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AT&T's 1 Gbps Fiber Upgrade Talk Makes Investors Nervous
by Karl Bode 12:01PM Monday Dec 23 2013
Stop the Cap directs your attention to the fact that AT&T's recent talk about network upgrades have started making investors nervous. AT&T has traditionally put investor returns far ahead of fixed-line network infrastructure investment or customer support, and their recent announcement of 1 Gbps fiber to the home service in Austin in particular seems to have thrown some investors for a loop. Ovum Research senior analyst Kamalini Ganguly, for example, seems confused as to how AT&T intends to pay for what AT&T promises are substantial upgrades:
The jump from 45/6Mbps to 1/1Gbps for consumers raises questions around its strategy. The cost issue looms large. Deploying 1Gbps point-to-point FTTH will continue to cost much more than GPON FTTH, which in turn still costs a lot more than FTTN – even with vectoring. AT&T needs to explain better what has changed from last year in the business case for FTTH over FTTN.
So where's the disconnect? Ganguly doesn't appear to understand that AT&T's network upgrades on the fixed line side of their heavily promoted "Project VIP" initiative are mostly (with a few key exceptions) theatrical in nature. AKA fiber to the press release.

For one, AT&T appears to have done some mathematics magic in terms of the number of U-Verse users that will see upgrades as part of the fixed-line budget upgrade tally for Project VIP. As noted previously, the telco is using fuzzy-if-not-entirely-misleading math and counting long-ago-slated U-Verse expansion efforts in places they ran into bureaucratic headaches (like San Francisco) as new expansion. With 75 and 100 Mbps speeds in the pipeline that's not to say some users won't see improvements, but they're of the very slow-and-steady variety most investors like.

There's also the fact that while AT&T insists their "GigaPower" 1 Gbps effort in Austin will be a large scale affair, it's primarily going to be aimed at select, high-end development communities moving forward. In context, these heavier infrastructure investments will be very selective in nature and investment-phobic investors don't have much to worry about. It's a different story for consumers, as the "tl;dr" version is that AT&T is promoting largely phantom fixed-line network expansion to sell regulators on their attempt to gut state regulations so they can walk away from tens of millions of DSL users they don't want to upgrade.

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We the people
Brewster, WA

3 recommendations

reply to itguy05

Re: Of Course

said by itguy05:

And dividends are typically paid out of net profit so it shouldn't impact a well run company at all.

And a well run company doesn't need investors who only want to steer the car from the back seat in the direction of the piles of cash on the edges of cliffs that they can grab before jumping in another car at the microsecond it is necessary to maintain their game play.
Say no to those that ‘inadvertently make false representations’.


Phoenix, AZ

2 recommendations

reply to itguy05

Not really, Dell has been quite reliable overall unless you buy the "cheap" things from them. They are certainly better than HP's for sure (I do like HP though for the fact that it keeps me a steady line of repairs waiting)

Any company who is truly interested in making any sort of customer investment has to go private, as wall street only cares about todays returns, not tomorrow. Cox went private a few years ago and I will have to say that their network (for cable that is) is still yet to be rivaled in many areas (or anywhere really)

Verizon Wireless is even private, how else do you think they were able to spend the cash to become the big behemoth they are? As much as i hate Verizon they do have an impressive LTE network - with cash to spare to add more as time goes on.

Contrast that with Verizon landline - they tried to roll out FiOS, the investors complained about not enough RoI right away and look what happened.

AT&T just needs to go private (they have the cash to do it) so they can get on to being a great company again and it's not going to happen while trying to please investors.

No dividends, nobody to answer too on wall street, etc is key to making a great customer experience.

Karl Bode
News Guy

6 recommendations

reply to Kearnstd

Re: Nervous Investors do not matter

The older I get, the more I realize the majority of Wall Street really is just a bunch of church gossip hens wearing suits, and a massive swath of our economy is based on their mostly-empty rumor chirping.


Austin, TX

4 recommendations

reply to buzz_4_20

Re: Of Course

This is why Dell went private. The company was hamstrung by Wall Street wanting quarterly returns.