertisements.

        Sadly, uverse IS barely better than existing DSL, owing to the fact that the speed tiers they offer are virtually identical to their local competitor’s, minus a buck or two. Higher speeds are dramatically more expensive. When ads suggest that it is uverse that makes these higher speeds possible, the reality is that ATT refuses to provision existing DSL in areas where faster speeds are feasible, in order to avoid competition with themselves.

        I live very close to the local Central Office. If i cancel my DSL for uverse, they’ll make me buy a new modem at $100, provide my connection over the same copper pair I use now, and just call it uverse.

    • Malcolm111

      Let’s get a little more balance in our analysis shall we?

      AT&T UVerse is a brand that encompasses a number of infrastructure elements, including copper. No question that its been left in the dust speed wise by the high end capabilities of DOCSIS 3.0 coax/copper networks (hence the need to offer higher speeds competitively), but the consumer services described in this announcement leverage existing copper significantly. UVerse is a last mile only copper service, but it uses some of the best DSL technology to maximize what copper can do in delivering speed to customers. UVerse IPDSLAM (not the same technology) uses that same VDSL technology with other amplification techniques (pair bonding, etc) to extend the range and speeds available to traditional DSL customers all on the same copper they used before. Finally, these DSL services come at speeds that are often well below cable broadband speeds and are priced accordingly. $10-$20 per month for relatively adequate broadband is, in my opinion, a signficant consumer surplus and positive social benefit. That AT&T is only doing this for 57 million people vs 300 million for LTE is merely a function of wireless vs. telco franchising.

      If this is “running from copper”, Verizon’s FIOS strategy must be considered in comparison as the “warp speed flight from copper.”