A little more than six months after AT&T announced it’s 5G SA Core Network would run on Microsoft Azure cloud platform, a Microsoft blog post by Shawn Hakl, VP of 5G strategy in Azure for Operators, provides a progress report on that crucial IT industry initiative. Microsoft received requests from many operators, partners, and customers to share more details of the evolution of Microsoft’s hybrid cloud technology to support AT&T’s 5G core network workloads.
Through Azure for Operators, Microsoft has forged close ties with AT&T personnel, product services groups, and partners. At the heart of the value Microsoft delivers in each of these relationships, is the way in which we leverage the power of the cloud to improve the next generation of telco networks. Microsoft aims to harness trends toward Software Defined Networking (SDN), Cloud-Native Network Functions (CNFs), and Virtualized Network Functions (VNFs) coupled with the service-based architecture of 5G, to begin digitally transforming the network.
That evolution involves introducing both hybrid cloud infrastructure and software, building scalable elastic carrier-grade networks, and using the power of AI and machine learning to build self-optimizing networks that can heal, defend, and provision themselves. These efforts will enable operators to hyper-automate the business itself, bringing down costs and improving the overall service experience. Azure for Operators represents the set of investments Microsoft is making to bring the power of the cloud to the network.
Microsoft’s efforts are aimed at getting workloads on the network to function on a carrier-grade hybrid cloud, which includes both public and dedicated on-premises cloud infrastructure. Telecommunication services are highly distributed and will likely become more so over time. As a result, the value of creating a carrier-grade hybrid cloud model lives in its ability to meet customers where they are—at the edge of the cloud, the edge of the network, or the edge of the enterprise.
AT&T Backgrounder on use of “SDN” and network virtualization:
In 2013, AT&T adopted an aggressive position on “Software Defined Networks (SDNs)” and network virtualization, with the ultimate goal of delivering 75 percent of their network using virtualized technology by 2020. With their own definition of SDN (not related to the ONF’s strict separation of control and data planes or using OpenFlow as the southbound interface between them). AT&T says they did meet those objectives, but this author is skeptical based on checks with AT&T employees that work in their central offices.
In the 2013-2020 time frame, there was no commercial cloud option available that included the necessary features and capabilities to enable carrier-grade cloud. AT&T created a mostly proprietary (not standards based as claimed) implementation of cloud technology that was deployed in their on-premises data centers. This initial integrated cloud evolved into a Network Cloud, and today, we’ve arrived at Network Cloud 2.7—representing seven years of experience developing on-premises cloud for network workloads.
With Microsoft’s recent acquisition of this technology, development teams from AT&T’s Network Cloud organization have moved into Azure for Operators, directly integrating the intellectual property into a Microsoft offering and assuring a seamless transition.
Unique AT&T – Microsoft Partnership:
Microsoft says their collaboration with AT&T is unique in three ways:
- It’s the first time that a tier-one operator has embraced commercial hybrid cloud technology to run mobility network workloads that support their existing consumer base.
- The effort is entirely focused on the mobility core network versus go-to-market collaborations at the edge.
- It’s a multi-vendor cloud-mobile core network system: Microsoft hybrid cloud technology supports the AT&T mobile core network that spans more than 60 cloud-native network functions (CNFs) and virtual network functions (VNFs) from 15 different vendors.
Network Cloud technology originally developed by AT&T can be utilized by multiple carriers, maintaining security, without losing differentiation, and with the added benefit of having many costs such as security patching, vendor updates, and regulatory changes delivered as part of a standard commercial product.
These capabilities will be combined with Microsoft’s edge platform, our hybrid management platform, Azure Arc, and our ecosystem of partners including equipment providers, hardware vendors, and software vendors. By joining the Network Cloud with our platform and growing ecosystem, we have achieved a carrier-grade hybrid cloud solution that will be delivered as the Azure for Operators platform. The roles of the partners are as follows:
- Microsoft develops the carrier-grade hybrid cloud technology that supports the AT&T mobility core network workloads.
- AT&T continues to select and manage the network applications (VNFs and CNFs) and their configurations to deliver mobility services to AT&T customers.
In other words, Microsoft is taking the AT&T Network Cloud technology, building it into Microsoft’s standard hybrid cloud product, and then delivering a carrier-grade hybrid cloud solution to the market and AT&T itself, where it can run at AT&T on-premises or on Azure public cloud. Microsoft hybrid cloud technology supports the AT&T mobility core network workloads used to deliver 5G connectivity that supports consumer, enterprise, and the FirstNet responder community. In terms of security, it’s important to note that Microsoft does not access AT&T customer data—AT&T continues to hold access to that data, and Microsoft cannot see it.
For AT&T, this collaboration puts them in a position to deliver new services faster and more flexibly across Azure public cloud and on-premises with common tooling and services, reducing time-to-market for a cloud-native approach.
Microsoft believes the result will be better resiliency across the network, cost advantages when it comes to scaling existing services, and a more effective introduction of new services resulting in continuous improvements to the customer experience.
Before joining Microsoft in 2020, Hakl was a longtime Verizon executive. He added that “Telecommunication services are highly distributed and will likely become more so over time. As a result, the value of creating a carrier-grade hybrid cloud model lives in its ability to meet customers where they are – at the edge of the cloud, the edge of the network, or the edge of the enterprise.”
James Crawshaw, a principal analyst of service provider operations and IT for research and consulting firm Omdia (owned by Informa in the UK), wrote on LinkedIn that Microsoft will have a lot of work to do to fully support AT&T’s complex core and cloud operations.
