With the advent of AT&T/DirecTV Now, AT&T’s new over-the-top streaming TV service launching later this year, AT&T is preparing to bury the U-verse brand.

Earlier this year, AT&T customers noticed a profound shift in the company’s marketing priorities. The phone company began steering potential customers to AT&T’s latest acquisition, satellite television provider DirecTV, instead of U-verse. There is an obvious reason for this – DirecTV has 20.45 million customers as of the second quarter of 2016 compared to 4.87 million customers for AT&T U-verse TV. Volume discounts make all the difference for pay television companies and AT&T hopes to capitalize on DirecTV’s lower programming costs.

AT&T’s buyout of DirecTV confused many Wall Street analysts, some who believe the days of satellite television are past their peak. Satellite providers lack the ability to bundle services, although some phone companies partner with the satellite company to pitch phone, broadband, and satellite TV to their customers. But consider for a moment what would happen if DirecTV introduced satellite television without the need for a satellite dish.

Phillip Dampier: The “U” in U-verse doesn’t stand for “unlimited.”

AT&T’s DirecTV Now will rely on the internet to deliver television channels instead of a satellite. AT&T is currently negotiating with most of the programmer conglomerates that own popular cable channels to allow them to be carried “over-the-top” through broadband connections. If successful, DirecTV Now could become a nationwide powerhouse alternative to traditional cable TV.

AT&T is clearly considering a potential future where DirecTV could dispense with satellites and rely on broadband instead. The company quietly began zero rating DirecTV streaming in September for AT&T Mobility customers, which means watching that programming will not count against your data plan. For current U-verse customers, broadband speeds have always been constrained by the need to reserve large amounts of bandwidth to manage television viewing. Although AT&T has been boosting speeds in selected areas, a more fundamental speed boost could be achieved if AT&T dropped U-verse television and turned the service into a simple broadband pipe that relied on DirecTV Now to manage television service for customers.

AT&T seems well on the way, adding this notice to customer bills:

“To make it simpler for our customers U-verse High Speed Internet and U-verse Voice services have new names: AT&T Internet and AT&T Phone. AT&T Internet product names will now align with our Internet speed tiers. Our voice plan names will remain the same.”

An earlier internal company memo suggested AT&T would eventually transition all of its TV products into “AT&T Entertainment” after completing a transition to its “next generation TV platform.” Increasingly, that platform seems to be an internet-powered streaming solution and not U-verse or DirecTV satellite. That transition should begin in January.

Gone by end of 2016.

It would represent a formidable change, but one that makes sense for AT&T’s investors. The transition to IP networks means providers will offer one giant broadband pipe, across which television, phone and internet access will travel. The bigger that pipe becomes, the more services customers are likely to use — and that means growing data usage. Having a lot of fiber infrastructure also lays the foundation for expansion of AT&T’s wireless network — particularly towards 5G service, which is expected to rely on small cell technology to offer faster speeds to a more localized area — fast enough to serve as a home broadband replacement. Powering that network will require plenty of fiber optics to provide backhaul access to those small cells.

Last week, AT&T announced it launched a trial 100Mbps service using point-to-point millimeter-wave spectrum to offer broadband to subscribers in multiple apartment complexes around the Minneapolis area. If the initial trial is successful, AT&T will boost speeds to include 500Mbps service to those same complexes. AT&T has chosen to provide the service outside of its usual service area — Minneapolis is served by CenturyLink. AT&T acquired a nationwide license to offer service in the 70-80GHz band back in 2009, and an AT&T spokesperson claimed the wireless signal can reach up to two miles. The company is also experimenting with new broadband over power lines technology that could offer service in rural areas.

Just like its wireless service, AT&T stands to make money not just selling access to broadband and entertainment, but also by metering customer usage to monetize all aspects of how customers communicate. Getting customers used to the idea of having their consumption measured and billed could gradually eliminate the expectation of flat rate service, at which point customers can be manipulated to spend even more to access the same services that cost providers an all-time low to deliver. Even zero rating helps drive a belief the provider is doing the customer a favor waiving data charges for certain content, delivering a value perception made possible by that provider first overcharging for data and then giving the customer “a break.”

