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AT&T’s ‘Future of Rural Landlines Decision Day’: November 7th

Phillip Dampier September 20, 2012 AT&T, Audio, Broadband Speed, Consumer News, Public Policy & Gov't, Rural Broadband, Wireless Broadband 61 Comments

November 7 will be an important day if you are a rural AT&T landline customer. On that date, AT&T, in concert with Wall Street, plans to announce the future of its rural and “tier two-smaller city” landline business.

The implications for customers are enormous. AT&T could elect to exit and auction off its rural customers to companies like Windstream, Frontier Communications, CenturyLink, and FairPoint Communications. AT&T could also announce it will aggressively petition the Federal Communications Commission to decommission its copper landline facilities in favor of a new wireless IP network based largely on its national 4G LTE expansion, or it could be a combination of both: keeping existing landline facilities but transitioning them to Voice over IP technology with a gradual shift towards wireless.

AT&T CEO Randall Stephenson delivered important clues about the company’s direction in remarks at yesterday’s Goldman Sachs Communacopia Conference, attended primarily by Wall Street investors. Stephenson drew clear distinctions between valued customers in areas upgraded to AT&T’s U-verse platform and more problematic customers in smaller communities where AT&T refuses to invest in landline upgrades.

“Where you look at the footprint where we have deployed U-verse technology we do very well,” Stephenson said. “In fact we are the share leader in virtually all U-verse markets. Those markets grow nicely. Where we have not deployed fiber and U-verse technology, we are losing share and those markets are in decline and that is the whole reason behind this analysis and evaluation that we will be laying out Nov. 7. What do we do with those markets? Because we have demonstrated if you go invest you can grow the market.”

Stephenson

“We said coming into the year that we have to find a broadband solution for these assets that is cost-effective or we need to look at selling them,” Stephenson said. “I would just tell you at the 30,000 foot [line length] level we think we’re finding line of sight to some investment theses here. We can get a good competitive broadband product to a large portion of our footprint and would avoid us having to go through a number of regulatory approval processes to sell [landlines] across a large geography. There will probably be a mix of actions here, but the bottom line is we think we may have line of sight but we will flush that out on Nov. 7 in an analyst conference here in New York.”

Early indications suggest the company is considering deploying DSL extenders to reach a larger share of rural customers without a complete overhaul of its copper wire network. The upgrades could deliver results similar to what Frontier Communications has been doing in territories it acquired from Verizon Communications, which includes extending fiber optics further into neighborhoods and finding ways to reduce copper wire length to improve speeds. Frontier has set its sights on delivering up to 25Mbps over copper landlines, a speed it feels is competitive with cable broadband. AT&T could come close to these speeds without the amount of investment required in a typical U-verse deployment.

But just as likely is a largely wireless broadband solution to replace the company’s aging copper wire-based DSL service. Stephenson says he strongly believes that a wireless solution exists for rural America over the company’s new LTE 4G network.

“I don’t envision in major metropolitan dense population centers that LTE will serve as a broad-based fixed-line replacement or surrogate,” Stephenson said. “I do believe in less dense markets and especially when you begin to think about rural America and tier two towns, that LTE can become a fixed line replacement or even better than what you can get in fixed line out in those markets. This is one of the exciting things about the WCS spectrum [AT&T plans to acquire]. It allows you to truly begin to think about investing in and doing this.”

But AT&T’s solutions will come with strings attached: a lobbying effort to get the FCC to loosen up on regulations, acquire more wireless spectrum, and allow the company to dispose of its landline infrastructure.

“You don’t go out and put in LTE capability in rural America and leave up all your copper infrastructure in the long haul,” said Stephenson. “It just wouldn’t make sense to do both. So this is the big regulatory issue. The FCC would require us to leave that copper and TDM fixed-line infrastructure up by some mandated rules and you can’t do both. You can’t support both infrastructures. We have got to work through the regulatory implications of this, but I think LTE can prove over time to be a fixed line replacement in rural and less dense populations. I think in a five year time horizon that can become significant.”

