AT&T teases a $5 Internet service to help seal the DirecTV deal - The Washington Post

AT&T teases a $5 Internet service to help seal the DirecTV deal - The Washington Post: AT&T will offer cheap Internet to food-stamp recipients if the Federal Communications Commission approves the telecom company's big acquisition of DirecTV.

In a regulatory filing, AT&T says it's prepared to make two plans available to low-income consumers. The first would provide speeds of up to 5 megabits per second (or roughly half as fast as the current national average) for $10 a month. After the first 12 months, that price would rise to $20 a month.

The other plan would be offered in places where AT&T lacks the infrastructure to provide faster speeds. In those areas, poorer Americans would be able to buy a 1.5 Mbps plan starting at $5 a month for the first 12 months. At that point, the price would increase to $10 a month.

It's hard to see how this will influence the FCC's review or what relevance it has given the FCC earlier this year set a minimum standard for Internet connectivity at 25/3Mbps. The proposal also is based on the inappropriate concept of Internet service as a consumptive utility like electric power, natural gas or water and that low income households thus should be offered a low cost consumption option to ensure they have service.

AT&T’s planned “wireless local loop” plant could help it meet its Title II universal service obligation

When AT&T began the regulatory review process of its planned acquisition of DirecTV one year ago, it proposed to offer fixed wireless Internet service to about 13 million residential premises in its service territory not offered Internet service in order to improve the deal’s odds of gaining approval. These premises were never offered AT&T’s legacy ADSL service after it was introduced more than a decade ago. And even if they were today, ADSL would fall far short the Federal Communications Commission’s speed-based minimum standard for Internet service of 25 Mbps for downloads and 3 Mbps up.

Now that the FCC’s rules deeming Internet a common carrier telecommunications service under Title II of the Communications Act are going into effect requiring Internet service providers to “furnish such communication service upon reasonable request” under Title II’s universal service and nondiscrimination provisions, AT&T may be seeking another, more important role for its planned “wireless local loop” fixed wireless plant. 

Specifically, helping it meet its universal service obligations. With so many premises in its service territory refused Internet service for a decade or longer, AT&T could face a potential barrage of complaints and penalties if these premises remain without premises Internet service and it continues to say no to service requests.

However, as arstechnica reports today, AT&T’s fixed wireless service is expected to provide connectivity of up to 20 Mbps – below the FCC’s minimum standard for Internet service. The only way to get more wireless bandwidth is more fiber backhaul bandwidth and/or more wireless transmitters. That means AT&T would likely have to spend more than it would like on its planned “wireless local loop” plant to bring service up to the FCC’s standard in order to keep itself out of hot water with regulators.

AT&T hopes to squeeze more milk from the pay TV cow to boost earnings and pay dividends -- not to fund network CAPex

New Services Cloud AT&T’s Bet on Pay TV - WSJ: AT&T Inc. knew it was buying a melting ice cube when it agreed to acquire satellite-TV company DirecTV last year for $49 billion. But recent moves by HBO, Apple Inc. and the National Football League have turned the temperature up a few degrees.

A wave of new TV services delivered over the Internet allow Americans to get prime programming like the hit HBO series “Game of Thrones” and ESPN sports without paying a big cable or satellite bill. That, in theory, means fewer customers for bundles of TV channels like those sold by DirecTV. And unlike cable companies, DirecTV doesn’t have a significant broadband business to fall back on.

AT&T is aware of the risks. Chief Strategy Officer John Stankey says the telecom giant figured when it did the deal that demand for traditional bundles of TV channels probably had peaked. But AT&T is betting the decline will be slower than many people think—a gradual 34-degree melt, as opposed to a 75-degree one— and that it will be able to milk the cash produced by the declining satellite business in the meantime to fund upgrades in its networks. (Emphasis added)

It's an unlikely bet since given AT&T's business structure and strategy. Milking the pay TV cow boosts earnings and pays fat dividends, not CAPex.