As of mid-September, streaming media analyst Dan Rayburn noted Akamai — a major internet backbone transit provider — was selling content delivery contracts at $0.002 per gigabyte delivered, the lowest price Rayburn has ever seen. Other bids Rayburn has reviewed recently topped out at 0.5 cents per gigabyte. According to industry expert Dave Burstein, that suggests large ISPs like AT&T are paying something less than a penny per gigabyte for internet traffic.

“If you use 139GB a month, that costs your provider something like $1/month,” Burstein wrote, noting doubling backbone transit costs gives a rough estimate of the cost to the carrier, which also has to carry the bits to your local exchange. In this context, telecom services like broadband and phone service should be decreasing in cost, not increasing. But the opposite is true. Large providers with usage caps expect to be compensated many times greater than that, charging $10 for 50GB in overlimit fees while their true cost is well under 50 cents. Customers buying a cell phone are often fitted with a data plan that represents an unprecedented markup. The extent of price increases customers can expect can be previewed by looking at the cost of phone service over the last 20 years. The average, often flat rate telephone bill in 1995 was $19.98 a month. In 2014, it was $73 a month. In 2015, it was $90 a month. Those dramatically rising prices in the last few years are mostly as a result of the increased cost of data plans providers charge to clean up on customers’ growing data usage.

Both Comcast and AT&T are dedicated to a campaign of getting customers to forget about flat rate, unlimited service at a reasonable cost. Even as both companies raise usage caps, they continue to raise prices as well, even as their costs to provide the service continue to drop. Both companies hope to eventually create the kind of profitable windfall with wired services that wireless providers like AT&T and Verizon Wireless have enjoyed for years since they abandoned unlimited flat rate plans. Without significant new competition, the effective duopoly most Americans have for telecommunications services offers the opportunity to create a new, more costly (and false) paradigm for telecom services, based on three completely false claims:

• data costs are expensive,
• usage must be monetized, and
• without a bigger return on investment, investors will not finance the next generation of telecom upgrades.

But as the evidence clearly shows, profits from selling high-speed internet access are only growing, even as costs are falling. Much of the drag on profits come from increasing costs related to licensing television content. Voice over IP telephone service is almost an afterthought for most cable and phone companies, often thrown in for $10-20 a month.

AT&T’s transition puts all the attention and its quest for fatter profits on its broadband service. That’s a bad deal for AT&T customers no matter what the company calls its “next generation” network.

The Federal Communications Commission should redefine broadband as speeds of at least 50/20Mbps, according to the New America Foundation’s Open Technology Institute.

The advocacy group argues that the FCC’s current definition of 25/3Mbps is too slow to support the growth of high-bandwidth online applications including high-definition video, cloud computing, and online gaming.

“People use their connections for many reasons, and often multitask,” the group writes in a filing submitted to the FCC this month. “It is easy to see how multiple people with multiple devices engaging in multiple online activities on the same residential connection can quickly lead to buffering, slow load times, and frustration even with a 25/3 connection.”

In general, consumer groups want the FCC to push providers to offer faster speeds, particularly telephone companies still relying on ADSL, a technology that first became widely available in the 1990s. There are millions of consumers still reliant on DSL technology on copper wire phone networks that can only support speeds of 6Mbps or less. Many of those are Verizon and AT&T customers, particularly in suburban and rural areas bypassed by Verizon FiOS or AT&T U-verse. Almost no AT&T or Verizon ADSL customers come close to achieving the FCC’s current minimum definition of broadband: 25/3Mbps.

The OTI argues that it isn’t just the speed required by applications, it is also the number of concurrent connections. As emerging technology like the Internet of Things introduces new devices that will share a user’s home broadband connection, faster internet speeds may be needed.

“The general consensus around IoT is that, with potentially billions of new devices connecting to the Internet via Wi-Fi or cellular signals, capacity will need to increase,” the organization writes.

But the OTI will have to contend with provider opposition to redefining broadband speeds upwards. The NCTA – the Internet and Television Association, the nation’s largest cable lobbying group, wants the current definition maintained by the FCC.

