Why telcos drag their feet on residential broadband

In the fall of 2007, Ralph de la Vega, AT&T's group president for regional telecommunications and entertainment made a pronouncement with profound implications that were largely overlooked in the mainsream media.

de la Vega told Investor's Business Daily that AT&T would ultimately shut down its existing voice network and replace it with a VOIP (Voice Over Internet Protocol) system in metro areas where U-Verse is being deployed.

Since U-Verse deployment has been delayed and scaled back, it calls into question the future of AT&T's wireline residential market segment. Essentially de la Vega pronounced the beginning of the end of the Publicly Switched Telephone Network (PSTN) and its replacement by the Internet with Next Generation Telephony.

That also means telcos' proprietary central office switches are on a fast track to obsolesence, destined to be replaced with Internet servers and field-based fiber optic distribution equipment. Industry observers like Bob Frankston are right to accuse telcos of foot dragging by creating artificial bandwidth scarcity and restricting broadband access in order to live in the copper-bound PSTN world for as long as possible. This is the unspoken subtext to the larger Strum und Drang on this blog and elsewhere over the pathetically poor state of broadband availability in much of the United States. It's typically explained as a simple return on investment problem, but there's more to it than that.

As the Internet wreaks massive disruption in mass media, it also threatens an end to the days of Plain Old Telephone Service (POTS) delivered over twisted copper. Just as people are canceling their newspaper subscriptions, they are also ditching their residential land lines. And who can blame them when all they can get over them is POTS and perhaps DSL (an acronym that should mean Doesn't Serve Lots)?

It also explains why first tier telcos like AT&T are redefining the residential wireline segment as "personal wireless" services since this segment can remain proprietary if residential wireline moves out of the old proprietary, closed system scheme and into one where last and some middle mile infrastructure is owned and operated by small local providers, local governmental entities and telecom cooperatives.

More signs of trouble for AT&T's U-Verse

AT&T continues to emphasize wireless as its future while deemphasizing the wire line market segment. As evidence, gigaom cites a June 4 report by UBS Research analyst John Hodulik that the big telco has slowed by nearly half deployment of its premier wire line product, U-Verse.

Hodulik projects AT&T's U-Verse buildout to reach an additional 4 to 5 million premises this year, down from 9 million new premises passed by the service -- which offers Internet connectivity, IPTV, and VOIP -- in 2008.

As predicted last September, I continue to expect AT&T to pull the plug on U-Verse sometime in the first half of 2010 as part of a general retreat out of residential wire line service in favor of more profitable wireless service. The Dallas-based company will likely blame unanticipated cost, technological and competitive market challenges for the move. In the residential and small business wire line segment, AT&T's future role will be a middle mile and particularly a long haul provider.

No antitrust issue in ISP suit vs. AT&T, U.S. Supreme Court rules

Reuters reports the U.S. Supreme Court has ruled against several Internet Service Providers who brought an antitrust suit against AT&T in 2003 claiming the big telco's pricing policies on DSL service constituted uncompetitive market conduct.

The ISPs alleged AT&T and its predecessor, SBC Communications, maintained unreasonably high wholesale access charges to ISPs to deliberately thwart them from competing with SBC/AT&T for Digital Subscriber Line (DSL) customers as permitted under the line sharing provisions of the federal Telecommunications Reform Act of 1996. Ma Bell then lowballed prices on her own DSL offerings, making it impossible for the ISPs to compete on price, the ISP plaintiffs complained.

Don't subsidize slow, outmoded AT&T DSL, groups urge California PUC

One of five AT&T broadband build out projects subsidized with 40 percent matching funds from the California Public Utility Commission's California Advanced Services Fund (CASF) has drawn criticism from community groups in California's North Coast area.

