AT&T’s claim it wants to expand gigabit fiber to the home service to as many as 100 cities nationwide requires closer inspection on news this week it has slashed spending on its wireline business.

Investors knocked AT&T’s share price today as they learned earnings from AT&T’s wired networks will be lower than expected.

TheStreet reported this morning the spending cuts are so significant, they are creating a financial risk for a number of AT&T’s major vendors.

Research firm Jefferies issued a research note warning that AT&T’s spending cuts began last month and seem to be ongoing. As a result the companies that have the most exposure to AT&T’s wireline business are at increased financial risk. Those suppliers include optical fiber equipment manufacturer Alcatel-Lucent, as well as Ciena, Juniper, ADTRAN, Finisar, and JDS Uniphase. As a result, all but Finisar saw their share prices drop significantly in morning trading.

Earlier today, AT&T reported it was ahead of schedule to complete its Project VIP expansion of its 4G LTE wireless and U-verse networks. As U-verse expansion nears an end, vendor orders may be in decline. Wall Street analysts see no evidence AT&T is preparing to spend much on any other expansion efforts, including fiber to the home service.

As Broadband Reports’ notes, without significant capital to invest in fiber upgrades, they are not going to happen.

These cuts make it hard to take the company’s claims of meaningful 1 Gbps fiber expansion seriously as there’s simply no budget cordoned off for such a project (“Project VIP” funds are already in use on other efforts). While AT&T has the press believing they’re deploying 1 Gbps to “up to 100 cities,” AT&T’s shrinking CAPEX tells a different story entirely.

Fiber to the home service is more costly than AT&T U-verse’s fiber to the neighborhood service because it requires a fiber cable be brought directly to each home or business — a more costly endeavor that requires careful cable burial or overhead drop line replacement, as well as the possibility of in-home wiring adjustments. Considering the billions spent on U-verse expansion to date, at least as much will be required to upgrade to fiber to the home service and there are no signs AT&T is ready to invest in anything beyond press releases.

CenturyLink does not believe it will face much of a competitive threat from AT&T and Verizon’s plans to decommission rural landline service in favor of fixed wireless broadband because the two companies’ offers are too expensive, overly usage-capped and too slow.

Both AT&T and Verizon have proposed mothballing traditional landline service in rural areas because both companies claim wireline financial returns are too low and ongoing maintenance costs are too high. In its place, both companies are developing rural fixed wireless solutions for voice and broadband service that will rely on 4G LTE networks.

CenturyLink does not traditionally compete against either AT&T or Verizon because their landline service areas do not overlap. But as both AT&T and Verizon Wireless continue to emphasize their nationwide wireless networks, independent phone companies are likely to face increased competition from wireless phone and broadband services.

CenturyLink isn’t worried.

“About two-thirds of our customers can get access to 10Mbps or higher [from us and] that continues to increase year by year,” CenturyLink chief financial officer Stewart Ewing told attendees at Bank of America Merrill Lynch’s 2014 Global Telecom & Media Conference. “Our belief is that with the increasing demands customers have for bandwidth — the Netflix bandwidth requirement — just the increasing amount of video that customers are watching and downloading over their Internet pipes, we believe will drive customers to using a provider that basically has a wire in their home because we believe you will get generally higher bandwidth and a much better experience at lower cost.”

Ewing

CenturyLink customers consume an average of slightly less than 50GB of Internet usage per month, and that number is growing. Ewing said that CenturyLink has long believed that as bandwidth demand increases, wireless becomes less and less capable of providing a good customer experience.

“At this point, we don’t really have any concerns because people on the margin — the folks that don’t use much bandwidth — probably use a wireless connection today to download,” Ewing said. “But as the bandwidth demands grow, the wireless connection becomes more and more expensive and that could tend to drive people our way. So as long as we have 10Mbps or better to the customers, we don’t really think there is that much exposure.”

CenturyLink does not measure the difference in Internet usage between urban and rural residential customers, but the company suspects rural customers might naturally use more because alternative outlets are fewer in number outside of urban America.

“Folks in rural areas might actually can use Internet more for buying things that they can’t source [easily], but it’s hard to really count,” said Ewing. “I think our customers in the rural areas probably are not that much different from folks in urban areas.”

Prism is CenturyLink’s fiber to the neighborhood service, similar to AT&T U-verse. It is getting only a modest expansion in 2014.

CenturyLink’s largest competitor remains Comcast, which co-exists in about 40% of CenturyLink’s markets. The merger with Time Warner Cable won’t have much impact on CenturyLink, increasing Comcast’s footprint in CenturyLink territory by only about only 6-7%. CenturyLink believes most of any new competition will come in the small business market segment. Comcast’s residential pricing is unlikely to attract current CenturyLink customers in Time Warner Cable territory to consider a switch to Comcast if the merger is approved.