Accelerating implosion of pay TV will hasten AT&T exit from residential wireline

The accelerating implosion of subscription pay TV offerings will hasten AT&T’s exit from the residential wireline market segment and could also result in the telco’s withdrawal of its planned acquisition of satellite provider DirecTV announced in 2014.

AT&T offers video packages with its U-Verse-branded triple play Internet-video-voice product. With the DirecTV deal pending regulatory approval, AT&T hopes to expand its audience of potential viewers and consequently, boost its purchasing power with TV programming providers as negotiations with the programming providers have hardened in recent years.

Viewers have historically regarded the TV programming packages as a poor value for the money since they typically watch only a handful of a few hundred channels. Now they can stream only the video programming they desire via their Internet connections, disrupting the triple play revenue model.

In addition, AT&T’s U-Verse product is delivered to residences over its aging legacy last mile copper cable plant that offers far less bandwidth headroom -- much of it consumed by video -- than hybrid fiber-coax (HFC) cable plants. To keep technologically abreast of cable, AT&T would have to replace its copper plant with fiber. But it is unable to easily do so, constrained by shareholder expectations for earnings and high dividends that militate against substantial capital expenditures.

That leaves AT&T with only one viable option – to continue to sell off chucks of its residential market as it did in December 2014, spinning off its Connecticut residential landline unit, including Internet and TV services to Frontier Communications for $2 billion.

CWA's support of AT&T/DIRECTV merger based on fallacious logic

CWA says AT&T-DIRECTV merger will advance broadband buildout, help consumers, Workers | Speed Matters - Internet Speed Test: The AT&T/DIRECTV merger will improve the economics for AT&T’s investment in high-speed broadband, the critical infrastructure for the 21st century, CWA said. Video is the major driver of broadband expansion, producing the revenue stream to support investment in high-speed networks. As a stronger video competitor, a merged AT&T/DIRECTV will have the economic incentives to increase investment in the high-capacity networks that are so essential to drive economic growth, jobs, and the social benefits enabled by high-speed digital technology.

So asserts the Communications Workers of America in comments filed with the U.S. Federal Communications Commission in support of AT&T's acquisition of DIRECTV.

The problem is the logic does not hold up. AT&T's deriving additional revenues from DIRECTV video services does not necessarily mean those additional funds will be invested in landline Internet infrastructure.

And why should that be the case, AT&T will likely ask itself once the deal goes through, when satellite does the job of delivering video content to residential premises? Instead, any video revenue bump from the deal will likely be plowed into earnings and dividends, not CAPex.

AT&T's dubious "wireless local loop" strategy to boost Internet reach if DirecTV deal blessed by regulators

AT&T’s hard sell on DirecTV: A new type of broadband network - Yahoo Finance: AT&T, however, still owns those 2.3 GHz airwaves in the Wireless Communications Services (WCS) band. In fact, it recently consolidated its WCS holdings across much of the country. And through a compromise with the satellite radio industry, it managed to clear the interference issues that previously made the band useless for wireless data services.

AT&T has said it will use WCS for LTE, but it’s beginning to look like it won’t build the same kind of LTE network it uses to connect phones, tablets and cars. Broadband spectrum analyst Tim Farrar believes AT&T plans to use those 2.3 GHz frequencies for its planned air-to-ground in-flight network. It may choose to use WCS for its fixed wireless network as well. Instead of transmitting to a plane in the sky, the network could link to an antenna. And that antenna could be conveniently mounted on a DirecTV satellite dish – all part of a bundled broadband and TV package.

This is more of the same 23rd century Star Trek quantum subspace channel magical thinking to rationalize an ABF (anything but fiber) infrastructure deployment strategy. Frequencies in that band may work in relatively flat terrain like AT&T's home state of Texas. But they can't penetrate more rugged and forested portions of AT&T's service territory where many premises are still only offered antiquated 1990s dialup Internet. A small New Hampshire wireless Internet service provider explains the problem in this item:

“The challenge with our technology is the land, the hills and valleys,” says Foucher. “The amount of trees is the other major factor. We might be able to connect one person, but their next-door neighbor might be behind a stand of trees that absorb the signals"

And consider this excerpt from a Wall Street Journal item on AT&T's Federal Communications Commission filing on the proposed merger:

If the deal goes ahead, however, it’s unclear how much of an improvement the fixed wireless technology will be. In its application with Federal Communications Commission for the DirecTV deal, AT&T said the transaction makes investing in the technology more feasible, but noted that the service is “relatively untested technology” and “its success in the marketplace is thus unproven.”

