Saturday, April 23, 2011

AT&T exec suggests wireless will save its residential market segment

AT&T may be the nation's largest telecommunications company. But its size hasn't helped it meet the challenge of upgrading its cable plant to transport Internet protocol-based services. AT&T provided wireline Internet connectivity first through dial up and ISDN connections in the early 1990s, and then DSL as the 1990s turned into the 2000s. Starting in 2006, AT&T brought fiber closer to customer premises -- but not to them -- with its FTTN (Fiber to the Node) U-Verse service utilizing VDSL. Some new, dense greenfield developments received U-Verse service via direct fiber to the premises connections.

New home construction cratered shortly after U-Verse rolled out, leaving only more challenging FTTN brownfield opportunities. They are more challenging because the old cooper cable plant designed for POTS (Plain Old Telephone Service) is used to carry high compressed VDSL signals that quickly degrade with distance, limiting the size of the potential U-Verse customer base.

Faced with these challenges to reach customer premises and seeing strong growth on the wireless side of its business, AT&T not surprisingly sees its future in the wireless space. "The future is wireless broadband and we must keep that in front of us at all times," Tim Ray, executive director for AT&T External Affairs in Northern California, said at a recent roundtable discussion hosted by Sacramento-based Valley Vision.

In 2010, Valley Vision formed the Connected Capital Area Broadband Consortium (CCABC), a coalition "which seeks to identify and coordinate strategic broadband investments in the six-county Sacramento region aimed at improving broadband infrastructure, access and adoption." Ray, who sits on Valley Vision's board of directors, appeared to suggest wireless Internet connectivity will be able to substitute for wireline connectivity, noting "27 percent of homes no longer have wire line and this trend will continue to grow."

Ray's wrong and engaged in wishful thinking. There's currently nothing indicating wireless Internet service -- which is aimed at mobile devices with a low bandwidth allocation per customer  -- can provide sufficient capacity to handle burgeoning bandwidth consumption and be able to reliably deliver to customer premises high definition video content and applications like video conferencing and telemedicine. Indeed, AT&T's wireless infrastructure is already choked with far lower bandwidth traffic from devices such as the iPhone.

AT&T is in conflict with its own business model. It's in the telecommunications business which by its nature requires lots of CAPEX and OPEX. But it expects to get a full ROI within 5 years on its CAPEX. That's not going happen in most places except perhaps in new dense greenfield developments, which as previously mentioned also aren't happening.
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