He also wrote that AT&T has a history of offloading networking systems. For example, the company in 2016 offloaded its ECOMP orchestration/automation system to the Linux Foundation open source community. However, “I don’t think that was a huge success,” Crawshaw wrote. He believes AT&T has replaced ECOMP (subsequently dubbed ONAP) elements with commercial orchestration systems in a number of areas. Here are are his exact words:
“When AT&T found that its ECOMP orchestration/automation system was getting too hard to manage they offloaded it to the Linux Foundation in the hope that the open source community would take care of it (ONAP). I don’t think that was a huge success (it was a failure, in this author’s opinion). I believe AT&T has actually replaced ECOMP/ONAP with commercial orchestration systems in a number of areas. Offloading its OpenStack-based cloud platform to Microsoft is a similar strategy. But if Microsoft struggles to turn a managed service into a repeatable product that they can sell to other operators around the world they may end up offloading it onto an IT services company whose business model is a better fit.”
Microsoft’s acquisition of AT&T’s Network Cloud, as well as Metaswitch Networks and Affirmed Networks, brings the anchor applications and telco know-how to build the features that are required for a carrier-grade hybrid cloud. These features, available to the entire partner ecosystem, contribute to an open, interoperable network that offers support to all operators. The message to operators from Microsoft is simple and straightforward: your partners and your customers—and the relationship is powered by our technology. For more information about the Azure for Operators strategy, refer to the e-book.
AT&T added 1.3 million new postpaid mobile subscribers in Q4-2021, including 880,000 cell phone customers, similar to its performance in Q4-2020.
With 3.2 million postpaid phone net adds in the full year 2021, AT&T said it delivered its best performance in over 10 years.
AT&T CFO Pascal Desroches was scheduled to discuss AT&T’s numbers at Citi’s Apps Economy Conference on January 5th. However, the company said that AT&T CEO John Stankey would replace him and participate in a Q & A discussion with a Citi moderator.
AT&T said in a statement before the event that it “continues to benefit from strong network performance and its disciplined and consistent go-to-market strategy.”
In the fixed wireline market, AT&T added 270,000 fiber optic subscribers for the quarter, taking it to a total of around 1 million net adds for the full year. This is the fourth consecutive year in which the company has added 1 million or more fiber subscribers, AT&T noted.
Fiber roll-out faced some delays earlier in the year, due to supply chain issues related to the coronavirus epidemic. Nevertheless, AT&T added 2.6 million new premises passed with fibre, slightly better than its target of 2.5 million.
The company said it also exceeded its target for HBO and HBO Max subscribers. It reached 73.8 million subscribers worldwide at year-end, compared to earlier guidance to reach the high end of its targeted range of 70-73 million subscribers.
Stankey said during his Citi keynote Q & A with Michael Rollins:
We’ve been able to run our operations better because of improved customer satisfaction. That’s extending into lower churn levels. That ultimately drives efficiency in things that we’re doing to make our business more effective and efficient moving forward, that are helping us keep that margin equation where it needs to be, so that we’re getting good, healthy, profitable growth around that. I feel really good about the progress we’ve made against our $6 billion objective over a three-year period to drive costs out. We’re halfway plus through that at this juncture. And I think there’s really good momentum and discipline and operating capability moving into the business as a result of that.
In the communications company side, we’re going to walk out of this with a capital structure and a balance sheet that I think puts us in a great position relative to our peers in the industry. I’ve articulated where we’re stepping up our investment, especially making sure that we have fiber capillaries that allow us to do really well in our wireless business and really well in our premium business networking entity. And then go back into places where we’ve been underpenetrated, like the consumer broadband market, and ultimately be share takers and grow our business as a result of that.
I do believe we’re seeing a reordering of industry structure in general where customers don’t necessarily love the notion of having to make a decision to buy one form of connectivity from one company and another form of connectivity from another. And I think most customers when they get up in the morning just think about it in the context of I need to get on the Internet, I like to just get on the Internet, I’d like to be able to do the business I need to do.
And my gut is that customer desires are ultimately going to drive how product and industry performs. And I expect that we’re going to see more consolidated offers going out to customers, where people are selling a bundle of connectivity. And it doesn’t matter where you are or where you need to use it. And as we think about how product evolves and the capabilities and features of products, that that’s going to be kind of the next several years or ultimately going to start to seed into the industry as we think about things.
And when I start talking about why I believe AT&T is well positioned with that transition, we are a company that has more fiber infrastructure than anybody else who does networking in the United States. And we know more about building these integrated networks than anybody else, and we do more — we have a more balanced portfolio at the low end of the market, in the consumer space and at the top end of the market in business networking.
I think in the business segment, we’re going to see this interesting dynamic of public and private networking start to evolve where private networking used to be in the domains of exclusively unlicensed spectrum, and what I would call fixed (wireless) LAN connectivity oftentimes and larger more complicated businesses. And I think we’re going to now start to see a little bit of that dynamic where managed wireless networks are going to become relevant in parts of businesses and how that gets done I think will be maybe another dynamic that requires companies to work — a company like ours to work with large enterprises on that approach.
And, again, I think we start from a unique place there, where we have the account management infrastructure, the consulting expertise and the capabilities to go into those businesses to support them through that evolution as they do a combination of what used to be fixed private networking that’s now fixed and wireless private networking in combination with large scale public networks. And I think that’s probably another dynamic we’ll see play out over time.
In response to Citi’s survey which found 64% thought AT&Ts biggest risk was Verizon, T-Mobile and the competitive landscape broadly; 24% cable, 12% dish, and 0% for other possible new entrants, Stankey said: “First, my reaction to kind of those results are I’m actually surprised that 0% for other new entrants is at the bottom end of the spectrum, because I frankly believe if 12% of the folks think that Dish Networks is maybe going to be the most disruptive aspect, my gut tells me that Dish coming into the market may be something that’s more paired with a combination of possibly another new entrant that wants to do something a little bit differently….I feel really good about that momentum and our ability to respond to T-Mobile and Verizon in the way we’ve done this year and continue to be very, very effective.”