AT&T already selling DirecTV

AT&T isn't waiting for regulatory approval of its recently announced acquisition of DirecTV to start bulking up the DirecTV subscriber base in order to gain greater bargaining power with television programming wholesalers -- the business rationale for the deal.

AT&T has launched a direct mail campaign pitching DirecTV as "Digital TV from AT&T," targeted at redlined portions of its service territory where it has no landline Internet infrastructure. Reviewing the fine print on the reverse of the direct mail piece reveals the "Digital TV from AT&T" is in fact DirecTV. The direct mail promo also pitches residential POTS (plain old telephone service).

Consumers have been able to get POTS and satellite TV for decades. Without an offer of a new and/or compelling value, the direct mail piece isn't likely to be appealing or gain many new DirecTV subscribers for AT&T. Instead, it's likely to end up in the waste can or junk mail recycling.

DirecTV CEO's hopes for AT&T deal could be disappointed

DirecTV CEO Mike White

DirecTV CEO Mike White

DirecTV CEO Mike White

White: AT&T Deal Unlocks Potential | Multichanne: White also sees a big customer service opportunity in the deal, allowing DirecTV to offer more products in a single truck roll.

“To me the real opportunity is growth,” White continued. “For us this is a real unlock, it unlocks our way to better serve rural areas, when you think about the 15 million [customer] build out of rural areas. We have been salivating to be able to do [a] one bill and one install experience for the customer and not have two different people show up on two different days, to run it from one call center. This is an enormous opportunity for DirecTV that’s one of the things we could not have gotten with any other partner.”

DirecTV Mike White's belief that AT&T will follow through with a commitment it announced concurrently with its planned acquisition of DirecTV to expand its Internet footprint to reach an additional 15 million premises could prove illusory, dashing his hopes of expanded cross marketing opportunities. For more than a decade, AT&T has announced various infrastructure expansion initiatives including Project Pronto, Project Lightspeed and most recently, Project VIP that have turned out to be far more sizzle than steak.

Yet another AT&T premise infrastructure deployment by press release

Included in AT&T’s announcement today of its acquisition of DirectTV is yet another in a long legacy of Internet premise infrastructure deployments by press release over the years including Project Pronto, Project Lightspeed and Project VIP that were essentially PR gambits.

AT&T said cash generated by unspecified "merger synergies" (most likely lower costs for TV programming) will enable it to provide premise Internet service to 15 million customer premises in its service territory utilizing a combination of technologies including fiber to the premises and fixed wireless. The planned infrastructure deployments will be completed within four years of the closure of the DirecTV transaction, according to AT&T.

Most likely “Project DirecTV” or whatever AT&T calls it will be forgotten within a year or two and any reduced TV programming costs will instead be allocated to shareholder dividends and executive compensation.

Boneheaded media coverage and analysis of AT&T purchase of DirecTV

AT&T close to announcing DirecTV acquisition: sources - Yahoo Finance: The deal would combine the largest U.S. satellite provider and the country's No. 2 wireless carrier, expanding AT&T's customer base by 20 million for its U-verse fiber product, which provides television and Internet service.

The transaction may also allow current DirecTV customers to get Internet service where AT&T u-Verse is available. DirecTV's growth has been hurt because unlike cable companies, it is unable to offer broadband alongside its TV subscriber services. AT&T has about 10.4 million u-Verse Internet customers in states such as California and Texas.

"AT&T just upped the ante," said Roger Entner, lead analyst at Recon Analytics, referring to the BuzzFeed report. "They have become an even more integrated telecom provider and are no longer tied to their U-Verse footprint."