“The current benchmark accommodates the expected needs of even those households using an atypically large amount of bandwidth, accounting for multiple streams of bandwidth intensive applications like HD streaming video, in addition to web browsing, email, and other applications,” the NCTA wrote. “The Commission should reject the notion of adopting a future-oriented, ‘aspirational’ benchmark, which would be necessarily divorced from the realities of the marketplace.”

Many NCTA members already offer speeds in excess of 50Mbps, although many cable companies also cap their customers’ usage.

The cable industry’s broadband Achilles’ heel has always been upstream speeds that are set much lower than download speeds. But the days of asymmetric cable broadband may soon be a thing of the past if CableLabs successfully defines a new Full Duplex extension for DOCSIS 3.1 — bringing symmetrical broadband speeds to cable companies across the country.

CableLabs sees the potential of eventually offering multi-gigabit broadband over today’s existing hybrid fiber-coax (HFC) cable systems. Marketing 1,000/1,000Mbps internet access could keep cable operators competitive with fiber to the home services that already offer symmetrical internet speeds.

The cable industry-supported research group is collaborating with vendors, according to Belal Hamzeh, vice president of wireless for CableLabs, in a blog post.

“The ecosystem support for the Full Duplex DOCSIS 3.1 technology has been staggering, with many vendors collaborating and contributing to the development of the technology,” Hamzeh wrote. “A recent example is Cisco’s contribution of a new silicon reference design of a digital echo canceler that maximizes the use of HFC capacity to provide a scalable multi-gigabit return path.”

The Full Duplex DOCSIS 3.1 project transitioned from the innovation phase to the R&D phase in June. A working group will continue to meet on a regular basis to finalize the specification, which will allow vendors to begin producing modems that support the new standard.

Only half of CenturyLink’s customers in well-populated areas formerly served by Qwest can buy broadband service at 40Mbps or higher, while rural customers fare considerably worse with less than 25% able to get High Speed Internet at those speeds.

Customers have noticed and at least 65,000 canceled their broadband service with the phone company in the second quarter of this year, most presumably switching to their area’s cable operator.

“CenturyLink is by far the most abysmal telephone company I’ve ever had to deal with and I’m 63 years old,” shares Glen Canby in Arizona. Canby is a retired telephone company engineer that spent 40 years with a larger phone company serving the midwestern U.S.  “Their reviews online echo my own experiences, which have ranged from being quoted one price while being billed another, being locked into a term contract you didn’t ask for, and getting only a fraction of the speed they claim to sell.”

Canby is counted as one of CenturyLink’s 40Mbps-qualified customers, yet he actually receives less than 6Mbps service.

But that isn’t what CenturyLink tells the Federal Communications Commission. In a semi-annual broadband deployment report, the company claimed 51 percent of their customers in urban and suburban former Qwest service areas can subscribe to 40Mbps DSL or higher. But whether a customer is “qualified” to buy 40Mbps service is not the same as actually getting the speeds the company markets.

CenturyLink attempts to cover their claims with fine print attached to their FCC submission: “The numbers shown in this chart reflect the percentages of households served by DSLAMs that are capable of providing the specified broadband speeds.” (A DSLAM is a network device typically used to extend faster DSL speeds to customers by reducing the amount of copper wiring between the telephone company’s central office and the customer’s home. Customers in a neighborhood typically share space on a DSLAM, in effect sharing a single connection back to the phone company.)

“That’s clever of them, because of course the DSLAM is just one link in the chain that ends with the ‘last mile’ between that equipment and my home, and that is where CenturyLink’s phone plant is at its weakest,” Canby writes. “I spent 20 years at a phone company dealing with last-mile DSL speed issues, so they cannot fool me.”

Canby blames the condition of CenturyLink’s infrastructure between the DSLAM serving him and his home for the problems, as well as overselling DSL service by packing too many customers onto a single DSLAM.

