AT&T seems to have suddenly discovered it has millions of rural customers who are making due with the company’s poorly-rated, slow speed DSL service AT&T pondered selling off to somebody else.

In a sudden turnaround, CEO Randall Stephenson has decided it might be better to upgrade the company’s service instead of ditching it altogether.

Stephenson’s apparent decision not to jettison rural AT&T landlines on the open market may have more to do with the current regulatory climate than what’s best for shareholders in the short term. AT&T may also find few buyers for the millions of rural landlines the company has no plans to upgrade to its U-verse fiber to the neighborhood platform. The most likely would-be buyers are preoccupied with their current operations:

• Frontier Communications, which purchased rural assets from Verizon Communications, is facing an enormous debt payment in 2013 and a declining stock price;
• FairPoint Communications, which owns former Verizon landlines in northern New England, is still trying to make its business plan work after an earlier bankruptcy filing;
• CenturyLink is still attempting to absorb former-Baby Bell Qwest into its network;
• Windstream may be too small to buy the millions of customers in multiple states AT&T seemed to no longer want until recently.

Stephenson told investors at a Sanford C. Bernstein conference that the company is now considering keeping its rural customers and upgrading DSL technology to better serve them.

A DSLAM reduces the amount of speed-slowing traditional copper phone wiring between the telephone company's "central office" (CO) and your home's DSL modem.

With 15 million AT&T customers having no prospect of getting AT&T’s U-verse service, and 5 million without any AT&T broadband options at all, Stephenson says investment in Internet Protocol Digital Subscriber Line Access Multiplexers, better-known as IP DSLAMs, could extend service and also improve speeds for existing DSL customers, and not cost the company a fortune.

Stephenson noted the cost of the equipment needed to extend service has dropped considerably, in part because demand for DSL has been in decline as customers seek faster broadband, often from cable operators. The two largest phone companies in the country — AT&T and Verizon — had also shown little interest in further expanding their DSL networks.

For a reasonable investment on service upgrades, AT&T could bring speeds of 10Mbps or more to certain customers who now live with 6Mbps or less.

The challenge AT&T faces is reducing the amount of legacy copper telephone wiring between the phone company’s switching office and the customer. Customers who live more than 10,000 feet from a central office make due with very slow DSL speeds. Replacing some of that copper wiring with fiber optics can dramatically increase speeds.

AT&T U-verse works on a similar concept, except AT&T’s most advanced service needs as little copper phone wiring as possible. AT&T’s newest proposal for its rural customers would represent a middle ground — extending fiber to a handful of DSLAMs at distant points from the central exchange, with copper phone wiring carrying the signal the rest of the way to the subscriber’s home. This would open the door to DSL for customers who could not purchase the service before. It would also boost speeds for existing customers.

The decision marks a departure from AT&T’s interest in “solving” the rural broadband problem with heavily usage-limited wireless Internet access over its 4G network. Verizon Wireless is currently testing its own wireless broadband service designed for home users, but it costs $60 and only provides 10GB per month of usage.

While Stephenson has not backed away completely from selling off rural customers outside of U-verse service areas, he told investors he now has a more optimistic view of AT&T’s rural folk in light of marketplace changes.

“We are giving this a hard look,” Stephenson told investors on a recent JPMorgan conference call. Already-available DSLAM technology “brings broadband capability in a more cost-effective manner, with a better revenue profile than perhaps we would have thought two years ago.”

AT&T has turned the city of Campbell, Ohio (population: 8,235) over to a collection agency in a dispute over a $15,000 unpaid phone bill.

Campbell city administrators report they began receiving collection calls at city hall from AT&T’s collections agency this spring. Law Director Brian Macala told The Vindicator he finally got the collection agency to stop calling and AT&T contacted the city after local media began covering the dispute.

At issue is AT&T’s bill — for $15,000, covering a trunk line connecting extensions at the city’s primary office building. A former city finance director claims the city did not extend its contract with AT&T to provide the service, mostly because the company ignored calls to negotiate one. The contract expired in November 2010, but city officials continued to use their phones until July 2011, when Campbell administrators approved a contract with rival Delta Telecom to pick up the service.