Rollins asked: “Can you give us a preview of what 5G is going to look like for AT&T over the next 12 months? AT&T was in discussions with the FAA and with C-band over the last few weeks. So what should your customers and investors expect for the evolution of what 5G will look like from an experience perspective?”
Stankey replied: “When you deploy an air interface like 5G, it’s with you for a very long time. And so a couple of weeks here and a couple of weeks there at the front end of this isn’t in the context of the grand scheme of what’s going to happen and how you build networks and how you support a customer base. In my opinion, it isn’t going to be a big shift one way or the other. I think we need to keep that in perspective (this author completely agrees).
What I would tell you about our approach is no different than what I alluded to earlier. We want to make sure all of our network deployment, whether it be fiber or 5G is done in a way where we’re taking advantage of our dense and rich fiber networks, that we’re putting the bandwidth where customers need to do it and we’re evolving a product in a way that we can have a relationship with a customer that says it doesn’t matter where you go, we will handle your bandwidth needs. And we may choose to do that on 5G or we may choose to do that on fiber. At the end of the day, that should be something that’s fairly transparent to the customer. It should be done in a way that makes sense for them and a product that makes sense for them. And I think we’ll be in a good position to do that.
Our approach to 5G rollout, partly because we have such a broad and dense low band spectrum position, our networks performing incredibly well right now. You see the speed tests. And I would tell you that yes, there’s nominal differences that are showing up at a couple meg (Mbps) here, a couple meg there. This provider wins in this market, a different one wins in another. But when you look at customer feedback, customers are telling you — AT&T customers that they’re incredibly satisfied with the service.
We see sentiment on the network improving. That’s really important as a result of that. And that’s all going on within the dynamic of what’s occurring in the market right now and what other competitors are doing. When you see that momentum and that ascent on network performance and the consistency, that’s really strong and that’s partly because of one, the dense spectrum assets we already had walking into the mid-band deployment; and two, just the infrastructure of how cell sites in the network has been built.
Now as we go into this mid-band deployment, we’re going to be a bit more deliberate in our approach here, because as you know we’ve got the dynamic of certain mid-band spectrum being available now, certain mid-band spectrum that won’t be available until ’23 and we have some other mid-band spectrum that may come available somewhere in the middle of those two things. And as a result of that, as you think about how you deploy, you want to make sure that you’re using the right electronics and the right time to be on a tower once as opposed to multiple times.
And so as we move through the middle of this year, I think you’ll see us hit our stride on how we get the right kind of pervasive coverage using a collection of mid-band spectrum assets to make sure that that occurs. And I think given the near term as we kind of get in to the middle of this year and we wait for further spectrum availability into ’23, a spectrum that we’ve acquired and other auctions, we’ll be in a really nice position to take the strength of where the network is today and evolve it and ultimately be in a position to do that in the middle of this year as we start to scale that.
Rollins asked: “One of the differences so far in the 5G discussion for AT&T is on fixed wireless broadband. How are you looking at the opportunity, especially where you don’t have an incumbent wireline footprint or in the areas where it may not make sense to build fiber, how are you looking today at the opportunity to use this mid-band spectrum that you have in the wireless network and offer a wireless home broadband solution?”
Stankey replied: I believe that having some fixed high bandwidth infrastructure is going to be essential to being an effective networking company moving forward. Here’s a simple example: If you go into a typical average U.S. household and you think about the amount of video consumption that’s going on in a household today and you think about the customer trajectory of how much of that video consumption is moving from what used to be what I’ll call broadcast or multicast combinations, where it’s one stream sent out to a bunch of households or one stream watched by many people in the household to unicast where each individual in the household is watching something different at a particular time.
And I would tell you that if you believe, two things happen. One, that there’s going to be more on-demand consumption of video moving forward. And two, the resolution of that video will improve over time. And it will improve at a rate that compression technologies won’t necessarily keep you even in that consumption, so the jump to HD to 4K is an example. I would tell you that you start to look at those things and realize that wireless networks in some instances will have difficulty scaling in certain segments of the market as a result of that and there’ll be more effective ways to serve those customers.
And when I start to look at what we’re seeing as we start to do our market tests and our market pilots on multi-gig deployment on fiber and the market success we’re having and the sentiment of the customers that are taking it, I think that’s a really, really powerful combination. And I think those segments of the market are going to need to be addressed with more fixed solutions.
Now, are there single individuals living in an apartment someplace that may have a usage profile that is effectively served by fixed wireless in a metropolitan area? Sure. There are those other businesses that sit in a strip mall that are low data intensity that may have an opportunity to be served by fixed wireless, sure. Is fixed wireless going to be the best way to get a lot of bandwidth out to less densely populated rural areas? Yes, it probably will be. So is there a segment of the market where fixed wireless will apply and be effective? Sure, it will, and we’ll be in a position to have the right product to address those places.
But I don’t want to just simply say, well, that is the single solution that’s going to deal with what I would call the 70% of the business community, the 70% of the consumer population that are going to be pretty intensive users in some location, indeed, to have fixed infrastructure to support that over the long haul, given all the innovation that’s going to come. So how do I think about it out of region? Again, having a broad portfolio of business and consumer and believing that ultimately having fiber infrastructure to make both networks run well is important.
I see an opportunity for us to be very targeted and very disciplined around what we do and what used to be I hate using the term but traditional out of region markets, where good fiber deployment that supplements the strength of your wireless network and at the same time can pick up businesses and consumer, that’s probably a place where if this future that I talk about, which is a consolidated broadband product offering that occurs in the market, a customer that just wants a provider that solves their needs starts to occur, that those opportunities and companies that ultimately sustain themselves in the U.S. market for networking will need to address and ultimately effectively do. And that’s how we’re positioned to move forward right now.