Thus far, AT&T has been unwilling to consider upgrading smaller communities to its U-verse platform, primarily because of the cost and return on investment. The company is content with its current U-verse footprint and has begun to enjoy increased wireline margins from a growing number of urban customers as programming costs decline.

LTE: AT&T’s wireless rural broadband solution?

“The U-verse margins continue to expand,” Stephenson noted. “U-verse is one of those where you go make a really significant capital investment and then you go in as a new entrant to do programming contracts and you’re paying multiples of what the big scale guys are paying and then as you scale that over time then margins really begin to expand. We’re riding that right now and we’re getting really good margin expansion just out out of scaling U-verse and getting better economics on content terms as well.”

Wall Street has been applying pressure to Stephenson to extract higher margins and cut costs from its traditional landline business. Stephenson sought to placate concerns about the cost profile of AT&T landlines before investors.

“We have done a nice job controlling our labor costs and that has been very helpful to continue to sustain margins in the fixed line business,” Stephenson said. “Those labor costs savings we take and reinvest back in the business in the form of U-verse and looking at some future investments as well.”

Stephenson hopes the FCC will eventually let AT&T abandon traditional landline service everywhere, which could also deliver serious cost savings for AT&T.

“I do believe if we can find a path to an all-IP infrastructure in not just your major metropolitan areas but your tier two markets there are significant cost savings in the five or six year time horizon that could come out of these businesses as well,” he noted.

AT&T CEO Randall Stephenson took questions at Goldman Sachs’ Communacopia Conference about its wireless network and the future of the rural landline business. (September 19, 2012) (41 minutes)
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Scott
Scott
11 years ago

We can only hope the FTC gets a backbone for once and tells AT&T to pound sand. Deregulation has been a huge failure for the market, and 4G as a landline broadband replacement is a joke that’s just going to provide abysmal connectivity and at a high cost to customers.

itchy
itchy
11 years ago
Reply to  Scott

1st of all, its the FCC, not FTC. I have 4G with US Cellular and it’s great and at a low cost. Landlines are 20th century. embrace change and new technology!
And the deregulation was the best thing ever. It stopped Bell Co’s from being a monopoly, opened up competition and forced more competitive prices.

JohnYaya
JohnYaya
11 years ago
Reply to  itchy

4G still hits copper sooner or later. Copper to Copper will always allow better connectivity, better bandwidth, and lower latency. Embrace reality. New isn’t always better. 4G may be great for quite a few people. Not everyone.

I think the anti-trust ruling against ATT had a lot more do to with breaking the “monopoly” than deregulation, as the a lot of the baby bells were bought back up by ATT after deregulation, and the monopolistic effects are worse again.

txpatriot
txpatriot
11 years ago

ISTM that if AT&T sells off its rural customers to carriers that are actually interested in providing them the services they want and need, that would be a “good thing”.

So I say call AT&T’s bluff, and let someone else take over who actually WANTS to do the job.

J
J
11 years ago
Reply to  txpatriot

The company’s listed to assume the landline business have poor track records for customer service. In fact Verizon has been stopped in selling off some of their land line business by some state DPUC’s because of terrible customer service.

swede mauser
swede mauser
11 years ago
Reply to  txpatriot

Have you seen difference in pricing between Frontier and CenturyLink broadband and at&t??? it would NOT be a good thing for consumer to pay for 1/2 the speed and 4x the price – been there done that.

BobPeoria
BobPeoria
11 years ago

“In fact we are the share leader in virtually all U-verse markets. Those markets grow nicely. Where we have not deployed fiber and U-verse technology, we are losing share and those markets are in decline and that is the whole reason behind this analysis and evaluation that we will be laying out Nov. 7. What do we do with those markets? Because we have demonstrated if you go invest you can grow the market.” CEO Stephenson…. I know 3 markets in Central Illinois where you have AT&T U-Verse deployed, and U-Verse is nowhere near the share leader. They all are… Read more »

jorato
11 years ago

So where does this leave the Union employees tied to the wireline business? Will Stephenson try to kill two birds with one stone?

Jim
Jim
11 years ago
Reply to  jorato

Jorato do your research. It is good union members providing and working on the uverse. This is the problem nowadays, people speak without thinking. By the way since unions declined wages in this country actually have gone down against inflation since the mid 70’s while the profit margins for corp have skyrocketed. If they are totally gone there goes your marketplace for wages. Unions only make up less then 7% in the private sector.

