Again, Where is the AT&T Fiber?

u_verse_truckAT&T recently announced that they are expanding service of their GigaPower fiber to 35 more communities, bringing the total up to 56 communities. They say that they have plans to pass 14 million homes with fiber by the end of 2019, exceeding the commitment of 12.5 million homes that they promised to the FCC with the purchase of DirecTV.

AT&T says that they were serving 1.6 million homes and businesses with fiber at the end of 2015. The FCC agreement requires them to be offering fiber to 2.6 million customers by the end of this year. AT&T press releases and quotes made to the press claim that the company is already out building fiber like crazy. But are they?

I spent some time on the web looking for evidence that AT&T is building fiber. I started by seeing what I could find about CenturyLink’s fiber build since I know that they are building to pass about 900,000 new homes by the end of this year – about the same goal as AT&T. I skipped over corporate press releases and instead searched for local evidence that CenturyLink is building fiber. And I found plenty of evidence. There are postings by cities warning of coming traffic delays due to construction. There are people posting in local chat groups about CenturyLink fiber. There are newspaper articles taking about the fiber construction.

There was evidence of CenturyLink fiber construction in a lot of markets including: Mesa, Chandler, Phoenix, Scottsdale, Gilbert, Peoria and Anthem in Arizona; Portland in Oregon; Seattle, Tacoma, Vancouver and Spokane in Washington; Salt Lake City in Utah, and St. Paul and St. Louis Park in Minnesota. That’s the kind of aggressive fiber construction needed to pass 900,000 homes in a year.

I found a much smaller list of cities where AT&T seems to be building fiber that includes: Raleigh, Cary and Charlotte in North Carolina; Austin in Texas and Overland Park, Lenexa and Prairie Village in Kansas. These are all markets where Google is also building and where it’s been reported for a few years that AT&T is building fiber. I couldn’t find any evidence for new AT&T fiber construction of any magnitude outside of these Google markets. To give AT&T some benefit of the doubt, perhaps they will be able to meet their 2016 goal to add 1 million passings just in these markets.

I also investigated AT&T’s plans for capital spending. I looked at what AT&T told Wall Street about their capital budget. The company has a $22 billion capital budget for this year. $10 billion of that is aimed at overseas spending including $3 billion to build out from their new acquisition in Mexico. The rest of that spending is aimed expanding its Network on Demand and dedicated Internet of Things (IoT) networks in Europe and to roll out new features for its AT&T NetBond offering in Asia-Pacific, EMEA, and Canada.

Most of the rest of AT&T’s capital budget is aimed at improvements in its wireless networks. The company did tell investors in November 2015 that they planned to spend $2 billion per year for the next three years (2016 – 2018) on wireline networks. Further, AT&T told its investors that it expected overall capital spending to start dropping in future years.

But it’s the wireline capital budget that has me scratching my head. Certainly spending $2 billion in 2016 is enough to add the 1 million new passings they are claiming for this year. But AT&T’s overall goal by 2019 is to go from 1.6 million to 14 million passings. Conservatively that is going to cost at least $12.4 billion over four years just for the fiber. And assuming even a modest take rate for getting 20% of those passings as customers would add at least another $2 billion. Looking back at when Verizon was building FiOS we saw the same sort of big numbers for fiber construction.

It’s just hard to see that AT&T is serious about actually meeting the fiber targets it promised to the FCC. To meet their goals will cost something in the range of $14 billion, and yet they have told Wall Street they will only be spending $2 billion per year on wireline capital. Something isn’t adding up.

AT&T – Building Fiber by Press Release

u_verse_truckIt seems like every few months AT&T makes a new announcement about markets where it’s going to bring its GigaPower broadband service. Just a week ago they announced more than three dozen new markets that include places like Memphis, San Francisco, and Detroit. And they supposedly already have this product available in over twenty markets today.

The trouble is that there is very little evidence anywhere that AT&T is actually building much, if any, new fiber. I’ve seen several reports that suggest that AT&T is offering the product only in those handful of places where they already have fiber – upscale high-rises and new housing developments where they decided to deploy new fiber rather than new copper.

The AT&T press releases make it sound like AT&T is undertaking a massive fiber building project in these cities similar to what Google is doing. Google pre-sells to neighborhoods and then follows up those pre-sales by building fiber past everybody in that neighborhood. I have my reservations about whether it’s really good for a city to let a carrier build to only select parts of their community, but at least Google is out spending the capital dollars on fiber.

In the communities where Google is building you find all sorts of evidence of the construction. There are tons of consumer reviews of the Google products. There are local news articles mentioning construction issues and warning people to stay away from certain streets on certain days. There are tons of local articles in each Google community speculating about who is going to get fiber and what it’s going to mean. The web becomes awash with local news of Google Fiber as it is being deployed.

And yet there is virtually nothing similar in the press in AT&T gigabit cities other than in Austin. In Austin, AT&T built fiber-to-the-home to some neighborhoods as a way to counteract Google, and so in that city the local news is awash with news of AT&T fiber. But there is almost nothing on the web from the other AT&T markets. I can only find a small handful of customer reviews about the AT&T GigaPower product outside Austin.

And other than corporate press releases there doesn’t seem to be big local advertising push by AT&T in the GigaPower markets. Verizon FiOS got their initial fiber customer base by an aggressive door-to-door campaign, a tactic also employed by Google. These campaigns also generate web noise and I can’t see any evidence that AT&T is doing this.

One would also expect that if AT&T was really out building fiber that there would be a big bump in spending on the landline side of the business. It’s not easy to decipher the AT&T annual reports to figure out landline versus wireless capital spending, but there are several wireless analysts who think that the vast majority of AT&T’s capital budget goes to the wireless business. When Verizon was building FiOS there was a huge uptick in capital spending that had all of the telecom analysts buzzing.

The funny thing is that AT&T seems to be using the illusion of building fiber to gain regulatory favor. For instance, one of the ways they got approval of the DirecTV deal was by promising to bring fiber broadband to many millions of homes. In the net neutrality debate they threatened at one point to stop their largely non-existent fiber buildout if the FCC ordered Title II regulation of broadband.

The mainstream press seems to have been duped by the AT&T press releases. As an example, there was just an article last week by Brian Fung of the Washington Post that praised AT&T for entering so many new markets and which chided Google for going slowly. I don’t really want to criticize Brian too much because his tech reporting is usually on point, but he missed this one. Google is spending the millions of capital dollars needed to bring fiber to urban neighborhoods while AT&T seems to largely be building fiber by press release and by increasing speeds in the tiny percentage of their network already on fiber.

For a company that is crowing so loudly about fiber, AT&T is not reporting GigaPower customers separately, nor are they likely to. They do report ‘broadband customers’ which is a combination of fiber customers and customers added to the U-Verse DSL network. In the third quarter the company added 172,000 broadband customers, most of whom were regular DSL customers upgraded to U-Verse. That does not look like a statistic of a company that is aggressively rolling our fiber to almost sixty markets and which is supposedly going to add millions of customers to fiber.