The groups, the Mendocino Coast Broadband Alliance, Redwood Coast Rural Action, Redwood Coast Connect and Humboldt Area Foundation protest the award of $15,200 in CASF funding to AT&T to finance the roll out of DSL technology to serve 97 homes over existing wire line facilities. The groups complain that won't deliver sufficient throughput in the affected areas including Albion, Little River, Caspar, Mendocino, Fort Bragg, Elk and Point Arena. The so-called Comptche project's DSL throughput of up to 1.5 Mbs for downloads and up to 384 Kbs for uploads is too slow, they say, urging the CPUC demand AT&T offer throughputs of 3 Mbs down and 1 Mbs up as originally specified in CASF funding guidelines adopted by the commission in 2007. Moreover, some of the groups say, a Wireless Internet Service Provider (WISP) could provide faster speeds over a shorter timeframe than AT&T's DSL project.

However in its resolution adopted Feb. 20 awarding funding for the project, the CPUC notes it "has no control over what applicants ultimately offer," and that the 3 Mbs download and 1 Mbs upload speeds are guidelines and not firm requirements. "We believe that broadband speeds below 3/1 still offer large benefits to communities that have no broadband service at all and does not hinder the possibility of upgrades by incumbents or competitors," the resolution states.

The unstated cause of the debate: AT&T's aged copper cable plant that cannot support higher throughput as well as the company's reliance on underpowered DSL technology that has very limited range over copper cable due to signal degradation.

AT&T slows Project Lightspeed/U-Verse deployment

AT&T will decelerate build out of its hybrid fiber/copper Project Lightspeed infrastructure that delivers the telco's bundled U-Verse offering, TelephonyOnline reports today.

The publication cites comments by AT&T executives in a conference call Tuesday discussing the company's Q4 2008 earnings and citing Lightspeed/U-Verse as a drag on profits.

Under the scaled back deployment, AT&T has decided to delay its goal of passing 30 million homes from 2010 to 2011, according to TelephonyOnline, and concentrate on the former BellSouth territory in the southeastern U.S. AT&T acquired in late 2006.

Last month, AT&T also pushed back the deployment of VDSL copper pair bonding technology to extend the severely limited range and throughput of U-Verse. The new target date is sometime this year, the second delay after a planned late 2007 deployment was scrapped.

Another sign of the coming end of AT&T's U-Verse

In late September, this blog predicted AT&T will abandon its Project Lightspeed/U-Verse deployment sometime in the first half of 2010 as part of a general retreat from the wireline-based residential/home office market segment.

Another sign of the coming end of the U-Verse universe emerged this week when AT&T pushed back -- again -- the rollout of VDSL copper pair bonding technology to extend the range and throughput of its bundled IP-based U-Verse product. The new target date is sometime next year, the second delay after a planned late 2007 deployment was pushed back a year.

The obstacle is the same one that has plagued AT&T 's ADSL service: not enough good, clean copper in the telco's last mile cable plant, much of it put in place decades ago to support POTS (Plain Old Telephone Service) and never expected to support advanced digital services like ADSL let alone U-Verse. Telephony Online explains:

Perhaps a more pressing limitation, however, is the simple requirement for extra pairs of existing copper, which are not in plentiful supply in AT&T’s network outside the territory of the former BellSouth, where extra pairs were deployed extensively in the 1990s to accomodate dialup and fax services.

Report: AT&T pulling plug on Pahrump, Nevada WiMAX by year end

A few years back, AT&T rolled out an early market test deployment of WiMAX in Pahrump, Nevada. Now an AT&T customer there tells me AT&T will stop offering the service effective Dec. 31 and has opted instead for DSL and is deploying remote DSLAMs around the town about 60 miles from Las Vegas.

Apparently there wasn't enough bandwidth to handle the demand. "We had it for about two years, and the longer we had it, the slower it got," the AT&T customer reports, noting he generally got 384 Kbs to 768 Kbs downloads on WiMAX. He's now on AT&T's 6 Mbs DSL plan, so while the switch to DSL cost $5 a month more, it was a no brainer.

What's notable about this development is AT&T's new technology chief John Donovan said only four months ago that the big telco viewed WiMAX as a less costly alternative to replacing aging copper plant and installing remote DSLAMs in order to provide DSL, particularly in less densely populated areas.

