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AT&T Announces Awaited Network Investment Plan
Some DSL Users Get U-Verse, Some Get Absolutely Nothing
by Karl Bode 02:14PM Wednesday Nov 07 2012
AT&T has announced their long-awaited plan to address the upgrade path for the company's DSL networks. According to AT&T's plan, the company will spend $14 billion on a new network expansion initiative that will include upgrading some current DSL users to U-Verse, but will also involve pushing many DSL users in outlying areas to their LTE network. $8 billion of the $14 billion total will be going toward upgrading LTE further, and around $6 billion will be going toward upgrading wireline networks.

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Specifically, AT&T says they'll be increasing their U-Verse coverage area from 24.5 million homes to 33 million. That 8.5 million upgrade total is welcome news, given that many analysts had predicted that number to be closer to around 3-4 million.

The company traditionally spends between $19 billion to $20 billion in annual capital spending, and says that they'll be boosting that to $22 billion a year for the next three years. The $6 billion being aimed at wireline services will not only go to U-Verse expansion; the company says it will also go toward increasing existing U-Verse speeds to 75 Mbps by the end of 2013, and 100 Mbps thereafter.

Another 24 million DSL users will be seeing what AT&T is calling "U-verse IPDSLAM" upgrades by the end of 2013. Those upgrades will offer users speeds up to 45 Mbps (depending on loop length), but won't include bundled TV offerings like AT&T's U-Verse platform.

While the U-Verse expansion is welcome, about 25% of AT&T's footprint won't be seeing any upgrades -- ever. Those DSL users will be swapping out DSL and a current 150 GB cap ($10 for each GB thereafter) with LTE service that may be faster, but also comes with a higher price tag ($15 per gigabyte overages). As noted previously, AT&T is busy stripping away regulations to pave the way for this market exit. That's going to court more than a little controversy given the billions in subsidies doled out to deploy and maintain these services, and the millions of people (particularly the elderly) that still rely on POTS services in these regions.

As I've been noting for some time, AT&T and Verizon's decision to hang up on millions of DSL users in more rural markets is a huge issue that has serious negative market repercussions. In an age where we're supposed to be eliminating broadband coverage issues, AT&T and Verizon are simply closing up shop and letting landline broadband users flee to cable, empowering the cable monopoly in these areas, which will result in higher prices and lower quality service for tens-of-millions of subscribers.

All of that said, the upgrades AT&T has announced are much more than what most analysts expected (myself included).

"This is a major commitment to invest in 21st Century communications infrastructure for the United States and bring high-speed Internet connectivity — 4G LTE mobile and wireline IP broadband — to millions more Americans," AT&T CEO Randall Stephenson said in a prepared statement. "We have the opportunity to improve AT&T's revenue growth and cost structure for years to come, and create substantial value for shareowners."

Shareowners weren't so impressed, punishing the stock today because they don't like that the company is investing anything into their wireline network. AT&T's stock fell 3.4 percent in early trading, compared to a broader index decline of 1.8 percent. AT&T has painfully considered what to do with their aging broadband infrastructure for some time. The company had originally hoped to sell off much of their networks to smaller telcos, but the majority of those companies (Windstream, Frontier) are already in the process of trying to digest major acquisition deals and weren't interested.

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