Stephenson

AT&T CEO Randall Stephenson on Tuesday told investors that AT&T will deploy a combination of fiber optics and 5G wireless and be able to sell a “true, high-speed internet network throughout the United States” within the next three to five years.

“In three to five years out, there will be a crossover point,” Stephenson told investors. “We go through this all the time in industry. 5G will cross over, performance wise, with what you’re seeing in home broadband. We’re seeing it in business now over our millimeter-wave spectrum. And there will be a place, it may be in five years, I think it could be as early as three, where 5G begins to actually have a crossover point in terms of performance with fiber. 5G can become the deployment mechanism for a lot of the broadband that we’re trying to hit today with fiber.”

Although the remarks sound like a broadband game changer, Stephenson has made this prediction before, most recently during an AT&T earnings call in January, 2019. Stephenson told investors he believed 5G will increasingly offer AT&T a choice of technology to deploy when offering broadband service to consumers and businesses. In high-cost scenarios, 5G could be that choice. In areas where fiber is already ubiquitous, fiber to the home service would be preferred.

Stephenson’s predictions about nationwide service will depend in part on the commercial success of millimeter wave 5G fixed home broadband, which will be required to satisfy broadband speed and capacity demands. Verizon Wireless has been offering fixed 5G in several markets with mixed results. The company’s early claims of robust coverage have been countered by Verizon’s own cautious customer qualification portal, which is more likely to deny availability of service to interested customers than offer it.

But Stephenson remains bullish about expanding broadband.

“So all things considered, over the next three to five years, [with a] continued push on fiber, 5G begins to scale in millimeter-wave, and my expectation is that we have a nationwide, true, high-speed internet network throughout the United States, [using] 5G or fiber,” Stephenson said.

Whether anything actually comes of this expansion project will depend entirely on how much money AT&T proposes to spend on it. Recently, AT&T has told investors to expect significant cuts in future investments as AT&T winds down its government-mandated fiber expansion to 14 million new locations as part of approval of the DirecTV merger-acquisition. In fact, AT&T’s biggest recent investments in home broadband are a result of those government mandates. AT&T has traditionally focused much of its spending on its wireless network, which is more profitable. For AT&T to deliver millimeter wave 5G, the company will need to spend billions on fiber optic expansion into neighborhoods where it will place many thousands of small cell antennas to deliver the service over the short distances millimeter waves propagate.

AT&T could sell a fixed 5G broadband service similar to Verizon Wireless, confine its network to mobile applications, or offer fixed wireless service to commercial and manufacturing users in selected areas. Or it could offer a combination of all the above. AT&T will also need to consider the implications of a fiber buildout outside of its current landline service area. Building fiber optic networks to provide backhaul connectivity to AT&T’s mobile network would not antagonize its competitors nearly as much as the introduction of residential fixed 5G wireless as a home broadband replacement. The competitive implications of that would be dramatic, especially in communities skipped by Verizon FiOS or stuck with DSL from under-investing independent telephone companies like CenturyLink, Frontier, and Windstream. Should AT&T start selling 300+ Mbps fixed 5G wireless in these territories, it would cause significant financial distress for the big three independent phone companies, and could trigger a competitive war with Verizon.

Wall Street is unlikely to be happy about AT&T proposing multi-billion dollar investments to launch a full-scale price war with other phone and cable companies. So do not be surprised if AT&T’s soaring rhetoric is replaced with limited, targeted deployments in urban areas, new housing developments, and business parks. It remains highly unlikely rural areas will benefit from AT&T’s definition of “nationwide,” because there is no Return on Investment formula that is likely to work deploying millimeter wave spectrum in rural areas without heavy government subsidies.

For now, AT&T may concentrate on its fiber buildout beyond the 14 million locations mandated by the DirecTV merger agreement. As Stephenson himself said, “When we put people on fiber, they do not churn.” AT&T has plenty of runway to grow its fiber to the home business because it attracts only about a 25 percent market share at present. Stephenson believes he can get that number closer to 50%. He can succeed by offering better service, at a lower price than what his cable competitors charge. Since 5G requires a massive fiber network to deploy small cells, there is nothing wrong with getting started early and then see where 5G shakes out in the months and years ahead.

Some residents in eastern Queens, N.Y. have paid tens of thousands of dollars to replace copper water pipes, some damaged beyond repair just three months after being installed, after mysterious stray electric current traced back to Verizon caused the pipes to prematurely deteriorate.