Rollins asked: “On the fiber side, you announced that you hit the 2.6 million homes incrementally passed in 2021. Are those now fully open for sale in 2022? And is there another bogey that we should be thinking about for the next year in terms of the expansion of your home fiber network?”
Stankey replied: The answer is yes on the 2.6 million. And as I think I shared on the last earnings call, we wanted to do 3 million this year. We got a little bit of a supply chain dynamic that worked in the latter part of the year on how we were getting some of the elements we needed for the — the final piece of the distribution plan. It was largely how the preassembly dynamics of the fiber come in for us to be able to splice it in and ultimately serve the home. Feel pretty good about how the team and our vendor community has worked through that in the fourth quarter.
Obviously, we did 2.6, not 2.5. I think that’s indicative of the fact that we’ve got a little bit better momentum than what we had expected. And now those homes are in fact available. And the next 400,000 that we didn’t hit will come very quickly in the front end of this year in the 30, 45-day timeframe, because we are in fact starting to see that ramp in that supply component we needed. As we told you, we want 30 million fiber households by the end of ’25. I’m very confident we’ll get that done.
As I’ve told you on the last earnings call, I’d kind of like to get away from a discussion of how many new homes are added this quarter and be able to talk to you about just what are we seeing in the growth of customer acceleration? I’m really pleased with 270,000 fiber adds in the fourth quarter and be able to talk to you about just what are we seeing in the growth of customer acceleration? I’m really pleased with 270,000 fiber adds in the fourth quarter of this year, especially given we were a little bit late bringing on that new inventory. I think now that we can sell into that in ’22, that’s going to allow us to get that momentum to break through that 300,000 range on customers per quarter.
And as we continue to add in the footprint, what the investor base should look about is, is our new fiber adds, are they continuing to scale and grow irrespective of what we’re doing with the footprint. And that’s really what I hold the management team to and how we think about our commitments and our financial planning moving forward. So yes, I expect you’re going to continue to see those to grow as we move through ’22 as the footprint expands, and that will be the case all the way through ’25 as we get to 30 million fiber homes through the end of ’25.
As I’ve also shared, we’re continuing to do work to look at opportunities out of region, what we want to do to possibly find other attractive places to go and penetrate more effectively in the business community (presumably with fiber access). And as we have confidence in those things and we’re in a position to go and demonstrate that we can make that happen, we may be doing some revisions to our approach and our guidance on that moving forward.
Rollins asked: “Our final question is what application(s) can fundamentally change demand for connectivity and data consumption over the next few years?”
Stankey replied: There isn’t one, and I’d go back and say, history repeats itself. It’s like saying what application made LTE and 4G relevant in society. I’ve been around here a long time. I can remember sitting around in 2009, 2008 answering the same, well, geez, what’s going to justify this investment in LTE? Isn’t 3G good enough? And why do we need to invest this money? And it almost seems quaint right now that you’d go back and say, was it worthwhile to invest in LTE and in 4G to give people more speed and more effective and more resilient, more ubiquitous networks? And the answer was, of course. And I’d ask the question, are wireless networks as effective and as resilient as what you’re accustomed to when you sit in your living room or when you’re at your desk inside of an office building? The answer is not yet.
And so if there’s innovation that occurred on the LAN in the workplace and if there’s services and capabilities that occur in your home that you can’t quite do everywhere you are, why wouldn’t there be an opportunity to invest to take that somewhere else. And as we start to think about what I talked about earlier, public and private mixes into enterprise, when we get to low latency and what that opens up in terms of opportunity for medical diagnostics and remote health care and we think about the manufacturing dynamics and autonomous vehicles, we’re going to see a whole another decade of innovation that’s built on the back of these networks. And I’m really optimistic about that. And I have no question that we’re going to someday be sitting around saying, we need more spectrum because 6G is here and if we don’t have it, we’re not going to be able to take the next wave of innovation for ubiquitous high broadband, high speed broadband networks, no matter where we are, live, work and play.
Chief Executive Officer John Stankey in June called the period “a hard year that’s been full of anxiety.” By December, he said he hoped that within another year “our attention will be entirely on the future and not on what we needed to do to reposition or restructure the business.”
The company’s WarnerMedia unit ended 2021 with 73.8 million global HBO subscribers, ahead of its 70 million to 73 million target. AT&T in May announced plans to spin off WarnerMedia, the entertainment empire it acquired in 2018, into a new joint venture with Discovery Inc.
The transaction secured European competition authorities’ approval in December but is still under review in the U.S. and other countries. AT&T shareholders will keep a 71% stake in the new media creation, so the company’s stock price partly reflects how the market values that future media business, which will be called Warner Bros. Discovery. The telecom company that remains is expected to pay shareholders a lower annual dividend.
Executives have said the yearly payout will fall from about $15 billion to between $8 billion and $9 billion after the media spinoff closes. An AT&T spokesman pointed to executives who have said that amount will still make it one of the top-yielding companies among dividend payers.
The subscriber surge prompted some market watchers to question how long the good times can last. Jeff Moore, a wireless-industry analyst for Wave7 Research, likened such explosive growth to all 32 NFL teams winning the same Super Bowl. “It just doesn’t make sense,” he said. “You would think that someone is losing and someone else is gaining.”
AT&T‘s rivals have pointed the finger at its now year-old marketing blitz, which offered deep smartphone discounts for new and existing customers, as the start of a race to the bottom that could eventually hurt industry profitability.
AT&T‘s leaders have said their wireless customer growth is durable. They have cited smarter marketing and improving traction in the public-safety market, as well as discounts, among the factors helping their results.
Mr. Moore agreed and said Verizon is the most vulnerable to slumping customer growth this year because its retail marketing operation has lost ground to more aggressive rivals. A Verizon spokesman declined to comment. “There’s too much skepticism about AT&T,” the analyst said. “They’ve really turned around their results.”
