Broadband: Fiber deployment will drive broadband growth:
AT&T Communications is driving broadband growth in our fiber footprint. We now cover more than 10 million customer locations today and plan to add 4 million more locations in the next year. We already have substantially more than 3 million broadband customers in our fiber footprint. And the longer we have fiber in the market, the higher our penetration.
In fact, we expect our fiber broadband base to increase by more than 1 million subscribers this year. This shift to fiber is beginning to drive IP broadband ARPU growth. The strategic pivot we’re making with video, combined with our execution with fiber gives us the confidence that we will stabilize Entertainment Group EBITDA next year.
[Implication is that increased fiber to the building will stabilize AT&Ts linear video business (U-Verse and DirecTV) which has been losing subscribers to cord cutters. However, FTTB is only applicable to U-Verse- not satellite TV (DirecTV)].
Finally, we’re keeping a laser focus on costs in all of our businesses and maintaining our margins in Business Wireline.
Our FirstNet team continues to execute extremely well. So far, we launched a nationwide FirstNet dedicated and physically separate network core with FirstNet traffic moving on it. We have priority and pre-emption in place, allowing continuous service during times of heavy traffic.
FirstNet devices are ready and available. These devices support all AT&T commercial LTE bands as well as the FirstNet Band 14 and meet the band priority selection technical requirements. And we’re six months ahead of schedule with our network deployment already covering about one-third of the expected FirstNet area.
We’re seeing in real time how we are performing in times of emergency with Hurricane Michael being the latest example. We began preparing for this storm before it arrived and our work continues even to today.
Because of these efforts, we were able to keep our customers, including first responders, connected during and after the storm in many areas. In fact, our network operated at 90%, and usually better, of normal performance in the areas affected by Hurricane Michael. And through our tight coordination with public safety, we rolled out network assets to impacted areas to keep first responders connected.
We also worked with local authorities to identify public safety agencies that were without service from their wireless provider and delivered hundreds of FirstNet-enabled devices to help these first responders carry out their important mission of keeping the public safe.
One first responder went as far to say, when everything else was down, FirstNet was working. That’s high praise, and we’re humbled that we can play a part in helping a community recover from such a devastating storm. That’s what FirstNet is all about.
We continue to push our deployment. We’re climbing towers and adding 700 megahertz, AWS, and WCS spectrum all at once. We’re also adding new radio capability, which will enable us to upgrade the tower to 5G, without another tower climb.
The first responder community is a great sales opportunity for us. It’s an area where we’ve been under-penetrated in the past. But with our dedicated network core and outstanding performance when it matters most to the first responders, we’re making headway.
We now have more than 250,000 subscribers on FirstNet with more than 3,600 agencies represented. With a sales team dedicated to building this base, we believe there’s a lot of opportunity waiting for us.
5G and LTE-LAA:
AT&T is on track to be the first wireless carrier to introduce mobile 5G services in the United States in the next few weeks. This will be standards-based 5G (what standard is that John???????????????????). We plan to introduce 5G in parts of 12 cities by the end of the year. And we’ve announced additional 5G cities for next year, as we drive toward nationwide coverage of our 5G network.
Editor’s Note/Sanity Check:
The first wave of AT&T “5G” markets will include Dallas, Atlanta, Waco, Charlotte, Raleigh and Oklahoma City. Mr. Donovan noted that this rollout is part of a ‘drive toward nationwide coverage of our 5G network’; a nationwide 5G coverage target date has not been disclosed. He also noted that the 5G service will leverage the telco’s substantial fiber-optic network (see Comment box below), saying ‘fiber (backhaul) is the backbone of 5G’ [Of course, we agree]. AT&T will pass 18 million customer locations with its fiber network this year, with 22 million locations targeted in 2019. However, neither AT&T’s or any “5G” network announced for this year or next will NOT be “standards based,” as there is only ONE!!!!! standard for 5G – IMT 2020 which won’t be completed till year end 2020.
Second, our 5G foundation is in place (see below). We’ve completed 5G trials in several cities in the last three years. Fiber is the backbone of 5G, and we have one of the nation’s largest fiber networks. Including businesses, we pass about 18 million customer locations today and are expanding that to more than 22 million locations by next year.