I sent an email to AT&T spokesman Michael Coe Dec. 10 asking why WiMAX was scrapped in favor of DSL in Pahrump but received no reply, so readers will have to draw their own conclusions. AT&T has also deployed WiMAX in Alaska offering sub 1 Mbs throughput speed and in parts of the former Bellsouth territory AT&T acquired at the end of 2006.

If AT&T's version of WiMAX can't provide more than 1 Mbs, it is already essentially obsolete and calls into question AT&T's expectations that it will serve as lower cost broadband option compared to DSL.

Tensions erupt between telcos, cablecos over over California broadband build out subsidy levels

As recently reported on this blog, California's incumbent telcos are bitching to the California Public Utilities Commission, complaining a 40 percent subsidy to underwrite the cost of building out broadband infrastructure to areas of the state lacking adequate access under the CPUC's California Advanced Services Fund (CASF) isn't likely to be enough for many potential projects.

Now the griping has turned into a contretemps between some of the biggest players and Comcast has jumped into the fray. In comments filed Nov. 19 on the eve of a CPUC hearing today to consider restructuring the CASF, Verizon criticizes AT&T's suggestion the 60 percent provider match be abandoned, warning it could lead to too much state funding of some projects.

In its Nov. 19 comments filed with the CPUC, cable provider Comcast takes issue with AT&T's "incredible" suggestion that the CASF fully subsidize some projects and Verizon's proposal that the CASF share be increased up to 80 percent for selected projects. The cable company warns the higher CASF funding threshold would be contrary to the CASF's goal of funding only projects that are economically viable.

AT&T's suggestion that CASF provide 100 percent funding for selected high cost projects in unserved areas "is truly outrageous, particularly coming from AT&T," Comcast said in its filed comments. "The CASF was not set up to be a slush fund to cover 100 percent of the costs of the largest ILEC in the state."

Gullible, disingenuous pols enact state video franchise schemes unlikely to lower cable rates

Gullible and intellectually dishonest politicians enacted so-called video franchise schemes in about a dozen states over the past few years pushed by big telcos like AT&T. They were gullible at best and disingenuous at worst because they parroted the telcos' party line that such regulatory "reforms" would enhance competition for video services by allowing telcos to compete with cable companies, resulting in lower prices for consumers.

Well surprise, surprise, surprise. Cable rates are headed up -- and not down -- despite the entry of telco TV offerings such as AT&T's U-Verse, according to this weekend item from the Milwaukee, Wisconsin Journal Sentinel. This week, the Federal Communications Commission launched an inquiry into cable rate increases in advance of next February's mandated cutover to all digital television broadcasting.

"On balance, the law hasn't been good for consumers but has been very good for the companies that wanted it," Barry Orton, a telecommunications professor at the University of Wisconsin-Madison, told the newspaper. "Two years from now, I don't think you will be able to say that consumers saved a lot of money if any at all."

Telcos sugar coated their true agenda with the false patina of increased competition and lower rates for consumers. Their real goal was to get local governments that wanted them to build out their broadband infrastructures evenly to serve all and not just some of their residents off their backs. It's far easier to lobby a single state regulatory agency and influence the pols who appoint their members (and get them to put in place rules sanctioning broadband black holes) than to herd the political cats who sit on city and town councils and county boards of supervisors.

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.

Telco market segmentation has shrunk U.S. residential wireline service area map, setting stage for locals to take over last mile

The widespread prevalence of broadband black holes throughout the United States — which can be found in urban, suburban, semi-rural and rural areas — has brought to light a major change in the landscape of residential telecommunications service. In modern times, residential telecommunications has meant near universal service to all but the most remote areas.

With the advent of high speed Internet, the residential wireline market is no longer a single one but has been segmented by the telcos who maintain monopolistic control over their markets. Over the past 2-3 years, the boundaries of broadband black holes have hardened and delineate the two segments.

The more accurate description is the residential market hasn’t been so much segmented but rather shrunk. One only need compare the telcos’ maps of where they provide Plain Old Telephone Service (POTS) and areas where advanced Internet protocol-based services are offered to graphically see the shrinkage.