“It might be 40Mbps service at the remote end, but it drops to around 6Mbps on a good day by the time it reaches my house,” Canby complains. “Once the sun goes down, the speed drops to 3Mbps, which is a classic case of overselling to me because too many people are trying to share one connection at the same time. It has been this way since 2008 according to my neighbors.”

Back then, phone service was provided by Qwest, the former Baby Bell providing service in 14 sparsely populated western U.S. states — Arizona, Colorado, Idaho, Iowa, Minnesota, Montana, Nebraska, New Mexico, North Dakota, Oregon, South Dakota, Utah, Washington, and Wyoming. Qwest was acquired by CenturyLink in 2011.

CenturyLink has promised to improve broadband speeds for former Qwest customers, but much of what counts as progress has been in more urban areas, while rural customers continue to languish. The company admits just 21.9 percent of rural households can get 40Mbps service. Only 47.6% can buy 12Mbps, 61.3% can get 5Mbps, and 83% can subscribe to 1.5Mbps. That leaves 17% of former Qwest customers with no broadband options at all. CenturyLink did not break out the percentage of customers that meet the FCC’s 25Mbps minimum speed definition of broadband.

“This is why CenturyLink loses customers to cable operators who have no problems trying to deliver internet access over their network, because it was built to support more bandwidth,” Canby shares. “They can usually deliver the same internet speed to customers no matter how far out they live while phone companies deal with a network built for making phone calls, not data.”

Company officials recognize they could do better and have promised investors another 2.5 million customers will be able to reach 40Mbps by the end of 2017. By the end of the year after that, CenturyLink hopes to reach 85% of customers with VDSL2, bonding, and vectoring technology to achieve 40Mbps service for most customers in their top 25 markets. But rural customers are likely to left waiting longer because of the costs to upgrade Qwest’s copper-based network, especially in smaller states like Idaho, the Dakotas and Wyoming.

“The only answer is cable or fiber broadband, and if you live in a small community it could be years before CenturyLink gets around to you,” Canby writes. “If it’s the same story all over town, I’d start advocating for a community-owned fiber network and not sit around and wait for CenturyLink to act, especially if there is no cable company in town.”

With more than one million people in its footprint across western New York, Frontier Communications has the potential of picking up a significant number of new customers and keeping others from leaving with the introduction of its Vantage IPTV service (see our coverage from this spring to learn more about Vantage TV), set to arrive in the Greater Rochester area by the end of this year.

Rochester is Frontier’s largest legacy copper service area by population, encompassing the majority of the 585 area code. Yet for all that history and Rochester’s significant population base, over the last 15 years Frontier has owned the former Rochester Telephone, upgrades to its copper wire infrastructure have been modest. Significant segments of Frontier’s service area in Rochester still cannot support greater than 3-6Mbps DSL because the company has proportionally underinvested in network upgrades.

That underinvestment has allowed Time Warner Cable (now Charter) to amass a large majority of the residential broadband, phone, and television market in the region. Winning those customers back may be tough without considerable investment in ridding the Rochester area of large segments of copper wiring in place since the 1960s and 1970s. Frontier will be competing against a company that offers broadband speeds starting at 60Mbps and will be discounting its plans, packages and equipment fees for the next few years.

Vantage TV is powered by Frontier’s broadband service and will need more bandwidth than the company can now supply across parts of the three dozen communities it plans to market IPTV in the Greater Rochester area. CEO Dan McCarthy promised to upgrade much of Frontier’s copper network to support speeds of 50Mbps or higher, but that isn’t likely to happen this year in large parts of western New York.

Historically, Frontier has preferred acquiring other companies’ already-built fiber and fiber/copper networks instead of spending the money to build comparable networks from scratch. That is why there is a wide disparity between Frontier’s performance in its acquired FiOS and U-verse territories (Indiana, Pacific Northwest, and Connecticut) and its legacy network (Rochester) and acquired dilapidated copper communities (non-FiOS Verizon acquisition areas, most of West Virginia, etc.)

The Vantage TV announcement underwhelmed local media, with only one television station bothering to cover it. That may be a result of skepticism among area reporters who have had direct past experience using Frontier’s DSL service and share our attitude about Frontier’s press releases: only believe it when you actually see it.