Fiber passing ~22M units
• 14M Consumer by mid ‘19
• 8M Business
400+ 5G Evolution Cities in 2018
LTE-LAA in 24 Cities by End of Year
Completed 5G trials in multiple cities since 2016
Introducing mobile 5G in parts of 12 cities in 2018
-> 7 additional cities by early 2019
Starting on path to nationwide mobile 5G
The Best Network according to the nation’s largest test2
Nearly 50% increase in spectrum deployed by end of 2019 vs 2016
Strong performance during recent storms
We plan for our 5G Evolution to be in more than 400 markets by the end of this year with nationwide coverage by mid-2019. Customers are seeing a dramatic lift in speeds with theoretical peak speeds reaching 400 megabits per second.
We also plan to launch LTE Licensed Assisted Access, or LTE-LAA, in parts of 24 cities by the end of the year. These are the building blocks towards the transition to 5G and can deliver speeds substantially faster than traditional LTE.
SDN, Virtualization, Spectrum, etc:
We’re also the leader in software defined networking (SDN) and are on track with our virtualization goals. This virtualization is bringing baseband units to the edge of the cloud or core and is going to be key for ultra-low latency that’s in 5G.
Thanks in part to our FirstNet build, our wireless spectrum is being put into service at a rapid rate. We’re on track to increase the amount of spectrum deployed by nearly 50%.
This is having a dramatic positive impact on our network, and others are noticing. We’ve been named the nation’s best network by a September GWS OneScore study, which is the largest and most comprehensive network study of its kind. Our network already is a recognized leader, and we’re taking steps to make it even better.
Moving to the video business. We continue to navigate industry pressure. We have plans to bring EBITDA stability back to our Entertainment Group. Allow me to elaborate on that.
First, we’re refining our four video products, tailoring them to customer needs. Our mobility-focused WatchTV is gaining traction. DIRECTV NOW is being updated to increase its simplicity and further differentiate the service. And our premium DIRECTV and U-verse services focus on the traditional linear TV viewers.
We’ve also begun beta testing our proprietary thin client streaming service (unnamed but said to be built around HBO) and plan to roll out trials in the first half of next year. This will be a more measured roll out. And like our introduction of WatchTV, we expect this service to be EBITDA positive. And over time, it should lower our acquisition cost of our premium video service. And both of these use the common platform we introduced with DIRECTV NOW.
If you look at linear TV, it’s really going to be about broadband and how do we use broadband to lead ourselves into premium TV. And then get an OTT package that’s well-suited to the people that are going to be the heavily engaged users.
If you look at the industry’s rate of decline on linear video, you find that we’re doing dramatically better than the industry where we have fiber footprint. We’re doing dramatically better than the industry in churn and acquisition where we have 25 meg and greater. Where our stress is is in the linear, in areas where we’re priced with just the linear video. And we’re going to have to take actions to continue to improve how we’re doing there.
Our fiber footprint build has given us a lot of inventory to sell into. With the fiber inventory that we’ve got coming online back half of this year, first part of next year, we have a lot of footprint to sell into. And within the quarter, not only do we have broadband ARPU growth, each month of the quarter got stronger. So we feel very good about where the broadband footprint is, in particular the fiber area. And that will help us with the video business, especially the linear video business.
But with the fiber inventory that we’ve got coming online back half of this year, first part of next year, we have a lot of footprint to sell into. And within the quarter, not only do we have broadband ARPU growth, each month of the quarter got stronger. So we feel very good about where the broadband footprint is, in particular the fiber area. And that will help us with the video business, the linear video business.
AT&T CEO Randall Stephenson aded: “And as we’re nearing completion of our fiber build and making pricing moves on video, we’re laying the foundation for stabilizing our Entertainment Group profitability in 2019. Across the business, I like our momentum and feel confident that we’re on track to deliver on our plans.”
CFO John Stephens on CAPEX and Free Cash Flow:
We continue to expect our capital spending in the $22 billion range this year but we don’t expect as much vendor financing in the fourth quarter as before. So now we expect to be in the $24 billion range in gross capital investment for the year. We’re feeling really good about our free cash flow position heading into the fourth quarter. We expect $1.3 billion of FirstNet reimbursements in the fourth quarter since we received the FirstNet authorities’ approval for the latest contract milestone achievement.
Earnings Call Transcript:
2Q-2018 AT&T Communications report by John Donovan:
AT&T Fiber Now Reaches 2 Million Business Customer Locations