This is a permanent alteration of America’s telecommunications map. Despite telcos’ promises to “turn up” advanced services to these areas over the past decade, it’s now apparent that these statements are a time buying PR ploy to keep regulators and politicians at bay. Now the residential wireline telecommunications map is posed to shrink even further with the limited rollout of fiber to the home service by Verizon and AT&T’s technologically constrained deployment of its fiber to the node Project Lightspeed as both companies migrate from DSL.

This redrawing of America’s telecommunications map has major implications for so-called “last mile” residential wireline. Where they don’t provide last mile IP-based access, the telcos will instead serve as first and middle mile telecom providers. Small local telcos and the residents themselves will become the default last mile providers. Where it makes business sense, smaller telcos that specialize in serving communities will deploy fiber to the node and fiber to the home. Where the numbers don’t pencil out for the small telcos, the residents will deploy their own fiber and fund it though voluntary cooperatives and special taxing districts.

Over the next several years, fiber will come to be viewed as a utility not unlike electric power and water and will appear on residential MLS real estate listings. Properties that lack fiber optic access will be at a distinct disadvantage to those that have fiber, creating a strong incentive for property owners to work together to bring fiber to their neighborhoods to better capitalize on recovering real estate values following the current market downturn.

AT&T will likely abandon residential wireline segment, U-Verse in early 2010

Sometime during the first two quarters of 2010, AT&T will probably become a pure play wireless company in the residential market, abandoning its Project Lightspeed/U-Verse deployment as part of a general retreat from the wireline-based residential/home office market segment.

The nation’s dominant telco — like other telcos — has been losing landlines to wireless phone service for several years now. When AT&T pulls the plug on U-Verse, which it began rolling out in selected markets in 2006 and which continues to fall behind deployment targets, it will likely cite unanticipated cost, technological and competitive market challenges.

The Achilles Heel of Project Lightspeed/U-Verse lies in the technological shortcomings of digital subscriber line (DSL). While DSL allows AT&T and other telcos to provide broadband over their existing copper cable plants, it’s hobbled by very limited range. When telcos first deployed ADSL around at the start of the decade, DSL’s limited range forced telcos including AT&T into a lose-lose proposition. Either they could spend significant sums of money installing remote DSLAM terminals to extend DSL’s notoriously feeble reach or leave money on the table in the form of lost opportunity costs, unable to serve subscriber premises not located close enough to their CO’s (central switching offices).

ADSL’s limited range also makes for unhappy customers who believe they are purchasing a particular speed tier only to find themselves involuntarily downgraded because the DSL signal isn’t sufficiently robust to support the level of service they ordered.

VDSL, the upgraded version of DSL that AT&T utilizes in its hybrid fiber/copper Project Lightspeed deployment, suffers from even greater range limitations. As such, it requires far more field equipment and fiber/copper interface cabinets (VRADs) than ADSL since VRADs can serve only premises located within 3,000 feet. While providing theoretical downside throughput of 25 Mbs, VDSL over copper also suffers from limited ability to scale up bandwidth to 100 Mbs and higher in order to remain competitive —at least when it comes to video — with MSOs (cable providers) and pure fiber triple players like Verizon and Surewest Communications.

Some market observers believe once copper has reached its throughput limit — many would maintain it already has — all AT&T has to do is change out the old copper for new fiber. That isn’t likely to happen. AT&T won’t bear that additional and substantial CAPEX burden and threaten its generous stock dividends when it is already struggling with the cost of the limited Lightspeed plant it has deployed to date and is reportedly cutting expenditures on it.

Additionally, given its existing alliance with Dish Network (to be replaced with DirecTV starting Jan. 31, 2009), it can still offer video without the associated CAPEX costs of Project Lightspeed and U-Verse just as it does with its marketing partnership with Wildblue to provide satellite “broadband” to the many residences located outside the restricted range of its DSL services.

What will happen to AT&T’s aging residential copper cable plant when it goes all wireless in this market segment? It will be put into runoff mode and minimally maintained — a plan that some would argue is already being implemented as resources have been redirected to Project Lightspeed. That will likely result in noisy and failed lines. But AT&T will probably simply pay any fines levied by regulators as a cost of unwinding its residential landline business with the expectation residential customers will migrate to its wireless service with the encouragement of limited time pricing incentives.

