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AT&T Hanging Up on Millions of DSL Users
Analysts Don't Yet See Plan to Dump Unwanted Users on Cable
by Karl Bode 09:39AM Wednesday Oct 17 2012
At least one market research firm believes AT&T will invest heavily in rural DSL markets despite significant evidence to the contrary. AT&T recently stated they're still pondering what to do with the millions of AT&T customers living in rural and smaller city DSL markets it believes are to slow to deliver significant, investor-pleasing returns. Fitch Ratings this week issued a report insisting they believe that AT&T will invest significanly in these markets using a combination of IP DSLAMs, VDSL2 and vectoring technologies.

"There are signs that AT&T is looking at various technologies to enhance rural broadband speeds, changes in regulation and modifications to labor agreements, which, in Fitch’s opinion, point toward the retention of its rural lines," insists this report.

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Except that's not really what AT&T's recent moves actually point toward.

While AT&T may be looking at these technologies, AT&T's history and filings suggest you'd best not hold your breath for any major landline broadband spending. As we recently noted, new filings with the FCC clearly lay out AT&T's plan: lobby to have all regulation stripped that requires they provide DSL and POTs services (despite billions in subsidies doled out to keep these lines available), then try to nudge those customers onto whatever other carriers are available.

In 2011 AT&T CEO Randall Stephenson called DSL "obsolete," freezing U-Verse upgrades entirely; AT&T's focus is almost entirely now on wireless and they've surrendered most of the country in their once-heated broadband war against cable.

AT&T had hoped to sell millions of these landline users to smaller telcos, but struggled to find a buyer. Companies like Frontier and Fairpoint are still struggling to integrate acquisitions of unwanted Verizon DSL and POTS users, complicated and ugly deals that saddled both companies with angry regulators, angry union workers, aging equipment and a small mountain of debt. As the Fitch Report notes, other companies like Windstream are still digesting other deals of their own, leaving them in no position to take on any significant new AT&T customers.

If there are any new builds, they'll be minor but highly theatrical in nature.
So what will AT&T wind up doing with tens of millions of unwanted DSL users? The Fitch analysts don't appear to understand this yet but AT&T will likely follow Verizon's lead and simply let them leave for cable competitors. The numbers show that's already happening, with DSL customers fleeing by the hundreds of thousands each quarter and neither company doing a damn thing to stop it.

There likely will be some additional investment to upgrade users in profitable markets, but AT&T's CAPEX and landline network investment has continued to drop, and any major upgrade investment would run contrary to AT&T's current executive mindset. If there are any new builds, they'll be minor but highly theatrical in nature (think 3 million of the 18 currently un-upgraded userbase within five years). Sales could also occur in a few years after companies like Frontier and Windstream have time to deal with recent acquisitions.

So in reality, despite what AT&T says on November 7, the likely fate for most of AT&T's DSL users will be -- nothing. AT&T doesn't want to upgrade them, doesn't want to keep them, so they'll simply let them sit there until they either leave -- or some other company decides to buy them. As those users wait AT&T will continue to lobby state regulators until they're given the green light to hang up on these users entirely. Like Verizon, you can expect AT&T to then use LTE to try and cash in on the gaps their landline inaction creates.

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