In April, without admitting liability, Verizon reached out to homeowners on 188th Street in the Fresh Meadows area, offering to reimburse costs incurred dealing with leaking, corroded copper water pipes.

The problems began nearly four years ago, affecting residents of Jamaica Estates, Rosedale, Flushing, and other nearby neighborhoods. An epidemic of water leaks originating in copper pipes that connect homes to the municipal water supply resulted in waterlogged front lawns and small rivers of water running down streets with no rain in sight. Copper water pipes rated for 60 years of service began failing after as little as three months. Inspection found premature corrosion and leaks.

Joe Concannon on 188th Street in Queens demonstrates how quickly water lines in the neighborhood deteriorate as a result of corrosion. (2:00)

What caused the pipes to deteriorate so rapidly, forcing some homeowners to replace their feed lines four times over the course of a few years? An investigation conducted by the New York City Department of Environmental Protection (DEP), which is responsible for supplying water service in the area, discovered the culprit was stray direct current electricity traveling underground. When DC voltage reaches copper pipes, electrolytic corrosion begins. True electrolysis is rare and had not been seen in most cities for decades, primarily because of the retirement of high amperage DC current-fed trolley cars our grandparents and great-grandparents once rode.

This copper pipe survived five months underground before deteriorating with a substantial corrosion hole. (Image courtesy: Joe Concannon)

As some homeowners continued to face thousands in repair bills, a classic game of finger-pointing ensued over where the excess leaking voltage was coming from. Con Ed was a natural suspect, except for the fact it supplies alternating current (AC) voltage, which was not responsible for the corrosion problem. Con Ed blamed Verizon, claiming the source of the stray electricity was coming from Verizon equipment on a pole in Rosedale. Verizon called Con Ed’s investigation flawed because that particular pole carried fiber optic FiOS cables. Besides, it was highly unlikely leaking voltage traced to a single overhead pole could cause the kind of damage being found in Queens.

In 2017, the DEP commissioned Corr-Tech, an independent consultant, to find the source of the stray voltage, and verify if city infrastructure was responsible. In a 2018 report, the consultant stated that the leaks were not caused by city infrastructure but rather by a private utility, namely Verizon.

Corr-Tech found that although Verizon had commissioned FiOS fiber optic service in Queens years earlier, its older network remained in service. Verizon’s copper infrastructure is powered by DC voltage and if allowed to fall into disrepair, could leak DC voltage from buried phone cables. In this part of Queens, Verizon used lead-sheathed communications cable in terracotta ducts in the immediate vicinity of the deteriorated copper piping. Terracotta is the same material used to make clay flower pots, and is relatively fragile and subject to cracking and breaking.

After the 2018 report was issued, Verizon announced some results of its own investigation, concluding “when homeowners disconnect traditional copper telephone wires, by either going to FiOS or removing phone service altogether, Verizon continues to emit a current through those lines.”

But Verizon did not accept direct responsibility, and for the rest of 2018 into 2019, copper pipe failures persisted. At least 32 private water service lines along the east side of 188th Street and between 73rd Avenue and the Grand Central Parkway have failed since 2017.

“We’re not talking about one or two or five or ten, were talking about dozens,” said City Councilmember Barry Grodenchik. “Let me do the math for you, one person having a broken water main into their house is bad luck on one block, two of them is a coincidence, 32 in such a short stretch of 188th Street is a statistical impossibility unless there is an intervening force.”

In January, fed up residents were joined by members of the City Council and New York Assembly at a press conference calling on Verizon and the DEP to resolve the situation and reimburse homeowners. Assemblyman David Weprin proposed a bill in the New York State legislature that would put the onus on DEP to replace damaged water pipes at their expense, and then chase Verizon for reimbursement.

“The homeowners should not be responsible,” Weprin said in January. “I will be introducing a bill tomorrow in Albany, hopefully with the support of my Assembly member colleagues, to not require the homeowners to lay out the money. DEP is in a better position to layout the money, in the thousands of dollars, and then go after the third-party, in this case Verizon, rather than the homeowners.”

Because Verizon may ultimately be found financially liable, the company is now disconnecting line voltage from unused landlines, but despite reducing stray DC current, it remains present underground. Verizon will likely have to decommission its copper landline network or replace it to fully eliminate the excess voltage. In the meantime, Verizon recently sent letters to all affected homeowners stating it hired Sedgwick Claim Management Services “to evaluate claims for reimbursement for monetary expenses incurred as a direct result of the leak of your corroded copper water pipes.”