Go suck a satellite, AT&T spokesman reiterates

AT&T's marketing slogan "Your world delivered" should be followed by a huge asterisk directing readers to fine print that states:

* Provided you reside in our world, which may or may not exist in this or other dimensions, parallel universes or those comprised of dark matter and/or energy.

An AT&T spokesman drove home the point this week, telling the Eureka (Calif.) Reporter “People choose to live where they choose to live. (How profound) We have a broadband solution for everybody in areas where it’s not feasible to stretch the wireline network via satellite.”

In other words, "Your world isn't necessarily our world and if it's not, we're sorry, you'll just have to go suck a satellite." However, that's hardly a good option as some local residents quoted in the Reporter article note, pointing to its slow and less than reliable connections and high costs that make it more suitable for remote Arctic regions than the lower 48 states.

Connie Davis, a Web-based business owner and treasurer of the Hoopa (Calif.) Association, has the right idea when it comes to countering the big telco's lackadaisical stance. Davis says people cannot look to large telcos or even their local governments for help (the latter hardly surprising given California's difficulty in keeping both state and local govenment functioning these days) getting broadband. They must take matters into their own hands at the grass roots level and most importantly, think outside the box. Moreover, Davis has no time for delaying games packaged as "studies" of broadband availability and demand. "We don’t need to do studies," Davis says. "We don’t need to talk about this. We just need to do it because we need it.” I couldn't have said it better myself, Connie.

I hope the millions of folks stuck in broadband black holes throughout the U.S. follow her advice and form fiber optic and wireless cooperatives they can control and operate rather than leaving themselves at the mercy of big telcos and cable companies who are about as responsive to their needs as the former Soviet phone company.

Telecompetitor: Telcos should offer complementary wireline and wireless broadband to residential customers

Telecompetitor is out with analysis today that warns wireless services that have been cannibalizing first tier telcos' landline voice subscriber base also pose a threat to their wireline broadband services.

Telcos can ameliorate the threat, telecompetitor suggests, by segmenting their residential broadband offerings into two complementary products: A wireline-based broadband "heavy" connection featuring fast throughput and a broadband "lite" wireless service delivered via their 3G and, later, 4G, cellular system-based service.

Service that will seamlessly extend the broadband experience, both inside and outside of the home, is "quite compelling," telecompetitor concludes, pointing to a Nielsen Mobile study released Tuesday that found wireless broadband access cards while originally targeted at mobile users are increasingly popular among fixed residential users.

Although it makes sense on its face, this strategy is currently flawed insofar that it assumes telcos are already providing robust wireline broadband connections to residential customers who can get them. That's hardly the case for most residential customers whose DSL connections typically max out at 3 Mbs and often at slower speeds very close to current 3G cellular wireless broadband throughputs. (I omit AT&T's U-Verse and Verizon's FiOS services since they're available to only a small fraction of their residential customer bases.)

The rise in fixed residential use of 3G cellular broadband connections discovered by Nielsen Mobile is likely being driven by the lack of wireline-based broadband offerings. As this blog reported a few months back, some telcos such as Verizon Wireless have picked off AT&T residential customers in the many areas where AT&T has neither wireline nor terrestrial wireless-based broadband offerings. That strategy also gives Verizon the opportunity to cross sell its cellular voice plans to AT&T customers and build brand loyalty.

Comments by AT&T exec show U.S. cannot rely on big telcos to speed lagging broadband deployment

Recent comments in the New York Times by AT&T technology chief John Donovan underscore why the United States cannot rely on for profit, private sector providers to bring advanced Internet protocol-based telecommunications services to a nation that continues to lag years behind where it should be on broadband deployment. While America’s largest telecommunications company, Donovan’s comments show that AT&T is simply too risk averse to make the necessary investment to bring its rapidly aging last mile infrastructure up to date.