Anonymous Tech
Anonymous Tech
11 years ago
Reply to  Jim

I don’t thnk Jorato was trying to say anything against the union, just worried that AT&T wanting to kill landlines could hurt the union in the process. You might want to do some more research yourself… AT&T UVerse Premises Technicians (prem techs) are non-union in some areas, and where they are union they are generally treated like unwanted stepchildren compared to the traditional wireline union members.

http://www.topix.com/forum/dallas/TR37JEH86FO62J943

ATT CUSTOMER
ATT CUSTOMER
11 years ago

I am a just a long time customer. I believe AT&T is a great company, but if they want to cut cost, I believe there are several ways to do it. i also don’t understand if they want to dump the copper lines , landlines because of the loss of profit, why would the other companies what the landlines, wouldn’t they loss money also? I know the Techs have bucket trucks F350 and F450 and I know they get their jobs from Chicago dispatch, but with the price of gas, why would you have your tech drive miles to one… Read more »

Virginia J House
Virginia J House
11 years ago

At&T has already given all people in rural areas the shaft…High prices, no quality. No DSL, and no date or desire to provide any service due to costs, they say. “What about those who live in rural areas who really need DSL with health issuess, etc? You really think AT&T cares, no, all they care about is money and that is called coperate greed, not service. Since deregulation in 1983, service is a joke for all of many living in rural areas and customer service ended at that time. Employees are not even trained correctly because the company doesn’t give… Read more »

walker
walker
11 years ago

Ms. House you are correct!!
The CEO of AT&T should stop receiving the Million Dollar bonus, each year, and the supervisors that receive the bonus.

Frank Jones
Frank Jones
11 years ago

When you talk about At&t and this decision you must remember this company GAVE away billions of dollars of revenue after divestiture (business with less than 6 lines) because of trouble to keep them up. And only wanted large PBx systems.Then gave CEO a large raises for coming up with the plan to sever the toe that ended up costing a leg. Then years later they give away billions more to small companies so they can get in the tv business, and we see how well that is working, first dish then unversed. Do you think they could make money… Read more »

Tim
Tim
11 years ago

As ATT has said….U-Verse is profitable where deployed. Why not deploy it to all rual areas? ATT needs to remember that ALL PAYING CUSTOMERS in these rual areas are part of who HELPED build ATT. BE LOYAL TO YOUR CUSTOMERS AND THEY WILL BE LOYAL TO ATT. “CUSTOMER RULES!!!!!”

swede mauser
swede mauser
11 years ago
Reply to  Tim

cost of laying new fiber if prohibitive in most rural areas, thus lack of Central Office based U-Verse or IPDSAM (basically a uverse terminal out in the field fiber fed to the central office). at&t does not give a $hit about rural customers nor the landline employees – business as usual.

JP
JP
11 years ago

It’s funny to see people debating how AT&T should do this or that, with no working knowledge of the business or the financials that drive it. As much as AT&T or any telecommunications company wants to serve everyone, you simply cannot do it. You wouldn’t spend your money on a business venture you know is not going to return anything or would be a losing proposition. Why should larger companies do it just so you can have service in BFE when YOU choose to live in a rural area knowing that there would be limitations to the services you would… Read more »

txpatriot
txpatriot
11 years ago

Phillip: the 1996 Telecommunications Act was approved by Congress on January 3, 1996 and signed into law by President Clinton on February 8, 1996. I don’t know how often the word “Internet” was used in the law but my guess is very rarely, if at all. There was no broadband as we know it. The best dial-up modems could do at the time was 28.8kbps. 56kbps modems wouldn’t be available until after the ’96 Act was signed. IP telephony was in its infancy, and consisted of a software package you ran on your desktop and limited its use to others… Read more »

Telco Engineer
Telco Engineer
11 years ago
Reply to  txpatriot

@txpatriot: What are you smoking??? The copper network will never disappear. After AT&T, forces all their POTS customer off of the copper network. They’ll turn around and sell that same copper back to the businesses as back-up. Ask any business that weathered the spring storms in the northeast last fall. Without electricity the wireless network is useless. At current levels, AT&T can only support up to 8 hrs, assuming the batteries are still viable. BTW, as a cost savings measure most of the battery maintenance programs have been canned. Once they toss all the pots users off of the copper,… Read more »

txpatriot
txpatriot
11 years ago
Reply to  Telco Engineer

Telco Engineer writes: “Without electricity the wireless network is useless”.

