Since DSL is obsolete, AT&T will sell you LTE instead

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 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.

Image courtesy of Flickr user Eddie~S

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Oh no he didn’t: AT&T’s CEO calls DSL obsolete

Updated: AT&T CEO Randall Stephenson (pictured) spoke Tuesday at the National Association of Regulatory Utility Commissioners summer meeting in Los Angeles, where he called his company’s copper-based DSL broadband technology “obsolete.” This is a stunning admission from one of the nation’s largest DSL providers. Sena Fitzgerald Fitzmaurice, a spokeswoman for rival ISP Comcast tweeted from the meeting:

When I asked her for a follow up she said Stephenson made his statement during the question and answer period following his speech and that Comcast EVP David Cohen was following Stephenson in the lineup. She recalled Stephenson saying “We built DSL back in 1997 to chase David’s company and now that’s obsolete,” but said she hadn’t written it down. I emailed AT&T to confirm and haven’t heard back, but a NARUC spokesman who attended the event confirmed Stephenson’s quote.

Update: AT&T got back to me with the following statement about Stephenson’s remark:

Stephenson was answering a question from an audience member about how state regulators should think about new technology cycles when they are considering things like USF. He said that new technology used to be amortized over a 10-15 year period, but that has shrunk to about 5 years now. He said that DSL was introduced in the 1990s, it has been surpassed in speed by U-verse and Comcast?’s DOCSIS 3.0. He also gave the example of deploying 3G in 2006 … and now 5 years later we are rolling out 4G. His point was — new technology is being surpassed by the next generation much quicker than ever before. We have millions of customers using DSL and remain fully committed to the technology — even as we constantly look to bring innovation to the marketplace.

My attention to this quote may seem petty, but as AT&T focuses more and more on wireless and continues pushing its fiber-to-the-node services instead of faster fiber-to-the-home or even cable, it’s leaving millions of Americans in the dust.

For many in rural areas DSL is the only option, and as of the end of AT&T’s first quarter it still has roughly 10.2 million DSL subscribers. AT&T doesn’t report total DSL subscribers so I am looking at the total of 14.5 million consumer broadband subscribers which AT&T says can be DSL, U-verse or satellite customers. From that number I am assuming that roughly 4.3 million are using U-verse based on AT&T’s statements that AT&T’s U-verse deployment now reaches 28 million living units and “companywide penetration of eligible living units is 15.3 percent.” Analyst Tim Farrar of TMF Associates estimates AT&T has “between 10,000-20,000K and quite possibly less” satellite customers.

And it’s not as if AT&T plans to continue upgrading all of its customers over to U-verse. Earlier this year, AT&T executive John Stankey told an investor conference that the company would likely halt its building plans after it brings the technology to about 55 percent to 60 percent of the homes it serves. Stankey also admitted that about 20 percent of the homes in AT&T’s service area are “not a heavy emphasis for investment.” Verizon has come to a similar conclusion and has sold off a huge number of its DSL lines to other telecommunications providers. It is now pitching its wireless broadband in those areas an alternative to DSL.

But if DSL is “obsolete” as Stephenson says, then what about the Americans who are forced to rely on that as their only method of broadband access? I know many argue that because wired broadband is expensive, mobile broadband can deliver the Internet and will be more competitive, but one only has to look at the pricing for a gigabyte of data and the lack of network neutrality rules on wireless networks to see what a sham that is. For millions of U.S. citizens their broadband access is obsolete and the head of one the nation’s ISPs just inadvertently admitted as much, but that doesn’t mean he’s going to do anything about — or stop selling it.

Manhole image courtesy of Flickr user Eddie~S

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