"The ideal way to deploy technology is on the last day as fast as possible, because it gets more capable and cheaper every day," Donovan told the newspaper. This has been AT&T’s failed broadband deployment strategy that has seen its seemingly bold broadband initiatives such as Project Pronto and Project Lightspeed collide with the company’s conservative culture aimed at maximizing depreciation and cash flow and paying large dividends to shareholders.

As your blogger has previously noted, that conservative capex strategy also likely reduces demand for advanced IP services over time since residential and home office based users who have repeatedly asked for such services conclude they will never be made available to them and give up and stop requesting them. The reduced customer demand in turn self justifies AT&T’s decision not to upgrade its plant and also limits competition since competitive local exchange carriers can’t sell their services if there are no circuits over which to deliver them. Moreover, cable companies won’t bother to extend their systems to such deprived areas either, leading to highly persistent broadband black holes.

The U.S. has already begun to move toward an alternative last mile broadband delivery model that’s playing out at the local level with support in some cases from state and federal funding. Under this emerging model, the last mile infrastructure — typically fiber — is privately owned and maintained by local property and business owners similar to privately owned roads. On a larger scale, entire communities opt to form nonprofits or cooperatives to deploy fiber systems. California Gov. Arnold Schwarzenegger recently signed legislation into law that would allow community services districts to construct their own infrastructure if for profit providers decline to do so.

AT&T sees WiMAX as solution for less densely populated areas of U.S.

As AT&T's copper plant has been neglected outside of metro area cores, there has been much speculation about the big telco's future plans for it. Particularly since much of it is too deteriorated and unreliable to support weak Digital Subscriber Line (DSL) signals that degrade quickly over distance. In addition, AT&T has not been upgrading its copper plant to support its fiber/copper hybrid Project Lightspeed/U-Verse IPTV/voice/data bundled service outside of the limited metro areas where it's deploying U-Verse.

AT&T's new technology chief John Donovan is making AT&T's view of the future its aged copper cable plant in these regions more clear in a published interview with USA Today: It's a costly, obsolete albatross -- a legacy of the analog era of plain old telephone service (POTS).

Now that AT&T defines itself more as a wireless than wireline carrier, wireless is naturally viewed as the logical copper cable replacement strategy. At the top of the list, USA Today quotes Donovan as saying, is WiMAX, which AT&T apparently sees as a longer range and more robust solution for both fixed and mobile voice and data services outside of densely populated areas. In the latter, the telco will likely deploy its planned 4G Long Term Evolution (LTE) cellular service that is expected to provide far faster Internet connections than its current 3G system that itself isn't universally deployed in AT&T's 22-state territory.

Donovan told the newspaper WiMAX appears particularly well suited to rural areas of the U.S. where it's becoming prohibitively expensive to maintain copper.

Reports last year suggested Ma Bell planned to ramp up her WiMAX deployments starting earlier this year after initial rollouts in the Fairbanks, Alaska area and parts of the former Bellsouth territory AT&T acquired at the end of 2006.

Telecompetitor speculates that AT&T's interest in WiMAX as a replacement for copper cable represents the start of a "coordinated rural market divestiture strategy."

Report: AT&T reduces investment in Project Lightspeed, concentrates spending on existing U-Verse deployments

While AT&T is making its triple play U-Verse its core wireline focus, at the same time it's throttling back investment in Project Lightspeed, the VDSL-based fiber to the node (FTTN) infrastruce that supports U-Verse.

Instead, spending is being redirected to selling and supporting customers in the limited areas where U-Verse has been deployed, writes Bob Wallace in xchange:

AT&T recently announced it is cutting capital spending by hundreds of millions, but didn’t disclose specifically how that will affect its FTTx plans. AT&T said roughly a year ago that all new builds would use an FTTN architecture, but with these cuts in capital spending more folks likely will have to get by with copper links. However, AT&T is hiring big for U-verse in areas including customer service and call centers, help desk staff and technicians to install the service. That plays toward customer retention and easy adds.