The dispute covers AT&T’s off-contract rates charged from November 2010 until July 2011. City officials are disputing the amount of the charges, which are reportedly significantly higher than AT&T’s on-contract prices.

Macala told the newspaper Campbell was not trying to skip out on the bill.

“We had service provided,” Macala said. “The question is, what was the exact value [of the service.]”

AT&T apparently isn’t sure, because the company reportedly told Macala there “may be some defects in the billing.”

But that did not stop the company from selling the account to an outside collection agency.

City officials told the newspaper negotiations with AT&T were ongoing.

Ordinarily, General Communication Inc., or GCI, and Alaska Communications Systems Group Inc. (ACS) compete with one-another for a share of Alaska’s television, broadband, phone, and wireless marketplace. But when Verizon Wireless unveiled plans to build and operate its own network in the state, GCI and ACS set aside some of that rivalry to pool resources for construction of what they claim will be Alaska’s fastest wireless network.

The two companies have agreed to form The Alaska Wireless Network LLC, a jointly-funded statewide wireless network to be used by customers of both companies. GCI will own two-thirds of the network and manage its daily operations, while ACS maintains a one-third interest.  The companies claim they needed to join forces because of the enormous construction costs required to build next generation wireless technology across Alaska.

Both companies will continue to market their own cell phone plans, but since both companies will share the same cell towers, coverage will be identical while accessing the new wireless network.

“By combining our respective wireless assets, GCI and Alaska Communications can provide a state-of-the-art Alaska wireless network owned and operated by Alaskans for Alaskans,” said Alaska Communications president and CEO Anand Vadapalli and GCI president and CEO Ron Duncan.  “We believe that The Alaska Wireless Network will provide the fastest, most geographically extensive, and most reasonably priced wireless services for Alaska subscribers, allowing us each to compete more effectively in the retail market.”

Verizon Wireless believes otherwise. Demian Voiles, vice president for Verizon Wireless Alaska, took a minor shot at the combined network stating Verizon planned to construct an Alaskan network that would rival the kind of coverage Verizon Wireless is recognized for in the lower 48 states.  Voiles said Verizon’s arrival in 2013 will provide Alaskans “the choice they need” in wireless phone companies.

The deal between GCS and ACS requires federal regulatory approval before it can proceed.

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/KTUU Anchorage Alaska Wireless Network 6-5-12.mp4[/flv]

KTUU in Anchorage investigates how GCI is teaming up with its biggest rival — Alaska Communications — to jointly construct a new statewide wireless network to compete with Verizon and AT&T.  (2 minutes)

While cell phone companies tell you the only fair way to price wireless data is to charge you for what you use, these same companies are now considering how to reverse that argument and force you to buy more expensive “unlimited voice calling” plans you may not want or need.

The Wall Street Journal reports that AT&T is the most vocal proponent of ditching “tiered minute plans” for voice calls, which let consumers pick cheaper plans with fewer calling minutes. With Americans talking less and less on their cell phones, customers have been downgrading voice plans to less expensive options.

Industry trade group CTIA-The Wireless Association notes the average cell phone call dropped from 3.03 minutes in 2006 to just 1.78 minutes in 2011. Customers who rely entirely on their cell phone and no longer have a landline used to talk an average of 826 minutes per month in 2007.  Last year, that number dropped to 681 minutes, according to CTIA.

Verizon Wireless sells customers 900 minutes for $59.99. But the company does not count minutes used during nights and weekends or when placing/receiving calls to or from other Verizon Wireless phones. If a customer now talking less still pays $60 for a 900 minute plan, they could shave $20 a month off their monthly bill if they kept their daytime calling to 450 minutes a month. Many do. In fact, younger customers use their smartphones for talking even less, with some not even reaching one hour of voice calling a month.

Verizon's cattle call? Will the company herd all of its wireless customers to unlimited voice calling at a higher price?

Given the option to downgrade, customers are jumping at the chance. With voice revenue declining 2-4% in the first quarter, Wall Street has been pressuring carriers to act.

