Views: 5 Author: Site Editor Publish Time: 2017-02-15 Origin: Site
AT&T has launched a variation of its U-verse service – U-verse with GigaPower – in Austin, Texas. It includes a 300Mbps FTTH broadband service which AT&T claims will be automatically upgraded to 1Gbps in a few months’ time. AT&T’s efforts to offer 1Gbps FTTH broadband to the consumer are laudatory but likely to confuse its customers and shareholders. If 1Gbps is the future, what is the future of Project VIP?
Having spent eight years deploying the U-verse FTTN service, a year ago AT&T chose to expand household coverage and upgrade speeds. That effort, called Project VIP, is still ongoing and until now has reflected AT&T’s projection that 45Mbps downstream (and 6Mbps upstream) should be good enough for the majority of its customers.
AT&T says it intends to boost part of its Project VIP footprint to 75Mbps or 100Mbps with VDSL2 vectoring, but the extent of this is unknown. It has also deployed a small amount of GPON FTTH in greenfield markets, typically designed to support 80–100Mbps to each household. Also as part of Project VIP, it plans to reach 1 million businesses with symmetric 1Gbps FTTH.
However, the GigaPower offering in Austin will be AT&T’s first 300Mbps or 1Gbps mass-market FTTH offering targeting consumers, not just businesses, in a major market. It is also a symmetric offering, meaning upstream will be 1Gbps as well. Those speeds are far higher than what Project VIP will deliver to the majority of consumers. The jump from 45/6Mbps to 1/1Gbps for consumers raises questions around its strategy. The cost issue looms large. Deploying 1Gbps point-to-point FTTH will continue to cost much more than GPON FTTH, which in turn still costs a lot more than FTTN – even with vectoring. AT&T needs to explain better what has changed from last year in the business case for FTTH over FTTN.
In April 2013, Google announced that it would offer its 1Gbps FTTH and TV services in Austin, Texas. AT&T made a similar announcement at the time. To its credit, AT&T has delivered by commencing FTTH services ahead of Google, which expects to launch services in mid-2014.
If AT&T explained that it felt the need to compete with Google, the offering would be understandable. However, AT&T has explicitly denied that its announcement had anything to do with Google, and everything to do with its broadband strategy. Despite the denial, AT&T has priced its service similar to that of Google elsewhere. Google itself has not yet announced pricing in Austin but its pricing in Provo, Utah and Kansas City suggests it will offer 1Gbps broadband at $70 per month and broadband + TV services at $120 per month. AT&T has the same pricing, though initially the broadband speeds will be 300Mbps. AT&T makes it clear that it intends to examine its customers’ browsing habits in order to generate incremental revenues with targeted ads and commercial offers.
To avoid the scrutiny, customers can pay a higher price of $99 per month. AT&T is also providing 1TB of DVR storage, 50GB of cloud storage for wireless customers, the local Longhorn network popular in Austin, and the ability to watch five shows at once. AT&T will also offer a triple-play offering for $150, whereas Google has chosen not to offer voice at all.
AT&T has also adopted the Google practice of asking potential customers to rally within their neighborhood and prove sufficient demand exists for 1Gbps broadband. AT&T will provide services only to those neighborhoods that achieve specific demand targets. It claims that tens of thousands have signed up already to “vote” for deployment in their neighborhood. However, AT&T launched the sign-up process before announcing prices.
The similarity in pricing shows the impact of the Google FTTH deployments even though they are selective and the number of customers is still small. Google’s 1Gbps pricing appears to have set the bar for services in the US. EPB Chattanooga, one of the first such 1Gbps deployments, recently lowered its pricing from $300 to $70 per month. Utah’s Utopia has lowered it even further to $64.95 per month. The pricing trend will be important to follow, as announcements about 1Gbps deployments have been more frequent recently. For example, several municipalities and communities partnering with Gigabit Squared are also deploying 1Gbps. Meanwhile CenturyLink, the third-largest wireline carrier in the US, is bringing a 1Gbps project to Omaha, Nebraska, and Las Vegas, Nevada.
By accepting a ceiling of $70, AT&T may be making it harder to break even. We may see lower prices cascading down for all broadband services. AT&T runs the risk of de-valuing its own broadband business and ultimately that of others too. On a more positive note, demand for 1Gbps was seen as questionable when prices were unaffordable for consumers and when multiple HD streams can be supported by 40–50Mbps. With these price levels however, demand may spike and boost the business case for 1Gbps.