DSL Reports says that AT&T “will virtually stop” its U-Verse build-outs at the end of this year.  U-verse,  which delivers residential triple play service bundles, is one of the fastest growing parts of AT&Ts wireline business.  Much more so than the traditional digital private line and IP VPN services to business customers

During a recent Citibank investor’s conference,  John Stankey, AT&T’s President, said that the service provider is confident it can pass 55-60 percent of the 30 million homes passed in their service region by end of 2011.  But that may be the end of the line for U-Verse.  

Within the broadband data realm, Stankey said that only 25-30 percent of homes in AT&T’s region will be offered ADSL, adding that 20 percent of them are “not a heavy emphasis for investment.”Interestingly, AT&T’s goal comes at a time when U-verse continues to resonate with customers in the regions where it’s available. In Q1 2011, AT&T added 175,000 new broadband subscribers and 218,000 U-verse subscribers to reach 3.2 million in service.  However, the broadband numbers fell short of analyst expectations of 195,000 new subscribers.

AT&T CFO Ritcher told investors “Consumer wireline is growing again, thanks to our U-verse product. We’re really just seeing the benefits of scaling the service and it gives us great momentum. U-verse is transforming our consumer results. Where we offer U-verse, our ARPUs are higher, our churn is lower, our customer satisfaction is better across all of our products.”

DSL Reports’ Dave Burstein, wrote, “I didn’t expect so severe a cutback, and wouldn’t be surprised if they reversed it eventually. I checked with AT&T whether Stankey mis-spoke, but not so according to his pr people. Virtually stopping means that in many cities U-Verse will look like Swiss cheese, with 10-50% of homes in holes that can’t be served. 

I’m guessing that what’s going on is that AT&T decided they had no choice but to raise capex on wireless, accelerating the LTE build to prevent falling too far behind Verizon. Expanding U-verse to 75-85% is almost surely profitable after cost of capital, which to a purely theoretical economist would suggest they would just borrow modestly and do both.”

To stem the loss of traditional DSL customers,  where  U-verse is not available, AT&T is offering a number of special promotions.  These include low-priced DSL offerings to lure dial-up Internet customers starting at $14.99. It is also appealing to its growing wireless custoemr base with a special bundle for qualifying U-Verse TV customers a $45 monthly discount for six months covering the cost of U-Verse Internet Max.

Personal Note:  AT&T trucks and technician’s have spent the last three days at the patch panels outside my condo complex in Santa Clara, CA.  They have been testing resident copper loops for U-Verse compatibility.  During those tests, existing customer phone and DSL based Internet were out of service with no notice given to the customers effected.  I am wating for an AT&T Executive to explain this unexpected outage with no customer notification.  Will report back later.

For more information:  AT&T’s Stankey: U-verse Build Virtually OverCompany Comments Suggest Build Ends at 55-60% of Homes

http://www.dslreports.com/shownews/ATTs-Stankey-Uverse-Build-Virtually-Over-114279