Guess what? Without electricity, the copper network is also useless. True, you may have a several days of diesel generator availability at Big COs, but most SLC remotes don’t even have eight hours, let alone eight days, of battery back-up. And the battery back-up program supporting cell sites was the same one supporting remote switches, remote SLC cabinets, and remote DSLAMs.

So the idea that the copper network is more bullet-proof than the fiber-IP network is largely a myth.

Telco Engineer
Telco Engineer
11 years ago
Reply to  txpatriot

Last fall, while on storm patrol, I had customers run out to my car and thank me and AT&T because the only thing that worked in their house was the copper POTS line. No TV, No electricity, No cell phones, no dish network, just Copper Potes telephones. We had CO’s in areas that electricity was out for nearly two week, but the phones still rang. Myth??? I think not!! Central Office service is regulated differently the RT and Wireless towers. Thanks to regulations and the FCC. If AT&T is allowed to decommission it copper network, you’d better get out your… Read more »

txpatriot
txpatriot
11 years ago
Reply to  Telco Engineer

telco engineer: you’re not telling the whole story.

I agree a POTS line will work during an electrical outage if it is copper all the way to the CO, but if the POTS line is fed by a SLC remote or a remote DSLAM, I stand by my earlier comment: those customers will be lucky to have eight hours of battery back-up. I notice you didn’t mention that little detail in your response.

I don’t know how many customers are fed over SLCs & DSLAMs compared to dedicated copper but my guess is many (if not most) of them.

Telco Engineer
Telco Engineer
11 years ago
Reply to  txpatriot

In the Northeast, where I hang my cables, the WC’s and DA’s are relatively small. The local loops out feed the Slc’s and DSLAM’s by at least 3:1 In the past 5 to 7 years, there has been minimal growth in SLC’S and DSLAM’s . All the money has been in the Uverse/Vrad bucket. We’ve been neglecting and butchering the aerial plant to support the FTTN build. Chopping up plant to remove bridge-tap and then now piecing it all back together to try to squeeze the extra distance for Uverse pair bonding. Our Uverse technicians are expected to install, test… Read more »

txpatriot
txpatriot
11 years ago
Reply to  Telco Engineer

Telco engineer: good point about U-Verse and VRADs. But of course my point applies equally to those boxes. Any customer served by one of those boxes will not have more than eight hours of battery backup, if that. My point being, unless you have a dedicated copper loop all the way to the CO, you won’t benefit from the CO’s diesel stand-by capacity. And if you DO have a dedicated copper loop, then you DON’T have DSL, U-Verse, etc. So you can either have straight POTS with CO back-up power, or you can have advanced services with no more than… Read more »

serv. tech
serv. tech
11 years ago
Reply to  txpatriot

a responce to your remote sites running out of battery backup, thats why we imploy the use of generators to run the sites, the battery backup is just there to buy time to get generators out not run the network.

txpatriot
txpatriot
11 years ago
Reply to  txpatriot

@serv tech: I understand portable generators are used to supplement battery back-up. But no telco on earth has enough portable generators to back-up up every SLC, every remote DSLAM, every remote fiber terminal, every cell site, etc. If your does, please enlighten us.

Phillip Allen
Phillip Allen
11 years ago
Reply to  Telco Engineer

Amen brother: well written.

txpatriot
txpatriot
11 years ago

Phillip: it’s a common misconception that telcos have an “obligation to serve” but cable companies do not. That is not correct.

Within its franchised area, a cable company must provide service upon request. Here is an example of a cable franchise agreement:

https://coloradosprings.gov/Comcast%20agreement.pdf

Go to PDF page 14 (franchise agreement page 10) and see paragraphs B and C. The cable obligation is in fact very similar to a telco’s “carrier of last resort” obligation.

