Home » AT&T »Broadband Speed »Community Networks »Competition »Consumer News »Data Caps » Currently Reading:

Wall Street Asking Questions About AT&T’s GigaPower: 1Gbps vs. 45Mbps U-verse

Phillip Dampier December 19, 2013 AT&T, Broadband Speed, Community Networks, Competition, Consumer News, Data Caps 8 Comments

ovumA Wall Street research firm is asking questions about the “mixed messages” AT&T is sending consumers over its broadband offerings.

Ovum Research senior analyst Kamalini Ganguly said AT&T’s fiber to the home (FTTH) network in Austin — set to upgrade customers to 1Gbps next year — is likely to confuse AT&T and its shareholders over the future direction of AT&T’s current fiber to the neighborhood (FTTN) upgrade effort, dubbed Project VIP.

Having spent eight years deploying the U-verse FTTN service, a year ago AT&T chose to expand household coverage and upgrade speeds. That effort, called Project VIP, is still ongoing and until now has reflected AT&T’s projection that 45Mbps downstream (and 6Mbps upstream) should be good enough for the majority of its customers.

att gigapowerAT&T says it intends to boost part of its Project VIP footprint to 75Mbps or 100Mbps with VDSL2 vectoring, but the extent of this is unknown. It has also deployed a small amount of GPON FTTH in greenfield markets, typically designed to support 80–100Mbps to each household. Also as part of Project VIP, it plans to reach 1 million businesses with symmetric 1Gbps FTTH.

However, the GigaPower offering in Austin will be AT&T’s first 300Mbps or 1Gbps mass-market FTTH offering targeting consumers, not just businesses, in a major market. It is also a symmetric offering, meaning upstream will be 1Gbps as well. Those speeds are far higher than what Project VIP will deliver to the majority of consumers. 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.

Wall Street is asking questions because AT&T has repeatedly denied its fiber project in Austin has anything to do with Google’s intention to offer a similar fiber network in Austin next year and everything to to do with its general broadband strategy. There is increasing skepticism about AT&T’s veracity on that point, particularly after AT&T announced pricing that was suspiciously similar to what Google charges its fiber customers in Kansas City and is likely to charge in Austin. Ovum’s researchers also took special note of AT&T’s intention to “examine its customers’ browsing habits in order to generate incremental revenues with targeted ads and commercial offers.”

There is evidence Google is proving a growing market disruptor, turning cable and telco industry pricing models upside down where the search engine giant threatens to compete. Industry plans to charge premium prices for incrementally faster broadband speed tiers is at risk with Google’s gigabit offer, priced at just $70 a month. Comcast charges up to $300 a month for considerably less speed. Community owned fiber broadband providers are increasingly adopting Google’s pricing model themselves. EPB in Chattanooga reduced the price of its 1Gbps tier from $300 to $70 earlier this year.

“By accepting a ceiling of $70, AT&T may be making it harder to break even,” writes Ganguly. “We may see lower prices cascading down for all broadband services. AT&T runs the risk of de-valuing its own broadband business and ultimately that of others too. On a more positive note, demand for 1Gbps was seen as questionable when prices were unaffordable for consumers and when multiple HD streams can be supported by 40–50Mbps. With these price levels however, demand may spike and boost the business case for 1Gbps.”

Currently there are 8 comments on this Article:

  1. Paul Houle says:

    Wall Street is right to question the wisdom of overbuilding. I’m sure there are 20 other cities where AT&T could build a Gigabit network that customers would love and would be willing to pay a premium price for. Instead they are going to overbuild against U-Verse and against Google. Are they trying to make money or just trying to kneecap Google?

    • Ian L says:

      The better question is whether AT&T should cede most of its position in the fixed-line market to Google in Austin. Because anywhere Google goes in the city there will be a $70/mo price cap for internet service and $120 for internet plus a reasonably high-end TV offering. AT&T has been trying to, with U-Verse FTTN, get out of the bargain basement where all they can sell is $35/mo DSL (and that’s on the high end…I get $15 DSL with phone service offers every few days in my mailbox)…and even that gets taken away form them when Google comes around due to Google’s 5/1 product.

      Realistically, Google’s entrance into a market forces competitors to play by its rules: focusing on the long term rather than quarterly earnings. You either sink enough money into your infrastructure to compete with Google or you find a niche that Google won’t serve. It seems like AT&T’s betting that that niche won’t be small enough to sustain the level of market share they want in one of their larger markets so they’re deciding to go big rather than go home.

      I think TWC is trying to go in the other direction, since they can pump more speed into their existing infrastructure without too many huge issues. I’m expecting 50M service to settle in at $55-$70 depending on what promo you’re on, but that 50M service will include free WiFi in any area that isn’t exlusively residential. And maybe TWC will start giving away home gateways again, in order to spread their WiFi footprint into the residential areas as well, similar to what Comcast is doing in other areas (albeit without giving away the gateways).

      The point here is that TWC and AT&T haven’t lost market share to Google quite yet in Austin, so they’re trying to do everything that they can to offer a compelling product when Google does come around, so they won’t lose as many customers when that happens.