Ewing also shared his thinking about several other CenturyLink initiatives that customers might see sometime this year:

• Don’t expect CenturyLink to expand Wi-Fi hotspot networks. The company found they are difficult to monetize and is unlikely to expand them further;
• Any change in the FCC’s definition of minimum broadband speed to qualify for federal broadband expansion funds would slow rural broadband expansion. Ewing admitted a 10Mbps speed minimum is considerably more difficult to achieve over DSL than a 4 or 6Mbps minimum;
• Don’t expect any more merger/acquisition activity from CenturyLink in the Competitive Local Exchange Carrier business. CenturyLink shows no sign of pursuing Frontier, Windstream, FairPoint, or other independent phone companies. It is focused on expanding business services, where 60% of CenturyLink’s revenue now comes;
• CenturyLink fiber expansion will primarily be focused on reaching business offices and commercial customers in 2014;
• CenturyLink will only modestly expand PrismTV, its fiber-to-the-neighborhood service, to an additional 300,000 homes this year. The company now offers the service to two million of its customers, with 200,000 signed up nationwide. Last year, CenturyLink expanded PrismTV availability to 800,000 homes.

When customers have three or four $600 smartphones on their family plans, purchasing insurance for all of them can prove costly.

Most cell phone companies offer insurance plans that often carry expensive monthly premiums and high deductibles, but many also cover the loss or theft of a phone. With independent insurers including Squaretrade taking a bite out of their business, large carriers have been forced to respond with improved plans of their own.

Last week, AT&T quietly launched a new Multi-Device Protection Pack ($30/month) that covers up to three devices (including phones, tablets, laptops) against loss, theft, damage, or out of warranty defects for as long as customers stay enrolled in the plan. The primary limitation: the device must run Windows Vista, OSX, Android or iOS or newer operating systems. Customers can add their two additional devices at any time the insurance is in effect. Asurion provides the coverage and warranty service.

Squaretrade says it offers better value than traditional cell company insurance plans.

AT&T’s $30 a month price tag will seem high when compared against competing offers from Squaretrade running as low as $5 a month per device for up to three years, but AT&T argues its insurance plan covers loss or theft, while Squaretrade does not.

Squaretrade responds that it doesn’t believe loss/theft protection is a good value for its customers.

“Research has shown that people are 10 times more likely to have their phone break due to malfunctions or accidents like drops and spills (which SquareTrade covers better than anyone else) than lose it or have it stolen,” Squaretrade argues. “And yet, loss & theft coverage can cost twice as much as accident protection. Meanwhile, there are free apps to help find your phone if you ever do misplace it.”

Customers who find themselves needing to file a claim will find significant differences between AT&T’s plan and competitors like Squaretrade.

Both charge deductibles, but AT&T’s drops the longer you don’t file a claim. Squaretrade charges a flat $75 deductible after returning your damaged device in a postage-paid box. Many Squaretrade customers report they typically receive reimbursement — not a repaired phone — for the full retail (no-contract) value of the phone, minus the deductible. Most cell company insurance plans send customers a previously refurbished phone of the same or better model.

AT&T’s declining deductible varies depending on the device. For the first six consecutive months without a claim, AT&T charges these deductibles:

• Devices connected to AT&T’s network (phones, 4G-enabled tablets, etc.): $50/125/199 depending on device model;
• Approved repair of a laptop or tablet: $89;
• Replacement of lost/stolen/non-repairable laptop or tablet: $199

After the first six months but less than one year with no claims, customers get a 25% discount on their deductible. After 12 months, the discount increases to almost 50%. There is a limit of six shared claims between all three devices within any consecutive 12-month period with a maximum replacement value of $1,500 per claim. There is a 30-day waiting period before AT&T starts coverage of non-connected devices (laptops, etc.).

AT&T also provides technical support for customers via phone or online chat to set up and back up devices and deal with basic troubleshooting.

There are some devices AT&T won’t cover:

• Galaxy Camera (EK-GC100A)
• Blackberry Playbook
• Phones on GoPhone® accounts
• Tablets with pre-paid data plans
• PlayStation® Vita
• AT&T 3G MicroCell
• Phone or device models not sold by AT&T (e.g., Dell Streak, Google Nexus One, TerreStar Genus)
• Docks (such as for the Motorola ATRIX 4G)
• Amazon Kindle

A complete list of covered devices is available from AT&T’s website and is subject to change.

[flv]http://www.phillipdampier.com/video/ATT Cell Phone Insurance – Multi-Device Insurance Protection from ATT 5-23-14.flv[/flv]

AT&T explains its new Multi-Device Protection Pack, priced at $30 a month, covering up to three devices. (1:35)

AT&T U-verse cabinets attract unsightly trash and graffiti in San Francisco.

After a unanimous vote by San Francisco’s Board of Supervisors further restricting AT&T’s U-verse above-ground cabinets and extending the public a larger say about their placement, AT&T filed suit in San Francisco Superior Court claiming the company’s rights have been violated.

In 2011, supervisors voted 6-5 in a controversial decision to let AT&T install up to 726 metal cabinets in the city, connecting AT&T’s fiber network to existing copper telephone wiring. Since that vote, AT&T has installed almost 200 boxes that are supposed to avoid blocking pedestrian travel, curbs or fire hydrants and are kept away from street corners. But after the city received hundreds of complaints — mostly about pervasive graffiti — AT&T suspects the city intentionally slowed approval of more boxes.

