Sunday, November 02, 2008

Cable company capitalizes on AT&T's failure to deploy DSL, inability of telco's aged copper cable plant to support bundled services

Two years ago, South Lake Tahoe was one of El Dorado County, California's most puzzling and persistent broadband black holes. Neither incumbent telco AT&T nor the incumbent cable provider, Charter Communications, offered broadband to many of the area's neighborhoods, leaving residents with the dreary Hobson's choice of antiquated mid-1990s era dialup technology or costly, substandard satellite Internet connections.

Patti Handal was fed up with the situation and went door to door with some of her neighbors, collecting signatures of nearly 700 residents of the affected neighborhoods petitioning AT&T to deploy DSL and do so ASAP. Then several months later in June 2007, the Angora Fire incinerated some of these neighborhoods along with portions of AT&T's aerial copper cable serving them. AT&T's replacement of the fire damaged infrastructure enabled the telco roll out DSL to Handal's and some -- but not all -- of the Tahoe neighborhoods stranded on the dark side of the digital divide.

In retrospect, Handal believes the petition campaign to show AT&T demand was there for DSL had no meaningful impact despite the encouragement of the effort by AT&T and local elected officials. Instead, it was the Angora Fire's destruction of AT&T infrastructure that altered the dial up status quo.

Now Handal reports Charter is about to roll out service to much of Montgomery Estates, all of Echo View Estates, all of Angora Highlands, and all of Mountain View Estates with Christmas Valley and all of Montgomery Estates in the near future.

Charter officials were likely motivated by a report in the Tahoe Tribune that AT&T decided in January 2008 not to expand DSL service in the area in the foreseeable future, seizing an opportunity to take and hold market share since in a duopolistic market, whichever provider deploys first enjoys initial customer appreciation and loyalty for bringing them out of dial up purgatory and into the modern era of telecommunications.

Notably, AT&T isn't matching Charter's bundled services including video. According to Handal, an AT&T representative told a South Lake Tahoe Chamber of Commerce meeting two months ago that it would not be offering its bundled U-Verse service. Instead, AT&T has chosen to deploy DSL in some but not all of the areas served by Charter in a limited response to Charter's deployment initiative.

The likely explanation for AT&T's decision to select a partial DSL deployment strategy is going head to head with Charter for bundled services would require AT&T to replace most of its aged copper cable plant that can support only slower DSL speeds but cannot carry the higher bandwidth VDSL signal used by U-Verse.

Despite the expectation that AT&T introduced U-Verse in order to compete with cable companies, the scenario playing out in some South Lake Tahoe communities is likely to be mirrored throughout much of the United States where telcos' aged copper cable plant precludes them from offering bundled services and higher speeds to effectively compete with cable providers.

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