Not all investors believe that. Jerry Braakman, chief investment officer at First American Trust, said his firm held AT&T shares in client portfolios for several years before selling them in December 2020. He said the pandemic’s reordering of the winners and losers in the film industry kept AT&T‘s WarnerMedia unit from delivering on its promise. “AT&T looked like their strategy was struggling, so we decided not to continue to ride something down,” he said. “Sometimes you have to cut your losses and move on.”
- The SmartRPM platform supports iGlucose, iBloodPressure and iScale. A fourth product, iPulseOx, is being unveiled at CES this week in Las Vegas. End users insert the batteries — which are included — and press the start button to activate the service. The device’s IoT SIM card automatically sends data to the SmartRPM cloud, where it can be accessed by secure log-in by the healthcare provider.
- AT&T cited Smart Meter data that found that 84% of diabetes patients and 88% of hypertension patients who are at high risk for disease complications “experienced significant improvements” when using iGlocuse and iBloodPressure, respectively. Studies show remote patient monitoring can help change this.
- For example, 84% of diabetes and 88%1 of hypertension patients at highest risk for severe disease complications experienced significant improvements in their health when using the Smart Meter iGlucose and iBloodPressure as part of RPM programs.
- Smart Meter’s cellular-enabled devices simplify RPM. They are an easy out-of-the-box solution; just insert the included batteries and press the start button. The monitoring devices contain IoT SIM cards, so they automatically send the patient’s data over the AT&T IoT network to the SmartRPM cloud. The healthcare provider then accesses the data there via secure log-in.
For patients, Smart Meter’s cellular RPM devices mean easy access to improved healthcare with the peace of mind that comes from frequent assurances and support. For health care providers, the benefits include ready access to more complete patient data and the ability to act on it in near real-time, while automatic record keeping meets requirements for reimbursement.
Because of these benefits, a growing number of doctors are embracing RPM. A recent survey found 43% of clinicians believe RPM adoption will be on par with in-patient monitoring in 5 years.
“The iGlucose solution proved to be an outstanding resource for my clinical team to enable greater insights into our patients’ results between visits. More than 70% of participants required some form of intervention prior to their next in-office visit, and as a result, there was a reduction in emergency room visits and need for hospitalizations, demonstrating better overall diabetes care.” – Dr. Gail L. Nunlee-Bland, MD, Howard University Diabetes Treatment Center
“Our collaboration with Smart Meter is another example of how our IoT connectivity is advancing connected healthcare. IoT-enabled devices ultimately provide a quicker and more convenient patient service with better outcomes for both the patient and the healthcare provider.” Joe Drygas, VP of AT&T Healthcare Industry Solutions
“As an early RPM innovator, Smart Meter has done extensive work to drive the best outcomes by improving patient engagement and adherence, and our cellular alliance with AT&T has been a large part of our success.” Casey Pittock, Smart Meter CEO
Last month, AT&T said that its FirstNet first responders’ network is supporting Qure4u, which is a “patient engagement and virtual care platform” that includes a Bluetooth-enabled blood pressure cuff, the Samsung Galaxy Tab A7 Lite and enhanced security.
C Spire also is offering an RPM service. The carrier said in August 2020 that it is teaming with the Delta Regional Medical Center in Mississippi. C Spire Remote Patient Monitoring will monitor “a broad array of chronic medical conditions.”
Speaking at Wells Fargo (Virtual) TMT Summit, AT&T Communications CEO Jeff McElfresh discussed momentum in AT&T’s wireless business, noting that AT&T’s consistent go-to-market strategy has driven improved market position supported by healthy wireless service revenue and EBITDA growth. McElfresh noted that over the past five quarters the company has delivered its best subscriber results in a decade, with nearly 4 million postpaid phone net additions, and 1.4 million fiber net additions. At the same time, wireless delivered its best-ever EBITDA in the third quarter of 2021, up 3.6% year over year.
McElfresh said his company added over 1.4 million fiber net adds in the last five quarters. That was based on AT&T’s conviction to reinvest in what they believe is a very future-forward technology in fiber that’s got superior advantages to any other kind of broadband connectivity offering (e.g. FWA, bundled copper pairs, cable, etc).
McElfresh told the audience that the company’s fiber expansion is “rekindling” its consumer broadband business and that he has a high degree of confidence that the company is hitting “game speed” when it comes to the number of homes passed with fiber that it is achieving every month.
AT&T had approximately 14 million homes passed with fiber as of year-end 2020 and is expected to increase that to 16.5 million homes passed by the end of this year. The company now has 5.7 million fiber to the premises/home customers, including Internet access, VPN, private line, virtual private line, etc.
McElfresh said that he believes AT&T has enough “weight” in the industry that it can work with vendors to overcome any supply chain delays (which the company warned about in July). He added that he has no concerns about achieving the 30 million locations by 2025 goal based upon the company’s current buildout pace. “I have no concerns about hitting the pace that we need to reach that,” he said.
“What I am focused on more than penetration levels is that we are demonstrating that we can step up our net add performance quarter to quarter.” In the third quarter, AT&T added 289,000 fiber customers which was down year-on-year from 357,000. However, the company also said that 70% of its net adds were new to AT&T.
To help entice consumers to switch to AT&T’s fiber network, McElfresh said that the company has a dedicated fiber team within its consumer wireline business that is working in neighborhoods to sell fiber optic based Internet access. He added that the telco is measuring the number of fiber net adds they can achieve in 30 days, 60 days and 90 days in those local markets. The company sees those fiber net add numbers accelerating during each of those time periods.
