AT&T gets fiber envy

With Verizon's fiber-to-the-premises initiative barreling along, and AT&T's fiber-to-the-node project still hovering, analysts say AT&T insiders are increasingly pushing for a shift toward more FTTP and less FTTN to ensure more bandwidth to the home.

“Increasingly, elements within AT&T think more aggressive deployment of FTTP is needed, though senior management wants to stay the course,” wrote Simon Leopold, Morgan Keegan analyst, this month. He admits the basis for that assertion is “more anecdotal than scientific,” stemming from conversations with people who had conversations with AT&T insiders. But Leopold isn't alone. In May, Cowen and Co. analyst Tom Watts predicted AT&T would announce a shift to more FTTP before the end of this year.

Criticisms of AT&T's chosen triple-play technology, VDSL2, and the potential clash between its bandwidth limitations and the bandwidth requirements of high-definition television aren't new. While AT&T rolls out 20 Mb/s to 25 Mb/s to the home, some of its cable competitors are conducting trials of DOCSIS 3.0 that promise five times the speed, more in line with FTTP. But those fears may have grown this summer in the face of large-scale, real-world deployment of VDSL2 over copper plant of varying length and quality.

“The guys in the trenches are saying, in reality, deploying VDSL2 doesn't get us as much bandwidth as advertised,” Leopold said.

AT&T says it sees no reason to alter its stated plans to bring FTTN to 18 million homes and FTTP to another million by 2007. But Leopold suspects the company could easily bump its FTTP plans by a few million homes.

It's probably no coincidence that chatter about AT&T's fiber strategy is escalating just weeks after Verizon touted the progress of its own FTTP rollout with some up-to-date hard data. The company's network already has passed more than 4 million homes and will reach 6 million by year's end, when Verizon expects to have about 175,000 video customers. Meanwhile, AT&T's Project Lightspeed has languished for reasons unknown. At mid-year, the company's U-Verse IPTV service wasn't available outside San Antonio, Texas, and wasn't expected to reach other towns until just before this year's end.

And whereas the chief criticism of Verizon's approach was its high cost, its deployment costs per home have dropped 40% in the last two years and are still falling. Its FTTP markets should generate positive operating income by their fourth year.

“Perhaps Verizon's success — or hype or buzz — is creating fiber envy,” said Ken Twist, vice president of Ovum-RHK's technology consulting and broadband networks practices. “Who knows? What I do know is that the cable companies do not believe AT&T's plans are a competitive threat, whereas Verizon's activities make them somewhat nervous.”