The answer that works for them, although probably not for you, is forcing all customers to purchase an unlimited voice calling plan at contract renewal time. At today’s prices, that could add an extra $30 a month for customers used to paying $40 for a basic 450-minute calling plan.

“The industry’s definitely moving towards unlimited,” AT&T Mobility Chief Executive Ralph de la Vega said in a recent interview. “Especially as more people adopt smartphones that have voice capabilities over the Internet, segmented voice plans will become less relevant.”

Ironically, cell phone companies that have spent the last year or two defending the end of unlimited mobile data as “fair” because customers can “choose exactly the plan they need,” are adopting a completely different strategy to push for unlimited voice calling.

“It’s more important to offer a complete solution to consumers which is really, truly unlimited,” said T-Mobile USA Chief Executive Philipp Humm in a recent interview. “The new world is a completely unlimited, worry-free world.”

Sprint agrees, although its insistence on preserving an unlimited data experience for its customers protects the company from charges of hypocrisy.

Fared Adib, head of product development for Sprint, told the Journal eliminating tiered voice options makes sense because it simplifies choices for customers. “People like the freedom of not having to worry about either data or voice,” he said.

No cell phone company would go on the record as the first to discard tiered voice plans, but AT&T led the way to ending unlimited data, and the company is increasingly vocal about ending tiered voice calling as well.

At current prices, consumers could pay substantially higher cell phone bills as a result.

Both AT&T and Verizon Wireless currently charge $70 a month for unlimited calling. Sprint charges $99.99 for its combined unlimited calling and data plan. T-Mobile charges $60 for unlimited talking and texting. Compelling customers to adopt unlimited calling plans will likely bring smartphone monthly charges well above $100 a month when factoring mandatory data plan add-ons, taxes, surcharges, and fees.

Customers who find this pricing intolerable will likely gravitate to prepaid calling plans, which is where an increasing number of occasional and light cell phone users have already ended up.

[flv width=”512″ height=”308″]http://www.phillipdampier.com/video/WSJ Voice Calling Plan Changes 6-5-12.flv[/flv]

The Wall Street Journal explores why cell phone companies want to compel customers to choose unlimited voice calling plans.  (4 minutes)

The cable industry is moving in on the phone companies' best customers: commercial enterprises

The growing competitiveness of the cable industry in the commercial services sector could spell trouble for some of the nation’s smaller telecommunications companies.

A new report from Moody’s Investor Service declares the cable industry is spoiling the business plans of telephone companies to grow revenue selling service to business customers.

With cable companies now investing in wiring office parks and downtown buildings to sell packages of voice and data services to corporate customers, traditional phone company revenue will suffer, declares Moody, which predicts traditional wireline revenue will be flat or decrease this year into next.

“Cable Companies Quash Telecom Business-Revenue Rebound,” warns the companies at the greatest risk of revenue declines include EarthLink, Inc., Integra Telecom, Inc., U.S. TelePacific Corp., and CCGI Holding Corp. Among familiar independent phone companies, Frontier Communications, FairPoint Communications, and Hawaiian Telcom are at the biggest risk of losing customers, primarily because all three lack strong business products, according to the Moody’s report.

AT&T, CenturyLink, and Verizon are at a lower risk of losing customers, because all three focus investments on commercial services. CenturyLink’s acquisition of Qwest, a  former Baby Bell, strengthened its business services position, especially in the Pacific Northwest.

The cable companies best positioned to steal away telephone company customers are Comcast and Time Warner Cable, both of which have invested heavily in wiring commercial businesses for service. In the past, cable operators charged thousands (sometimes tens of thousands) of dollars to install service in unwired commercial buildings, but now that initial wiring investment is increasingly being covered by cable operators.

Moody’s declares the business service sector a growth industry for cable. The report notes business revenues only account for $5 billion — just six percent — of the cable industry’s total business in 2011. In contrast, phone companies earn 40 percent of their revenue from business customers.

The report also states individual cable companies are now collaborating to deliver business service to companies with multiple service locations, which used to present a problem when offices were located in territories served by different operators.

If the cable industry continues to erode traditional telephone company revenue, it could eventually threaten the viability of some companies, especially those heavily-laden with acquisition-related debt.