Looking forward, McElfresh is encouraged by underlying mobile industry trends and sees limited signs that suggest a near-term shift in demand levels. He said he believes AT&T’s momentum is sustainable with the company’s simplified plans, targeted subsegment approach, improved customer experience and network performance all helping AT&T retain and attract subscribers, leading to lower churn and increased customer lifetime value. Reiterating recent comments by CFO Pascal Desroches, McElfresh indicated that AT&T’s outlook for 2022 and beyond does not assume a continuation of outsized industry net adds. Should recent mobile industry trends continue, he believes the changes made to AT&T’s go-to-market strategy puts the company in a better position to capitalize on healthier than anticipated demand.
McElfresh noted that AT&T continues to see postpaid phone ARPU stabilizing in 2022 with an improvement in international roaming and subscribers adopting higher-ARPU plans balancing the impact of amortization accounting for device promotions. McElfresh said that fewer than a quarter of gross adds and upgrades in the third quarter traded in newer devices for premium promotional offers. As previously noted, only about 20% of AT&T’s postpaid smartphones are on Unlimited Elite – the company’s highest-ARPU and fastest-growing rate plan.
With postpaid phone ARPU stabilizing in 2022, AT&T expects higher wireless service revenues from a growing postpaid subscriber base. McElfresh also indicated that he believes AT&T can continue to profitably increase its wireless market share going forward and reiterated that the company continues to expect fourth-quarter EBITDA growth to exceed third-quarter levels.
When asked about fiber penetration levels, McElfresh responded, “What I am focused on more than penetration levels is that we are demonstrating that we can step up our net add performance quarter to quarter.” In the third quarter, AT&T added 289,000 fiber customers which was down year-on-year from 357,000. However, the company also said that 70% of its net adds were new to AT&T.
To help entice consumers to switch to AT&T’s fiber network, McElfresh said that the company has a dedicated fiber team within its consumer wireline business that is working in neighborhoods to sell fiber. He added that they are measuring the number of net adds they can achieve in 30 days, 60 days and 90 days in those local markets and they are seeing those numbers accelerate.
AT&T and Verizon said today that they would limit some of their 5G wireless services for six months while federal regulators review the signals’ effect on aircraft sensors, an effort to defuse a conflict about C band interference that has roiled both industries.
The cellphone carriers detailed the proposed limits Wednesday in a letter to the Federal Communications Commission (FCC). The companies said they would lower the signals’ cell-tower power levels nationwide and impose stricter power caps near airports and helipads, according to a copy reviewed by The Wall Street Journal. This comes after, both companies agreed to push back their 5G C band rollouts by an additional month to January 5, 2022 after the FAA issued a Nov. 2 bulletin warning that action may be needed to address the potential interference caused by the 5G deployment.
“While we remain confident that 5G poses no risk to air safety, we are also sensitive to the Federal Aviation Administration‘s desire for additional analysis of this issue,” the companies said in the letter to FCC Chairwoman Jessica Rosenworcel.
“Wireless carriers, including AT&T and Verizon, paid over $80 billion for C-band spectrum—and have committed to pay another $15 billion to satellite users for early access to those licenses—and made those investments in reliance on a set of technical ground rules that were expressly found by the FCC to protect other spectrum users.”
AT&T and Verizon said they had committed for six months to take “additional steps to minimize energy coming from 5G base stations – both nationwide and to an even greater degree around public airports and heliports,” and said that should address altimeter concerns.
Wireless industry officials have held frequent talks with FCC and FAA experts to discuss the interference claims and potential fixes, according to people familiar with the matter. An FCC spokesman said the agreed-upon limits “represent one of the most comprehensive efforts in the world to safeguard aviation technologies” and the agency will work with the FAA “so that 5G networks deploy both safely and swiftly.” Wireless groups argue that there have been no C-Band aviation safety issues in other countries using the spectrum.
Earlier this month, the Federal Aviation Administration (FAA) warned it could restrict U.S. airspace in bad weather if the networks were turned on as planned in December. The FAA warning came in the thick of cellphone carriers’ network upgrade projects. A spokesman for the FAA called the proposal “an important and encouraging step, and we are committed to continued constructive dialogue with all of the stakeholders.” The FAA believes that aviation and 5G service in the band telecom companies have planned to use can safely coexist, he said.
AT&T and Verizon said they would temporarily lower cell-tower power levels for their 5G wireless services nationwide.
Photo Credit: GEORGE FREY/AGENCE FRANCE-PRESSE/GETTY IMAGES
Wireless industry executives don’t expect the temporary limits to seriously impair the bandwidth they provide customers because networks already direct signals away from planes and airport tarmacs, according to another person familiar with the matter.
Still, the voluntary limits are a rare step for wireless companies that place a high value on the spectrum licenses they hold. U.S. carriers spent $81 billion to buy licenses for the 5G airwaves in question, known as the C-band, and spent $15 billion more to prepare them for service this winter.
The carriers earlier this month delayed their rollout plans until early January after FAA leaders raised concerns about the planned 5G service. Air-safety officials worried the new transmissions could confuse some radar altimeters, which aircraft use to measure their distance from the ground.
At an industry event last week, FAA Administrator Steve Dickson said conducting flights in a safe manner and tapping spectrum for 5G services can both occur. He said the question was how to “tailor both what we’re doing in aviation so that it dovetails with the use of this particular spectrum.” Mr. Dickson said another focus is the use of the spectrum in other parts of the world and how it differs compared with the U.S. “That’s what the discussions are that we’re having with the telecoms right now.”
U.S. wireless companies send 5G signals over lower frequencies than the altimeters, but air-safety officials worried that some especially sensitive sensors could still pick up cell-tower transmissions. Regulators in Canada and France have also imposed some temporary 5G limits.
The carriers’ letter said the mitigation measures would provide more time for technical analysis “without waiver of our legal rights associated with our substantial investments in these licenses.”
