Analysts predict an AT&T switch

Pike & Fischer has added its voice to chorus of those predicting AT&T will have to alter its strategy and invest in deploying fiber-to-the-home in order to compete with cable operators in the video business.

In a report, “AT&T U-verse: Analysis of the Business Strategy,” released yesterday, Tim McElgunn, chief analyst for Pike & Fischer's Broadband Advisory Services, said AT&T is likely to alter its strategy in the next 12 to 18 months and begin investing more heavily in its access networks.

One reason AT&T has thus far stuck to its less expensive fiber-to-the-node plan, he believes, is to mollify Wall Street during the period when it was going through major mergers.

“They may have been able to fund that $20 billion build-out for fiber to the premises with their cash flow,” he said. “But it would have made the acquisitions themselves ridiculously expensive because it would have knocked the hell out of their share price. The fiber-to-the-node strategy is a reasonable story for how AT&T is going to move to the future and do it in a way that makes Wall Street happy.”

Where FTTN becomes unreasonable, McElgunn said, is as a future-proofed technology capable of supporting symmetric bandwidth to handle video.

“The fact of the matter is, the reason people are looking at GPON [gigabit passive optical networks] is to figure out how to get the upstream bandwidth they need,” he said. “We are finally getting to a place where video is moving in two directions over the net. The cable guys are also staggering around trying to figure out what their next move is going to be because they will have to make significant changes to their plant as well.”

The 25 megabits AT&T says it is getting over bonded copper pairs might be able to support multiple streams of high-definition TV into the home, McElgunn said, but that depends on squeezing all the available bandwidth into the downstream and could not accommodate symmetric video traffic.

A fiber-to-the-premises network such as Verizon is building will also help AT&T more effectively compete as cable companies move more aggressively to court commercial business, he added.

McElgunn expects AT&T to quietly begin to deploy FTTP, despite its protests, in areas where copper needs significant maintenance and ultimately, throughout its network.