      • Paul Houle says:

        Many other cities are screaming for Gigabit fiber and Google doesn’t seem to be serious about doing it. I think Google is doing it as a stunt and they don’t need to make a profit at it, so trying to compete head-to-head with Google in the same markets is like competing with MCI Worldcomm in 2000.

        They could build the same network in some other city (eh, Los Angeles) and charge $80 a month instead of $70 and put the difference in their pockets.

  2. Jason says:

    I think you guys are underestimating how badly people here in Austin loathe both AT&T and Time Warner.

    I mean….we HATE them. I specifically chose the apartment complex I’m in because it didn’t have either of them for cable, and I’m paying $140 a month for 70/5 internet and the 2nd tier of cable. Not the best prices in the world, but lightyears better than what TWC or AT&T are doing.

    You’re going to see vacancies in the Google fiberhoods vanish QUICKLY once they start announcing. And apartment complexes that don’t want to pay to get Google Fiber will start losing tenants, as well.

    Austin is extremely tech-savvy, especially the further north in town you go.

    • Ian L says:

      It’s ironic that you mention going farther north, because Grande (your ISP) stops around 2222. Maybe further south than that. My apartment complex has two cell sites right near it (so Clearwire works okay here…as does pretty much everyone else because Sprint, Verizon, AT&T and T-Mobile all have equipment on one or the other of those sites), plus TWC, plus AT&T. But I’m guessing that 90% of the apartments are on TWC; AT&T won’t serve me video out of the VRAD that’s on the curb right next to the apartment entrance. IP-DSLAM ADSL2+ only.

      So I know firsthand the annoyance that is the TWC + AT&T duopoly. And if my apartment complex doesn’t make GFiber happen I’ll move. But the great thing about GFiber is that people willing to stick with AT&T and TWC will get better deals as well.

      • Dan says:

        Much of North Austin, especially areas built in the 80’s, still have FTTN on AT&T with a max speed of 18/1.5. AT&T investors lost when I had Uverse, since I wouldn’t get the TV service with such low bandwidth and they lost again since I switched back to TWC. TWC is also offering 30/5 for the same price as Uverse 18/1.5 for one year for customers that switch. I own a home, so it’s more difficult to move, but since fiber increases home values, HOAs will be pushing for it.

    • Jason says:

      True, most of North Austin doesn’t have Grande. There’s about 5 apartment complexes that do, though, and that’s why I moved in here 🙂

      And absolutely, HOAs will be screaming for Google (or similar).

    • Mike says:

      As an Austin area resident, I can confirm Jason’s comment that most people here hate AT&T and TWC. I’m currently with TWC, and thanks to the monopoly they have in most areas, they pretty much have no incentive to improve speeds or price. Calling them up yearly after your discount expires, and threatening to cancel is pretty much the only way to get anywhere close to a decent price.

      I don’t expect Google Fiber to change the status quo much here in Austin. AT&T and TWC’s control and influence over the city’s broadband infrastructure will keep Google Fiber out of most areas, and the tech savvy will slowly migrate to the few areas that do have it.

      Sometime in 2014, Google will announce the successful launch of gigabit service in Austin, after which 95% of the Austin residents who attempt to sign up will be told they are outside the service area.

Search This Site:

Contributions:

Recent Comments:

  • A: I got notice for price hike from Nov 2017, this is 3rd time price hike since 2015...
  • Roger: Better get your tin foil hat tuned up, Dave. The idea behind the ACA was a noble one. The idea of mandatory health insurance was to build the pool o...
  • Limboaz: What!? No mention of anti-trust hawk Paul Weiss being nominated to head the FTC? He needs to break up the tech behemoths, like Comcrap, Slime Warner, ...
  • Dave: How long before democrats force households to buy cable so they can get “real news”? If they could force us to buy health insurance, then why would th...
  • JayS: Will these price hikes attract over-builders, like Google, to fire-up the trenching machine again? Insight the likes of AT&T, Verizon, T-mobile, S...
  • George: It's a good thing Charter was allowed to buy up Time Warner, or else we'd still have $15/mo cable internet service packages available... If you're no...
  • EJ: Trump and Pia are a blessing in disguise you will see. As long as someone somewhere can muster a decent Bernie type person we only have three more yea...
  • Dale: In our area suddenlink just downgraded the 200mbps from unlimited data to a 350gb data cap. I don't know if this is only for new customers or existing...
  • Larry Gall: This has become far, far too important a resource for the likes of these jerks to control (in it's entirety). The jerks I'm referring to are the Holl...
  • Matt: Until an operator has the guts to give true à la carte options to the customer the trend is just going to continue. Everyone I know who has cut the c...
  • EJ: They better do it while the getting is good. Raise your price and be put on the radar for unfair rate increases. Attempt to sell that you NEED to incr...
  • FredH: If no one saw this coming - they were idiots. Next come the data caps for everyone....

Your Account:

%d bloggers like this: