Note:  This article is co-authored by IEEE ComSocSCV officers Sameer Herlekar and Alan J Weissberger.  Some information used in this article was gathered during a July visit of ATT Labs in San Ramon, CA.

With the recent proliferation of triple-play (high-speed Internet, high-definition television, and phone) services being offered by telcos (such as Verizon and AT&T) and MSOs/ cable operators (including Comcast and Time Warner Cable), subscribers may be able to choose among an array of telecommunications services to meet their needs.  In some geographical areas, the MSO is only one choice for true triple play services, because the telco has not built out their advanced network to cover every U.S. city.  For example, if one lives in Santa Clara, CA- the heart of silicon valley- you can only get triple play services from Comcast.   In fact, if you are not a U-Verse customer, the ADSL based Internet service you can obtain is much lower speed than the VDSL2 based High Speed Internet AT&T offers as part of U-Verse.

Many questions arise as to the efficacy of these triple-play services delivered by the telcos and MSOs?  Are these services accessible to all potential subscribers and what do subscribers think about the services?

A recent thread on the IEEE ComSoc SCV email Discussion group (free registration for all IEEE members at www.comsocscv.org) yielded a wealth of first-hand information on precisely the aforementioned issues.

Given that telecommunications service provisioning, like any other business, is driven by customer demand, the latter, in turn, is determined by the subscribers’ perceived need for the service(s), quality of the offered service(s), and subscriber awareness of the availability of the services (determined by the marketing of the services by their respective providers).

The explosive growth of social networking sites including Facebook, Twitter and MySpace, video-sharing websites like YouTube and online gaming websites such as Final Fantasy and World of Warcraft indicates that subscriber demand for high-bandwidth internet services is at an all-time high. Combined with the growing demand for high-definition (HD) television programming, overall subscriber demand for bandwidth is growing exponentially. Consequently, both telcos and cable operators have been forced to upgrade their network hardware and architectures to accommodate the ever-burgeoning demand for bandwidth. At the same time, the key business objective to stay profitable has not been lost on the service providers who have responded by offering customers the so-called triple-play services of high-speed internet, HD television and digital phone service.

The two principal telcos in the telecommunications services sector are Verizon (VZ) and AT&T. According to a report released by Information Gatekeepers Inc. (IGI) on July 15, 2010 the two companies in a recent year combined for 76% of total capital expenditure by major phone companies and over 46% of the total capital spent that year by all telecommunication carriers.

According to a Wall Street Journal article in July titled “Verizon’s fiber optic hole” by Martin Peers, VZ has invested $23 billion on their triple-play service offering FiOS which is based on fiber-to-the-home (FTTH) technology. On the other hand, AT&T’s U-verse service features fiber-to-the-curb (FTTC)¹ with copper cables reaching individual subscriber premises over a digital subscriber line (DSL) access line.

Footnote 1.  FTTC is often referred to as Fiber to the Node (FTTN) or Fiber to the Cabinet.

On a recent visit to AT&T Labs in San Ramon, CA, several IEEE ComSoc SCV officers learned that AT&T is pouring money into U-verse as it foresees tremendous growth potential for the DSL-FTTC market.  The ComSocSCV officers went on a very impressive tour of AT&T’s U-Verse Lab, which appeared to be much bigger than most telco Central Offices!  AT&T is testing a FTTC/VDLS2 arrangement that will deliver three HD TV channels, High Speed Internet and either digital voice (VoIP) or POTs.

In terms of technology, VZ’s FiOS represents a significant telco plant upgrade compared to U-verse, since the high-bandwidth capable fibers are terminated at the subscriber premises rather than at the curb or cabinet.  For AT&T’s U-verse, it is the quality of the DSL link (from the network node to the subscriber premises) which determines the perceived quality of the overall service. 

Therefore, one would be led to believe that FiOS, built on Fiber to the Premises (FTTP) technology and backed by a major telco (VZ), would be holding a large, if not the largest, portion of the telecommunications services market. However, it is surprising to note that U-verse has, in fact, been outselling FiOS by a whopping 35-40% according to the report by IGI (http://www.igigroup.com/st/pages/FIOS_UVERSE.html).

Sameer Herlekar, IEEE ComSoc SCV Technical Activities Director (and a co-author of this article), believes that the reason for the discrepancy is the larger per-connection cost entailed in deploying FiOS compared to the per-connection cost of U-verse deployments. Moreover, according to WSJ’s Martin Peers, VZ has recently down-sized its promotions and added only 174,000 net connections to the FiOS network in Q02/2010 compared to 300,000 a year earlier. On the other hand, according to Todd Spangler of Multichannel News, AT&T’s revenues from U-verse TV, Internet and voice services nearly tripled over 2009 and is approaching an annual run rate of $3 billion as it “continues to pack on video and broadband subscribers.”

However, not all potential subscribers for U-Verse can get it, while other that have just had it installed “like it a lot, when it was working.”  A recent thread on the IEEE ComSoc SCV discussion group indicated that U-Verse is simply not available in parts of Santa Clara, CA despite U-verse cabinets being installed in the area.  The installation problems experienced by some Discussion Group members seem to have been resolved, but highlight the “growing pains” AT&T is experiencing to make it work reliability and correctly.”

Mr Herlekar states that “according to AT&T network planners, those subscribers served directly from the central office (CO) receive, at present, limited bandwidths sometimes in the order of just hundreds of bits per second. Furthermore, while some subscribers have high-speed connectivity via ADSL2 (newer installations) others have a slower connection with ADSL (older installations), both of which are slower than the state-of-the-art VDSL2 technology.”

Another key issue is technical support and customer service – troubleshooting problems and resolving them.  From the perspective of co-author Alan J. Weissberger, AT&T seems to do a much better job in this area.  Again, from the IEEE ComSocSCV Discussion list, we read of a U-Verse customer who received excellent tech support from AT&T – including customer care from an AT&T Labs Executive in San Ramon, to resolve his installation problems with TV service.  Perhaps, because AT&T is the new kid on the triple play service delivery block, it seems “they try harder.”

Yet, we’ve read that Comcast is gaining market share over the telcos in the broadband Internet market.  We suspect this is because non- triple play telco customers can’t get the higher speeds offered by the MSOs.  Those unlucky customers have to live with older and much slower wireline access technologies (ADSL or ADSL2) from the telcos, rather than the much higher speed Internet available with VDSL2 for U-Verse or FTTP/BPON/GPON for FiOS).  How fast will AT&T and VZ build out their triple play delivery systems?  We suspect that they are not now available in a majority of geographical areas in the U.S.

Dave Burstein of DSL Prime

U.S. Cable Clobbers DSL, U-Verse, FiOS

“Comcast added 399K new cable modem customers in 2010 Q1 to 16.329M. That’s more adds than the total of AT&T (255K to 16,044K) combined with Verizon (90K to 9.3M). Time Warner was also far ahead of Verizon with 212K to 9,206K.  John Hodulik of UBS estimates 67% of the Q! net adds will go to cable, a remarkable change from less than 50% a year ago. This is not because of DOCSIS 3.0, which at $99+ is not selling well,

Overall, cable added about 1M to over 40M. Telcos added about half a million to 33M. Add between 5% and 10% for the companies too small to appear in the chart below. While this could be the start of a precipitous decline, for now we might just be seeing the effect of price increases (Verizon, +12% in one key measure according to Bank of America) and the dramatic cut in U-Verse and now FiOS deployment.

My take is that the telcos would be damned fools not to hold more of the market so that femtocells/WiFi will provide them more robust and profitable wireless networks. Blair Levin came to a similar conclusion, that it’s too early to claim cable is the inevitable winner. But Verizon cutting FiOS by 2-4M homes is exactly the kind of damned fool move that will hurt them in the long run.  U.S. broadband is a two player game with many different possible strategies I can’t predict.”

For the complete article, including graphs and tables, please see:

http://www.dslprime.com/docsisreport/163-c/2957-us-cable-clobbers-dsl-u-verse-fios

In closing, Mr. Weissberger would like to make two key points:

1.  If U Verse or FiOS is not offered in your geographical area, you will have to go to Comcast, TW Cable (or other MSO in your area) by default to get high speed Internet and digital cable TV with On Demand.  Those non triple play reachable customers can NOT get high speed Internet access from ATT or VZ, because those telcos  haven’t upgraded their cable plant in many areas, e.g. from ADSL to FTTN with VDSL2 for U Verse; or from ADSL to FTTP for FiOS.   In my opinion, those non reachable triple play customers are being neglected or even discriminated against by the two big telcos.

Hence, Comcast (or TW Cable or whomever is the cable franchise holder in their geographical area) wins by default.  Perhaps that’s why Comcast is signing up many more high speed Internet (above 5M or 6M b/sec Downstream) customers than AT&T or VZ.   

2.  All triple play customers are in danger of losing all three services on an outage (cable break, power failure, CO/Head end server failure, etc).  The exception is U Verse with POTS where you’d still be able to make voice calls (but U- Verse- VoIP customers would be dead in the water!).  Hence, you need to have a working cell phone if your access or ISP fails.  And that’s not always possible if you are in a remote area, or the hills where cell phone coverage is bad.