Are We Really Funding More DSL?

DSL modemRecently while speaking at the National Association of Regulatory Utility Commissioners (NARUC), AT&T CEO Randall Stephenson told the attendees that AT&T’s DSL technology is obsolete. This is a rare admission of the truth from AT&T, which has been less than forthcoming over the years about its broadband business.

And it’s a pretty interesting quote from a company that last year accepted $427 million in CAF II funding from the FCC to expand broadband in rural markets. That money is supposedly going to be used to upgrade rural customers to be able to receive at least 10 Mbps download and 1 Mbps upload speeds. CenturyLink and Frontier plan to spend their federal assistance money by expanding DSL. I think it’s widely assumed that AT&T will also use the money for DS. But we can’t be certain that they aren’t planning to instead use that money to bring cellular wireless to rural homes, against the intentions of the FCC.

To be fair to Stephenson, his response was answering a question about how regulators should look at new technology cycles. Stephenson pointed out that technology cycles have shortened over the years. When DSL was first introduced it was expected to be good for about 10 – 15 years, but today the cycles for new technology have shortened to 5 years – with his example being the transition between 3G and 4G wireless.

Stephenson is right about the speed at which broadband technologies are improving. Since the introduction of DSL we have seen cable modems go through several generations of improvements and in 2016 we are seeing the first widespread roll-out of DOCSIS 3.1 and gigabit speeds from cable companies. And in that same time frame we have seen the development and the maturation of fiber technologies for serving homes. From a performance perspective DSL has been left in the dust.

AT&T certainly still has a lot of DSL in service. But it’s hard to decipher AT&T’s broadband statistics because they lump all broadband customers together. This has gotten more confusing since they picked up DirecTV, which sells satellite broadband. AT&T has been further making a distinction between traditional DSL customers and U-verse customers, most of which are served by bonding two pairs of copper together and using two DSL circuits. But supposedly within the U-verse numbers are also customers on fiber, which many analysts suspect are MDUs or small greenfield fiber trials that AT&T has done over the years.

In the fourth quarter of 2015 AT&T announced a net gain of 192,000 IP broadband customers, which is a mix of the three different types of broadband customers. If AT&T is like Verizon and CenturyLink they have been losing traditional DSL customers at a torrid pace, so it’s hard to know what to make of that number. Are they finally adding some FTTP customers?

But back to DSL. Stephenson is right. At best, a DSL service on a single copper line can deliver perhaps 20 Mbps of data – but conditions are rarely ideal and in the real world DSL is generally a lot slower than that. But even if people could get 20 Mbps from new DSL it’s obsolete because that is no longer considered as broadband.

It’s a shame that the FCC is going to invest billions in DSL at a time when the large telcos were never going to make those investments on their own. The CAF II funds will channel billions of dollars to the DSL vendors for one last hurrah before the technology hits the dust heap. Without the CAF II money one can imagine the DSL equipment market fading away.

While CAF II is a huge gift to the companies that sell DSL equipment – it’s going to be a long-term curse to people that will be upgraded with CAF II funding. They are going to get upgraded to DSL in a fiber world and the telcos are going to check these areas off as upgraded and needing no more investment. A lot of the first DSL built in the 90s is still working in the network, and sadly we are probably going to find a lot of CAF II DSL still working in rural America twenty years from now.