Wednesday, June 04, 2008

Higher than expected equipment, lost opportunity costs dog AT&T strategy to retain copper cable plant

AT&T continues to use its decades-old copper cable plant designed for carrying analog voice traffic to distribute Internet protocol traffic via Digital Subscriber Line (DSL) and more recently, its triple play voice/Internet/TV bundled service, U-Verse.

This strategy has allowed AT&T to avoid large expenditures to replace its last mile copper with fiber optic cable while continuing to depreciate the aging copper cable plant. But over time, it could prove to be a costlier strategy. The reason is that it takes a lot of field-based booster equipment — remote DSLAMs in the case of DSL and VRADs for U-Verse — to pump high bandwidth digital signals over old copper.

AT&T has all but abandoned putting in more remote DSLAMs to provide DSL, choosing to concentrate instead on fiber-fed VRADs to distribute U-Verse. However, if DSL Prime has got it right, Ma Bell will need a lot more VRADs than DSLAMS to reach customers. While DSLAMs can reliably propagate DSL service up to 12,000-14,000 feet, the VRADs used to distribute far more bandwidth intensive U-Verse are considerably less robust, not able to reliably serve premises more than 3,000 feet away. According to DSL Prime, AT&T erred in initially believing their reliable service range was 5,000 feet.

If true, that’s going to cost AT&T big time. Both in higher infrastructure costs because it will have to install more VRADs than anticipated and in lost opportunity costs since it will have to turn away droves of potential customers — including many who missed out on DSL and are still relegated to early 1990s era dialup because the telco failed to install enough remote DSLAMs.

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