AT&T DSL growth surprises

AT&T reported surprising growth in legacy DSL subscribers and improvement in consumer retail line loss today amid accelerating revenue declines in its overall wireline business.

The company reported a more than 50% sequential increase in first-quarter wireline broadband subscriber net additions, including – according to estimates from Bernstein Research senior analyst Craig Moffett based on AT&T's numbers – 359,000 wireline broadband subscribers and 105,000 net new DSL subscribers outside of U-Verse.

On this morning's conference call, AT&T's chief financial officer Rick Lindner, who, like Moffett, seemed to express surprise at seeing positive DSL growth, attributed it to a range of factors but cited in particular high consumer demand for AT&T's standalone DSL service. About half of the subscribers to AT&T's so-called "naked DSL" also subscribe to its wireless service, Lindner said.

"Our standalone DSL product…has been very strong for us," Lindner said. "We haven't been running any significant promotional activities [around it]. We have had improved focus in our sales channels and call centers around selling broadband. We're very active with ‘save' activities as well. That's helped, and it's reflected in our reduced churn rates." 

Though consumer connections continued to decline in the first quarter, the rate of decline slowed, which Linder attributed in part to overall economic factors (since they inhibit residential customer relocation) but also to flexible bundled U-Verse offerings.

"We're now starting to get a lot of traction behind U-Verse voice -- that's helping us offset some of the consumer line loss," Lindner said. During the quarter, AT&T gained 170,000 net U-Verse VoIP subscribers; a year earlier, that number was just 4,000. U-Verse VoIP is now available in 86% of the U-Verse footprint, having been launched in Houston and Los Angeles in the first quarter.

Standalone DSL sales helped broadband growth in last year's first quarter as well, comprising nearly 30% of AT&T's 491,000 total net broadband subscriber additions that quarter. At the time, Paul Bonenfant, an analyst for Morgan Keegan, suggested AT&T's all-you-can-eat wireless plans could be encouraging customers to shed their landlines for mobile phones.