Cable companies cannot simply pick and choose which customers they will serve to the exclusion of others. That is called “red-lining” and is illegal anyway.

txpatriot
txpatriot
11 years ago
Reply to  txpatriot

The fact that cable TV is a “non-essential” service whereas telephone has traditionally been considered an “essential” service may explain some of the misunderstanding about the requirement each has to provide service. Regardless of how “essential” each service is, both kinds of providers have exactly the same obligation to provide service to any customer who demands it within their franchised service territory. The difference is in scope and scale. A telco generally has a statewide “franchise” (called a “certification” in most states) whereas a cable company generally has a local franchise, covering a single ccity or a few cities in… Read more »

txpatriot
txpatriot
11 years ago

Phiilip: phone companies can also charge extra if the customer is a long way from existing facilities. This is usually called a “line extension charge”.

Do you have a reference to the waiver for density? Not saying you’re wrong — I’d just like to read an actual example.

txpatriot
txpatriot
11 years ago

Thanx Phillip. Here is the first hit when I google those words: https://www.xfinity.com/error/404 The franchise agreement doesn’t exactly let the cable company off the hook for low-density areas (see section 3.2,, PDF page 11, document page 9). The cable company must contribute $1500 to the line extension cost but otherwise must provide service to requesting customers in low density areas of its franchise area if the customer is willing to pay the balance of the extension costs. This is no different that the carrier of last resort obligation for a telco providing service under its line extension tariff. If you… Read more »

txpatriot
txpatriot
11 years ago
Reply to  txpatriot

@phillip: thanx for the links. The Hailey franchise agreement you quote from also has this language: “If a potential Customer resides in an area that does not meet the density requirements of Section 4.8(A) above, the Franchisee shall only be required to extend the Cable System if the Customers in that area are willing to share the capital costs of extending the Cable System by making a capital contribution in aid of construction, including cost of material, labor, and easements.” Cox is “required” to extend service to customers in non-dense areas IF the customers agree to pay a portion of… Read more »

txpatriot
txpatriot
11 years ago

And my point is, cable companies CANNOT refuse your request for service IF you are willing to pay the line extension charge. I’d still like to see a franchise agreement that supports your claim, but just saying so doesn’t make it true.

And I’m not sure how the article you linked to is relevant: the cable company gave the guy several options, he refused to pay, so they don’t have to serve him. Seems pretty simple to me.

So help me understand how that article proves a cable company can “refuse” to serve someone?

Phillip Allen
Phillip Allen
11 years ago

My remark was for the the Telco Engineer in the Northeast!

Phil
Phil
11 years ago

wanted to add clarity: 1) They (Randall) are talking about “flow share” not “market share”. The incumbent “cable” provider has the highest market share everywhere for TV. U-verse is growing (flow share) faster than others in almost all of the U-verse markets 2) The labor costs are why VZ got out of the rural business. Most of them (the union workers) left as the VZ rural areas transitioned to others like Frontier who have a lower pay/operating cost model. Call up any of those technicians and ask them how they made out. Do you think union labor want’s AT&T to… Read more »

Phil Smith
Phil Smith
11 years ago

AT&T, like any company in a free market society, wants to remain profitable and grow while adding value to the country.

Ralph Oliverez
Ralph Oliverez
11 years ago

This is tragic. Randall has already proven that his decision making for ATT is a clear disaster. 4 billion dollar loss on a failed takeover of TMobile. The cable facilities all over ATT are falling apart due to the extreme policies ATT has implemented through MSOC. Randall is deliberately sabotaging the network, and failing to provide adequate service to it’s customers nation wide. And now, this will result in massive reductions in jobs. I implore the FCC to not allow this to happen

Universal service
Universal service
11 years ago

Randall Stephenson is the downfall of AT&T. For not getting T-mobile and shelling out how many billions? He should of been fired. Yet he is rewarded with another golden parachute. Here in the Chicago metro area where the suburbs want U-verse. It is not found. They only put it in areas with the least expense. If the fiber has to be run far from their duct run that area got by passed.So much for those so called valued customers. Remember when AT&T started to throttle back their high usage wireless customers? We will never see an overbuilt wireless network that… Read more »

txpatriot
txpatriot
11 years ago

Judge Greene didn’t break up AT&T. That decision was made in a settlement between the DOJ and AT&T management. All Greene did was approve it. He was not the bad guy in the Divestiture. If anyone is “turning in their grave” it should be the DOJ, not the courts.