In return for signing a release of all claims against Verizon for damage, the phone company says it will begin reimbursing valid claim holders. Some neighborhood activists have little trust in Verizon or its motives, and questioned whether that signed release would prevent future claims from being processed. Verizon denied that would be the case and said it would continue to reimburse impacted homeowners in the future. Many would prefer not having to cover the costly repairs out-of-pocket and then wait for reimbursement. Some have proposed a fund paid for by utility companies to cover replacement costs directly.

A few lawmakers wonder if Verizon’s deteriorating underground infrastructure could be a ticking time bomb waiting to go off in other neighborhoods and in other states.

“Homeowners have been affected, and yet again we’ve seen a huge corporation just shirk their responsibility for doing the right thing by each and every homeowner,” said Assemblywoman Nily Rozic. “It is incumbent upon the city it’s incumbent on the state the Public Service Commission, to make Verizon step up and really deliver for homeowners.”

WABC-TV’s consumer reporter visited Queens to report on the sudden deterioration of copper water pipes in the neighborhood in July, 2018. Impacted homeowners endured flooded basements and thousands of dollars in unreimbursed expenses. (2:54)

Verizon’s FiOS expansion is still, still, still, still, and still dead.

Despite the passage of favorable legislation deregulating the state’s largest telecom companies, Verizon has thumbed its nose at New Jersey’s efforts to convince the company to expand its fiber-to-the-home service.

“Verizon does not plan to expand its FiOS service footprint,” wrote Tanya Davis, a Verizon franchise service manager for FiOS in New Jersey and New York. “The company remains focused on continuing to meet its franchise obligations, and delivering competitive services, and enhanced consumer choices, where the services are available.”

More than a decade after passing the 2006 Cable TV Act in New Jersey, designed to convince telecom companies to compete more vigorously with each other, Verizon remains uninterested in further expanding its fiber network in New Jersey and beyond.

After successfully lobbying the state to adopt a statewide cable TV franchise policy, making life easier for Verizon by not requiring the company to negotiate a contract with each town serviced, Verizon suddenly stopped caring after announcing a pullback in further FiOS expansion in 2010. The change in heart appears to have started at the top. Then CEO Ivan Seidenberg, who approved FiOS, retired and was replaced by Lowell McAdam, who preferred Verizon invest mostly in its wireless networks.

Vergano

As a result, New Jersey has a telecom industry-friendly deregulatory policy in place with nothing to show for it.

“People want to see competition,” Wayne Mayor Christopher Vergano told the North Jersey Record, citing complaints his office has received about Altice USA’s Optimum service. “Over the years, they’ve seen their cable bills increase. We’re trying to give residents options.”

Wayne’s Township Council passed a resolution asking state lawmakers to review the 2006 Cable TV Act to find a way to coerce Verizon to do more fiber upgrades in the state. In 2006, then Gov. John Corzine got Verizon to commit to wiring 70 towns across New Jersey, and Wayne was not one of them.

Verizon agreed to expand its fiber network to all county seats, as well as areas with a population density in excess of 7,111 residents per square mile.

New Jersey’s Board of Public Utilities (BPU) is still allowed to report on Verizon’s progress, but little else, thanks to deregulation. A BPU report stated deployment of FiOS slowed to a crawl between 2010-2013, when only three new towns were reached with fiber upgrades. What little interest Verizon still had in FiOS expansion ended after 2012’s Superstorm Sandy, after which Verizon ended expansion in urban areas of New Jersey as well.

“It’s solely Verizon’s discretion to add municipalities to its system-wide franchise,” a BPU spokesman told the newspaper.

Prior to deregulation, utility boards and regulators could compel companies to offer service instead of shrugging their shoulders and telling state lawmakers ‘it’s all up to Verizon.’

Although continued traffic growth would seem to indicate companies like AT&T and Verizon will need to continue major spending initiatives to keep up with demand, technological advancements and upgrade programs have made networks more efficient than ever, allowing AT&T and Verizon to report cost declines as much as 40% annually.

Wireless One’s Dave Burstein spoke with Andre Fuetsch, AT&T’s chief technology officer about current telco cost trends. Feutsch said a lot has changed with AT&T’s networks over the last several years.

“We’ve gone from 10 gigabits to 100 gigabits to now 400 gigabits on our fiber,” Feutsch told Burstein. “MIMO and massive MIMO are extremely productive. Yes, I think 40% per year is a reasonable estimate of how our costs are going down. AT&T’s leadership in open white box and SDN will continue to drive that number higher, which is needed as network demand increases.”