C-band limits are most relevant to AT&T and Verizon, which paid premiums to grab licenses for the new signals ready for use in December 2021. The companies still plan to launch their service, subject to the new limits, in January 2022. The proposed limits would extend to July 6, 2022 “unless credible evidence exists that real world interference would occur if the mitigations were relaxed.”
Rival carrier T-Mobile US Inc. is less vulnerable to delay because it spent a smaller amount for licenses that are eligible for use in December 2023. It also controls a swath of licenses suitable for 5G that aren’t subject to air-safety claims.
It’s not yet clear whether the proposal will be accepted by the FAA, which has warned pilots of the possibility that “interference from 5G transmitters and other technology could cause certain safety equipment to malfunction, requiring them to take mitigating action that could affect flight operations.” After July 6th, both carriers say they’ll set everything back to normal “unless credible evidence exists that real-world interference would occur if the mitigations were relaxed.”
“Our use of this spectrum will dramatically expand the reach and capabilities of the nation’s next-generation 5G networks, advancing US leadership, and bringing enormous benefits to consumers and the US economy,” Verizon and AT&T claimed in their joint letter sent to the FCC.
The federal agencies and the companies they oversee are meanwhile stuck in what New Street Research analyst Blair Levin called “a deep state game of chicken” guided by each regulator’s particular interest, with no clear path towards resolution.
AT&T and Verizon’s heavy promotions lead to booming growth, but value of next-gen networks to users still unclear, by Dan Gallagher
Even before the country’s two largest wireless carriers reported strong quarterly results this week, Morgan Stanley (MS) had a bit of cold water to splash on those carriers.
The investment bank published the results of its ninth annual broadband and wireless survey on Monday. Among the findings were that only 4% of respondents cited “innovative technology” such as 5G as an important factor in their choice of service. That number was unchanged from the previous year’s survey—despite an unremitting onslaught of marketing from wireless carriers and device makers for the next-gen wireless standard. [IEEE Techblog reported the results of the MS survey here]
That would appear inconsistent with the strong growth in wireless services reported by AT&T and Verizon VZ this week. On Wednesday, Verizon reported adding 429,000 postpaid wireless subscribers during the third quarter, which is up 52% from the number added in the same period last year. On Thursday morning, AT&T said it added 928,000 such users to its rolls in the same period—up 44% from the same period last year and the highest number of net new additions in more than a decade of what are considered the industry’s most valuable base of customers.
The two carriers have been selling 5G hard over the past couple of years. That picked up significantly last fall, when Apple Inc. launched its first iPhones compatible with the next-generation wireless technology. Those phones have been in hot demand. Analysts estimate total iPhone sales jumped 25% to a record of 237 million units in Apple’s fiscal year that ended last month, according to consensus estimates on Visible Alpha. The 5G-compatible iPhone 12 and 13 models are expected to account for more than 80% of that number.
But customers appear to be driven more by old-fashion promotions than cutting-edge technology. AT&T, Verizon and T-Mobile —which reports its results on Nov. 2—offered heavy discounts last year for iPhone 12 models paired with new 5G plans. That appears to have continued with the newest crop; wireless analyst Craig Moffett of MoffettNathanson notes that “promotions tied to premium unlimited plans have gotten richer” with the introduction of the iPhone 13 family this year. Indeed, the Morgan Stanley survey found price to be the most compelling driver in choice of a wireless plan, with 44% of respondents citing it as their top factor.
AT&T today reported a net profit of $5.9 billion in the third quarter, up from $2.8 billion a year ago. Adjusted EPS, excluding the one-time effects of the divestments, reached $0.87 versus $0.76 a year earlier. The company now expects full-year adjusted EPS to be at the high end of the earlier indicated low- to mid-single digit growth range and free cash flow should meet the $26 billion target.
AT&T said it was on track to meet its full-year targets. Revenues for the three months to September were still down 5.7 percent year-on-year to $39.9 billion due to the spin-off its pay-TV business in July, along with other divestments and weaker sales in Business Wireline.
Mobility is AT&T’s largest and most important business, accounting for 48% of consolidated
revenues, and more than two thirds of pro-forma revenues post divestitures. The company’s mobile business did quite well in the third quarter, adding over 1 million postpaid lines. AT&T has now added 4.4 million wireless postpaid subscribers over the past four quarters. Jeff McElfresh, Chief Executive Officer, AT&T Communications said on today’s earnings call (see analyst Craig Moffett’s comments below):
Our (wireless) strategy is working here at AT&T. As we’ve demonstrated, it’s the fifth consecutive quarter where we have driven some momentum and gaining (market) share. Our net add strength here in the quarter at 928,000, that compares to what we had produced back in 2019 in the third quarter of 101,000. And we’re driving strong service revenue growth. And we just posted the largest total EBITDA that we’ve generated out of the wireless business segment. The best part about it, Phil, is that our customers are telling us that we’re doing a good job. These churn levels that are low are a signal to the service and the value that we’re offering and our NPS feedback that we’ve received is the highest that we’ve ever received.
I’d also point to things like our FirstNet program. We’re starting to reach some scale here. Third quarter, we posted the highest net add quarter since launching the program and we’ve arrived at a position of leadership and strength in the law enforcement segment under the public safety sector. And so all in all, it’s been the operational changes that we’ve made at AT&T that has driven really strong momentum in our customer counts.
For comparison, arch rival Verizon added a net 699,000 postpaid subscribers including 429,000 postpaid phones in the third quarter. T-Mobile US will report third quarter results on November 2nd after the stock market closes.
HBO subscribers grew to nearly 70 million by the end of the quarter. Excluding its U.S. video business (to be spun off and merged with Discovery (DISCA) by the middle of next year), revenues rose to $38.1 billion from $36.4 billion in the year-ago quarter, and adjusted operating improved to $8.1 billion from $7.8 billion.