Ken Andrews
Ken Andrews
11 years ago

I live in a community in suburban Atlanta that was built in the eary 1980’s. At that time, Bellsouth decided that IFTL (Integrated Fiber In The Loop) was the way to go and that it provided the greatest possibility for future innovation. Nothing could have been further from the truth. This is a large community but AT&T cannot provide DSL at any speed above 1.5mbps (Ultra). So a lot of my neighbors have Comcast. AT&T cannot provide U-verse. So again many of my neighbors have Comcast or satellite service. I have tried to talk with AT&T personnel to determine what… Read more »

Zee Xenon
Zee Xenon
11 years ago

WI-Bell sold its “rural” C.O.s in the ’80s, so here it’s a moot issue for ATT. One with more curiosity than I can check the on-line CLLI records (mine stopped being updated when I retired). However, we are keeping our residential land lines, which are verified C.O. battery driven. Yes, the SLC batteries are iffy, as we verified during the Y2K preparation, but then we begged borrowed and stole enough portable generators. Both of our twisted-pair lines went down weeks apart during the last month because U VERSE techs messed-up in a neighbor’s pedestal. Me, I was a Bell Labs… Read more »

mentor775
mentor775
11 years ago

As a former employee and current contractor for AT&T involved in the copper side with an emphasis on U-Verse products delivered by fibre to the node and from a C.O. based IPDSLAM, I can honestly say AT&T does not provide enough maintenance time to their technicians to maintain these services at a reasonable level. I see personally multiple string-by’s in U-V areas. These are non-bonded I.W. runs outside the sheaths of the so-called conditioned cables. The technicians are now being told to ‘cut around’ bad pairs if they can’t be fixed within 90 minutes. Often an all day job could… Read more »

john
john
11 years ago

That’s the end of my job with AT$T,,,, along with thousands of others in wireline business.

rdfimea
rdfimea
11 years ago

I don’t know who wrote this, but I’m sure many readers will enjoy it! Tip of the day: When shooting cable trouble in rural/farm town areas of California… Step 1) Cross middle finger over index finger and hope your day will go well by finding a half way decent spare pair in your cable count. Meter with your sidekick. Note: The condition of these spare pairs will almost certainly change as weather conditions change. Step 2) Meter field side and c.o. side all the while hoping you don’t have trouble on both your F1 and F2. If trouble is both… Read more »

Dwain Lish
Dwain Lish
10 years ago
Reply to  rdfimea

This was my life in att since sbc bought them. i worked in the back country of san diego calif. so i just retired 2 yrs early to get away from the POS Called att. they do not care about customers or employes . take note they have made a contract with the union in over 1 yr.
My god help you all

EUGENE LAPIERRE
EUGENE LAPIERRE
11 years ago

Hi, Somewhat related comment, I live in the ATT covered area of Kentucky, 502 area code. I have dial-up service as DSL is not available nor cable in my area. My modem been failing for several months. I changed internet service providers due to failed service. My landline went out about 6 weeks ago on a weekend. Now this weekend it went out again. I have voltage at times but not a dial tone. ATT says they have a wide area outage. They won’t say where. They say it will be taken care of tommorow but the date of tommorow… Read more »

Zee
Zee
11 years ago

Eugene, 1. Complain to your Public Service/Utilities Comission Telephone Division and get everyone else suffering from bad service to do the same. 2. Do the same at the FCC. DSL sounds very unlikely to ever be available at your location from what you described (voltage at times but no dial tone indicates one or more repeaters in your line; wide range outage indicates long distribution plant and DSL is optimum only under 5000 feet from the Central Office or special DSL repeater; a DSL line must be clean (no bridge taps, or line connections to serve someone else in the… Read more »

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