Burstein notes Verizon similarly estimated their costs were also falling about 40% annually.

“I have been able to confirm that the 40% Verizon efficiency savings figure is on target if not exact,” Burstein said. “You can replicate my thinking. Traffic has been growing 40% per year. Sales have been roughly flat for the similar time period. If productivity growth hadn’t been a similar 40%, profits likely would have trended down. In fact, they have been flat or slightly increasing.”

While AT&T has been embarked on a costly major fiber network buildout in its local phone service territory, Verizon has been focused on rebuilding and modernizing its core network. The “One Verizon” project is retiring a large percentage of the 200,000 legacy routers, switches, and other hardware in use across Verizon’s network and installing about 20,000 very efficient network box replacements. Verizon estimates its first year cost savings are about 50%.

Although network traffic growth, expansion, and upgrades come at a cost to carriers, technological improvements are covering much of those costs by making networks more efficient and capable of carrying much more data than ever before. When companies talk about their network investments in terms of justifying rate increases, that clearly does not tell the full story.

Charter Spectrum’s broadband-only customers run up more than double the amount of broadband usage average customers subscribing to both cable TV and broadband use, and that consumption is growing fast.

“Data usage by residential internet customers is rising rapidly and monthly median data usage is over 200 GB per customer,” Charter CEO Thomas Rutledge said on a morning quarterly results conference call. “When you look at average monthly usage for customers that don’t subscribe to our traditional video product, usage climbs to over 400 GB per month.”

Last week, Comcast reported its average broadband customer also used over 200 GB a month, but did not break out the difference between those subscribing to cable TV and those who do not. If Comcast’s broadband-only customers are consuming a comparable amount of data, they could be nearing half of their monthly usage allowance (1 TB), in markets where Comcast caps its customers’ usage. But because that is only an average, it means many more Comcast customers are likely nearing or now exceeding Comcast’s data cap, exposing them to hefty overlimit penalties.

Spectrum does not impose any data allowances on its customers — all usage is unlimited.

Charter officials also reported their average mobile customers use “well under 10 GB a month.” The fact Charter did not get more specific about mobile usage is important because the new product is getting scrutiny from some on Wall Street concerned it will have a hard time becoming profitable because of its wholesale agreement with Verizon Wireless, which provides the 4G LTE service for Spectrum Mobile.

Subscribers have been primarily drawn to the $14/GB plan, which includes unlimited talk and texting, because it offers a very low entry price for a full-function wireless plan. But a customer only needs to use more than 3 GB of service per month to find their bill higher than what they would pay subscribing to Spectrum Mobile’s $45 unlimited usage plan. If Charter executives said the average mobile user consumed 5 GB of data, analysts could deduce what the average customer bill probably looked like. To maximize profits, Charter needs customers to select an unlimited data plan and keep data usage low to assure it can cover the wholesale costs Verizon Wireless charges the cable company for wireless connectivity.

Rutledge

Rutledge stressed he expects Spectrum Mobile to be profitable with the current Verizon Wireless MVNO contract in place — the service simply needs a larger user base to overcome its current losses.

Rutledge also announced Spectrum Mobile was testing dual SIM technology, which could allow it to eventually offload more of its 4G LTE traffic to its own (cheaper) network, which could eventually include mid-band wireless spectrum and the CBRS spectrum the company is already testing for fixed wireless service for rural areas. Spectrum could also follow Comcast with its own in-home network of publicly available Wi-Fi or innovate with unlicensed wireless mobile spectrum using small cells or external antennas.

Charter executives noted that customer data demands were pushing many to upgrade to higher speed internet products.

“Over 80% of our internet customers are now in packages that deliver 100 Mbps of speed or more and 30% of our customers are getting 200 Mbps or more,” Rutledge said. “We’re also seeing strong demand for our Ultra product, which delivers 400 Mbps, and we have gigabit service available everywhere.”

The costs to continue upgrading service for broadband customers are negligible on the company’s current platform, Rutledge admits. In the future, Charter Spectrum is considering offering 10 Gbps and 25 Gbps symmetrical service to customers, and it can scale up upgrades very quickly.

“For example, in only 14 months we launched DOCSIS 3.1, which took our speeds up to 1 Gbps across our entire footprint at a cost of just $9 per passing,” Rutledge said.