Wednesday, November 12, 2014

AT&T Hits Pause on Residential Fiber Rollouts Due to Regulatory Uncertainty

AT&T will suspend plans to rollout out fiber connections under the regulatory uncertainty clears, said Randall Stephenson, AT&T Chairman & CEO, speaking at the Wells Fargo Technology, Media & Telecom Conference.  The decision comes in direct response to President Obama's call this week for the FCC to regulate broadband Internet as a public utility.

Speaking to market analysts and investors at the New York conference, Stephenson said the President's proposal at least brings clarity in so far that it envisions an end-to-end government regulation from the backbone through the aggregation layer to the last mile connection and the content provider.  Stephenson noted that prior to the President's announcement, FCC Chairman Wheeler had been working with multiple parties to see if existing rules could be amended to ensure the customer protections that the FCC wants. This path promised a near term resolution of the issues. Stephenson said the President's course of action, absent Congressional action, will not lead to quick resolution but only to further litigation over new FCC rules and thus market uncertainty. Stephenson estimates a 2-3 year period of legal wrangling and uncertainty if the FCC proceeds to write new rules.

Given the lack of regulatory clarity, Stephenson said it is difficult to proceed with its multi-billion dollar residential fiber projects while not know the rules under which these network will be governed. So AT&T will pause its rollout.  Another project to extend LTE service to airplanes is also on hold.

In April 2014, AT&T announced plans go big with its rollout of residential fiber in major markets across the U.S.  The company announced a major initiative to expand its Gigabit-capable fiber network to up to 100 cities and municipalities nationwide, including 21 new major metropolitan areas. The company is not changing its CAPEX guidance for 2014.  The initiative will fall under Project VIP.

"AT&T U-verse with GigaPower" service is available in parts of Austin, Texas and rollouts were already pending for Dallas and Raleigh-Durham and Winston-Salem, North Carolina.

AT&T's list of 21 candidate metropolitan areas for new fiber rollouts includes: Atlanta, Augusta, Charlotte, Chicago, Cleveland, Fort Worth, Fort Lauderdale, Greensboro, Houston, Jacksonville, Kansas City, Los Angeles, Miami, Nashville, Oakland, Orlando, San Antonio, San Diego, St. Louis, San Francisco, and San Jose (including Campbell, Cupertino and Mountain View). With previously announced markets, AT&T now has committed to or is exploring 25 metro areas for fiber deployment.

Earlier this week, President Obama issued a video urging the FCC to act now to reclassify consumer broadband service under Title II of the Telecommunications Act, setting a legal basis to create a new set of rules protecting net neutrality.  In a statement, Obama said he believes the bright-line rules should include:

  • No blocking. If a consumer requests access to a website or service, and the content is legal, your ISP should not be permitted to block it. That way, every player — not just those commercially affiliated with an ISP — gets a fair shot at your business.
  • No throttling. Nor should ISPs be able to intentionally slow down some content or speed up others — through a process often called “throttling” — based on the type of service or your ISP’s preferences.
  • Increased transparency. The connection between consumers and ISPs — the so-called “last mile” — is not the only place some sites might get special treatment. So, I am also asking the FCC to make full use of the transparency authorities the court recently upheld, and if necessary to apply net neutrality rules to points of interconnection between the ISP and the rest of the Internet.
  • No paid prioritization. Simply put: No service should be stuck in a “slow lane” because it does not pay a fee. That kind of gatekeeping would undermine the level playing field essential to the Internet’s growth. So, as I have before, I am asking for an explicit ban on paid prioritization and any other restriction that has a similar effect.