I continue to be vexed by boneheaded media coverage and analysis of this deal. First of all, AT&T does not have a "U-verse fiber product." For the vast majority of U-Verse residential customers, it's based on twisted copper pair using VDSL IPTV transmission technology, with fiber backhauling the field equipment. Second, DirecTV is a satellite TV service that is separate and distinct from integrated telecommunications services delivered over landline connections via Internet protocol. Third, there's nothing about this deal if it consummates that "may allow current DirecTV customers to get Internet service where AT&T u-Verse is available." U-Verse is offered in only a selected portion of AT&T's service territory whereas DirectTV is offered most anywhere. The two have nothing to do with one another.

Finally, analyst Roger Entner's comment that the DirecTV acquisition would make AT&T "an even more integrated telecom provider ... no longer tied to their U-Verse footprint" makes no sense whatsoever. Offering satellite TV does not make AT&T or any other telco "a more integrated telecom provider."  Direct broadcast satellite TV has been around as a stand alone service for many years before AT&T or other telcos began offering DSL-based premises Internet service in the late 1990s. However, Entner's reference to AT&T uncoupling from its U-Verse footprint does make sense if viewed in the context of AT&T turning to DBS as part of a strategic withdrawal from U-Verse due to technological obsolescence of IPTV over copper and its inability to upgrade to fiber to offer a competitive level of service quality on a par with cable TV.

LA Times offers flawed analysis of AT&T interest in DirecTV

Pay-TV field could shrink again with AT&T interest in DirecTV - latimes.com: For AT&T, the value and implications of a DirecTV acquisition are enormous.
First, DirecTV's signal and quality are considered far superior to AT&T's U-Verse television service. This could allow AT&T to rely on DirecTV for broadcast, and free up its fiber lines to increase broadband speeds to U-Verse customers.

This last sentence in this LA Times analysis of AT&T's interest in acquiring DirecTV is rubbish. Fiber lines offer enormous carrying capacity; AT&T does not need to offload video to increase it. The likely reason AT&T is eying satellite for TV distribution is because most of the telco's connections to customer premises are twisted pair copper that can't offer a comparable high definition experience that cable companies can deliver. That gap will only grow wider as ultra high definition TV adoption grows and gobbles up more bandwidth, forcing AT&T to compress it even more to squeeze video content over twisted pair and potentially degrading its quality even further. AT&T is reaching the point of technological obsolescence with its existing copper cable plant and is unable to quickly migrate it to fiber to the premise.

Another major reason is programming costs. AT&T already spends nearly $4 billion a year for programming on U-Verse, and it has just 6 million subscribers. DirecTV pays substantially less per-subscriber for channels than does AT&T.

Unlike the first rationale, this one actually makes sense. AT&T is being squeezed on the consumer side by outmoded delivery infrastructure that requires costly upgrades and on the programming side by TV program cartels that have substantial market power vis Internet service providers.

DirecTV's "premiere" of BPL dies at the box office

Last August, DirecTV it announced the "premiere" of broadband over power line (BPL) service in the Dallas metro market in alliance with BPL player Current.

The Denton, Texas Record Chronicle reports today the deal is dead and Current has sold its infrastructure to a power company that will use it monitor meters, transformers and other devices on the grid.

DIRECTV partners with BPL player for Dallas "premiere"

DIRECTV announced a couple of months back that it was looking to partner with a broadband over power lines (BPL) provider in order to be able to offer broadband to its satellite TV subscribers.

Today, it announced the "premiere" of the service in the Dallas metro market in alliance with BPL player Current. The companies claim the BPL service, to be offered sometime later this year and early next, provides a faster symmetrical connection than cable but no specific throughput speeds are mentioned.

BPL is considered a dark horse among three possible "third pipe" alternatives to the cable/telco duopoly for providing broadband in unserved areas along with WiMAX-based fixed terrestrial wireless and a venture by a coalition of high tech companies including Microsoft and Intel to use portions of the TV broadcast spectrum to provide broadband over the air.