“We know the capex slowdown will impact how many homes AT&T can pass with U-verse throughout 2008 and early 2009,” said Jeff Heynen, directing analyst for IPTV and Next Gen BSS/OSS for Infonetics Research. “However, right now the priority is signing up subscribers in the areas where they do pass the majority of homes. Their subscriber ramp continues to get better, as it should.”

Self perpetuating broadband black holes a product of telcos' cynical digital redlining strategy

Since late 2006 and again this week, there have been reports of slowing growth in U.S. wireline broadband subscribers and particularly those using telco-provided Digital Subscriber Line (DSL) service. Analysts and other observers have blamed the demand side of the market, attributing the decline to a slowing economy and market saturation.

There's likely a better explanation -- and it's on the supply side of the equation. Since 2006, DSL deployments by the tier 1 telcos such as AT&T and Verizon have been slowing and are now all but halted as the companies concentrate on building out their triple play (U-Verse and FiOS, respectively) infrastructures in a relative few selected markets.

For those unfortunate enough to reside or do business in these companies' service territories where they don't offer wireline broadband connections, there's another factor at work: the self perpetuating broadband black hole. They're the natural product of the telcos' digital redlining strategy.

Since the big telcos don't do market research, they rely on what they term as "pent up demand" for services. As the broadband boom unfolded at the start of the decade, pent up demand grew. Right around the time of the first reports of a broadband "slowdown" began appearing, that pent up demand had likely recently peaked. Folks who have been asking for wireline broadband connections over a period of 5-7 years and have yet to obtain them by mid-2008 have likely concluded they never will. So they stop asking for service, ignore misguided ads for telco broadband, and pent up demand for broadband falls away. The telcos can then cynically point to the falling demand to justify their continued failure to deploy broadband infrastructure to these redlined neighborhoods.

AT&T seeks regulatory roadblocks to wider broadband access

AT&T is notorious for incomplete wireline infrastructure in its 22-state service area. That produces sprawling broadband black holes that belie its motto of "Your World Delivered."

Now the big telco wants the Federal Communications Commission to block a joint venture between Sprint and Clearwire that would deploy WiMAX wireless broadband that could fill in many of AT&T's broadband black holes. AT&T's current strategy seems to have the perverse goal of preserving as many of its digital dark spots as possible for as long as possible. In some areas, AT&T is already under competitive pressure from Verizon Wireless Broadband, which has been harvesting customers who can't get wireline broadband from Ma Bell. Since it would likely offer faster thoughput speeds, the Sprint/Clearwire WiMAX venture would present an even greater threat to AT&T's dark territorial hegemony.

Supreme Court to hear AT&T DSL anti-trust case

More than two decades ago, a federal judge ordered the breakup of AT&T after concluding Ma Bell's monopolistic control of local and long distance voice telephone service violated federal anti-trust law.

Now AT&T as the successor to SBC Communications faces another anti-trust suit that the U.S. Supreme Court decided to take up this week. The high court will review a Sept. 11, 2007 decision by the 9th U.S. Circuit Court of Appeal in which the appellate court affirmed a U.S. district court ruling allowing an anti-trust action brought against SBC/AT&T by several Internet service providers to proceed.

The ISPs allege SBC/AT&T maintained unreasonably high wholesale access charges to ISPs to deliberately thwart them from competing with SBC/AT&T for Digital Subscriber Line (DSL) customers as permitted under the line sharing provisions of the federal Telecommunications Reform Act of 1996. Ma Bell then lowballed prices on her own DSL offerings, making it impossible for the ISPs to compete on price, the ISP plaintiffs complain.

The case, Linkline Communications et. al. v. SBC California, et. al. represents an important test of federal policy under the 1996 law intended to foster robust market competition and speed timely deployment of high speed Internet access to all Americans.

However the suit suggests SBC/AT&T's actions in response to the law have had just the opposite effect. By cutting its DSL prices to the bone in order to deter competing ISPs -- SBC/AT&T was promoting residential DSL for as little as $13 a month in late 2006-- it lacked adequate revenue to finance the expansion of DSL within its service territory. That led to the formation of monstrous broadband black holes filled with frustrated customers unable to order wireline broadband from AT&T at any price.