AT&T’s lawsuit specifies the city has denied permits for 26 of the boxes since November without offering alternate locations. AT&T also accuses San Francisco of taking more than 60 days to approve or reject another 67 permit requests.

The last straw seems to have been the unanimous passage of a bill introduced by Supervisor Scott Wiener giving more weight to public comments about the cabinets. The new policy also requires AT&T to propose multiple locations on permit applications, preferably not on main thoroughfares, as well as requiring AT&T to install graffiti-resistant boxes.

San Francisco’s 311 hotline has processed hundreds of complaints showing repeated graffiti attacks on AT&T’s boxes. In many cases, AT&T has not directly responded to the city regarding the complaints, although most have been addressed eventually.

AT&T says any further restrictions on its U-verse expansion, including public input, violate state law.

In most states, so long as AT&T confines its box installations to the public utility easement, it can choose locations for its boxes without consultation.

In some states, particularly North Carolina, this has resulted in large 4-foot tall, unsightly lawn cabinets appearing in the front yards of residential homes. In several instances, multiple cabinets are installed side-by-side and are protected from traffic by nearby bollards that further extend the equipment’s footprint.

“The U-verse boxes are always placed adjacent to or across the street from an existing interconnect box,” notes San Francisco resident Bryce Nesbitt. “AT&T has chosen not to invest in a combined box that would reduce impact on the public realm. One slightly larger interconnect box could take the functions of the dual interconnect/VRAD solution AT&T is pushing everyone to accept.”

AT&T’s solution for rural Americans without access to broadband service arrived this week with the introduction of an $80/month plan bundling a mandatory wireless home landline with a 10GB usage-capped Internet plan.

AT&T Wireless Home Phone and Internet has undergone market testing in selected northeastern areas (largely outside of AT&T’s landline service territory). This week the service became available nationwide and is marketed to customers disconnected (or soon will be if regulators approve) from AT&T’s traditional landline service. AT&T is petitioning to dismantle its rural and outer suburban wired landline network and transfer customers to wireless service. But AT&T’s wireless replacement is both expensive and usage capped with an allowance that is just a fraction of what AT&T DSL offers:

• Customers start with a $20/month wireless landline phone replacement, powered by AT&T’s wireless network. Customers will keep their current phone number and home phones and will be sent a “Home Base” device that will interface between AT&T’s wireless network and up to two telephones. AT&T does not permit its device to be connected to your existing home phone wiring, so it strongly urges customers to buy cordless phones. The device is portable so it can be taken with you when traveling. The standalone service offers unlimited nationwide calling, Voicemail, caller ID and call waiting;
• Those interested in also purchasing broadband can add one of three different data plans: $60 for 10GB, $90 for 20GB and $120 for 30GB. AT&T charges a $10 overlimit fee for each extra gigabyte. You cannot buy broadband service unless you also subscribe to AT&T’s wireless landline product. That means the lowest possible price for rural broadband is $80 a month for up to 10GB of usage. Access may be over AT&T’s 4G LTE network (5-12Mbps maximum speeds) or their much-slower, but more common 3G network. In contrast, AT&T sells DSL for as little as $15 a month with a 150GB usage allowance included.

[flv]http://www.phillipdampier.com/video/ATT Wireless Home Phone Internet Intro 5-2014.flv[/flv]

AT&T introduces its new solution for rural America — wireless home phone and Internet service, at a price much higher than what urban customers pay. (1:42)

AT&T’s Home Base

AT&T’s Wireless Home Phone and Internet includes plenty of fine print and disclaimers:

• A two-year service commitment is required to avoid a $199 charge for the Home Base device;
• 911 service is not guaranteed and you will be required to give your physical location to the 911 operator so they can send help to the proper address;
• A backup battery powers the Home Base allowing up to 1.5 hours of talk time and 18 hours of standby time. However, a standard corded phone that does not need electric power to operate is required to place or receive calls (including 911) during a power outage;
• Not compatible with wireless messaging services/text messaging, home security systems, fax machines, medical alert & monitoring systems, credit card machines, IP/PBX Phone systems, or dial-up Internet service. May not be compatible with DVR/Satellite systems;
• Call quality, wireless coverage, and service reliability are not guaranteed;
• Well-qualified credit approval required;
• An activation fee (undisclosed) also applies.

There are many surcharges that also may apply, including a $35 restocking fee, federal, state, and local taxes and the universal service fee. Customers must also pay AT&T-originated fees kept by AT&T, including a $1.25 “cost recovery charge,” a gross receipts surcharge, administrative fees and any government-originated assessments that AT&T passes on to customers in various states.

[flv]http://www.phillipdampier.com/video/ATT Wireless Home Phone Internet Setup 5-2014.flv[/flv]

AT&T explains how to set up and configure its Home Base to receive phone and broadband service wirelessly. (3:16)