“We continue to execute well in growing customer relationships, and we’re on track to meet our guidance for the year,” said John Stankey, AT&T CEO. “We had our best postpaid phone net add quarter in more than 10 years, our fiber broadband net adds increased sequentially, and HBO Max global subscribers neared 70 million. We also have clear line of sight on reaching the halfway mark by the end of the year of our $6 billion cost-savings goal.”
Third-quarter revenues were $28.2 billion, up 3.8% year over year due to increases in Mobility and Consumer Wireline more than offsetting a decline in Business Wireline. Operating contribution was $7.1 billion, up 0.8% year over year, with operating income margin of 25.2%, compared to 26.0% in the year-ago quarter.
Highlights of AT&T’s Consumer Wireline business:
- 289,000 AT&T Fiber net adds; penetration about 37%
- Revenues up 3.4%; broadband revenues up 7.6% with ARPU growth of 5.2%
Growth in fiber broadband is an important part of AT&T’s new strategy, with billions of dollars of capital investment planned to expand its network and win new customers. In the third quarter, broadband internet subscriber growth was underwhelming. The company added a net 5,700 broadband customers, versus the consensus of 52,000. That includes a smaller-than-expected 289,000 fiber adds and a larger-than-expected loss of 261,000 DSL customers. Yet AT&T CFO Pascal Desroches said on today’s earnings call:
Our Fiber growth was solid. We had our highest Fiber gross adds ever and we continue to win share wherever we have Fiber. We added 289,000 Fiber customers in the quarter, and more than 70% of the Fiber net adds are new AT&T broadband customers and this gives us great confidence as we continue to build out our Fiber footprint.
CEO Stankey added a bit more color by saying:
We’re on this path to substantially increase our Fiber footprint and that stretches across both our consumer and our business base. And I think as you’ve known from past history, this is — it’s not uncommon for us to go through these ramps of infrastructure builds. We’ve done that many times before. We’ve recently been through one where we went through a multi-year ramp on fiber builds that we kind of started executing around the 2015 timeframe. They always, as you move through the front end of them, have a few moments where they’re a little bit lumpy and a little bit rocky because that’s the nature of it.
AT&T said it cut operating expenses by $3.4 billion in the past 12 months, to $32.8 billion. Divestments and lower sports programming costs were offset by higher wireless equipment costs and higher costs for other types of content at WarnerMedia, plus increased sales and marketing expenses. Operating profit was helped also by lower depreciation and amortization following earlier asset write-downs.
Earnings report summary:
- AT&T added 1,218,000 postpaid wireless net additions in the third quarter as well as 249,000 prepaid phone ads and 928,000 postpaid phone net ads.
- AT&T’s mobility unit reported revenue growth of 7% in the third quarter to $19.1 billion and operating income of $6 billion.
- AT&T’s equipment revenue was $4.6 billion, up 15%, due to strong smartphone sales.
- AT&T Fiber added 289,000 net customers and broadband revenue was up 7.6% in the third quarter from a year ago.
- WarnerMedia revenue in the third quarter was $8.4 billion, up 14.2% from a year ago.
“AT&T lays claim to the most hated stock and the most maligned management team in our universe,” wrote New Street analyst Jonathan Chaplin after AT&T’s earnings report on Thursday morning. “…We continue to expect AT&T to struggle as T-Mobile and cable rise. That certainly doesn’t seem to have happened this quarter though, with exceptionally strong net adds in wireless; however, it’s unclear how much credit investors will give AT&T for the newfound resilience in its wireless business, at least in light of everything else.”
With respect to AT&T’s carrier competitors, analyst Craig Moffett wrote in note to clients:
In Wireless, competitor T-Mobile has staked out the rather unusual dual position of lowest cost AND best network. TMobile is expanding its footprint, retail presence, and market share in rural America, and it is targeting market share gains in business wireless. Verizon is planning a march “up the stack,” with a focus on mobile edge compute in the 5G enterprise market. Verizon’s network strategy, somewhat quixotically we would argue, still has a large component of millimeter wave ultra-wideband. But, as a backup, Verizon has amassed a huge trove of C-Band spectrum, and they claim the industry’s densest network.
As we inch toward the finish line of the 3.45 GHz spectrum auction, we will probably learn that AT&T has narrowed, but not fully closed, their spectrum gap versus Verizon (but not T-Mobile). What will its network strategy be? In Business Wireline, it is the nation’s largest incumbent, facing declining share and eroding pricing. What will its Business Wireline strategy be?
On October 11th, AT&T awarded a 5 year contract to Ericsson in order to accelerate the expansion of AT&T’s 5G network. This deal helps support deployment of the service provider’s recently acquired C-band spectrum and the launch of 5G Standalone (SA) (which has been outsourced to Microsoft Azure).
Ericsson will help AT&T to bring its 5G network to more consumers, businesses and first responders across key industries – including 5G use cases in sports and venues, entertainment, travel and transportation, business transformation and public safety. AT&T’s network evolution is made possible in part by the Ericsson Radio System portfolio, which includes the Advanced Antenna System (AAS), Advanced RAN Coordination and Carrier Aggregation technologies.
The deployments will support future network enhancements like Cloud RAN, which offers communications services providers increased flexibility, faster delivery of services and greater scalability in networks. The platform supports a centralized RAN architecture enabled by Ericsson Fronthaul Gateway, a new technology that will enable a more efficient transport of the fronthaul interface by converting it to packet (eCPRI).
AT&T CEO John Stankey was interviewed by Brett Feldman, Goldman’s U.S. telecom and cable analyst. AT&T is both a telecom and media company. We focus on the former for the IEEE Techblog. Here are selected telecom related comments Stankey made (BOLD font emphasis added):
We’re pulling (market) share back from our two largest competitors (Verizon and T-Mobile). I feel good about how we’re doing that. There’s more to be done as we invest in fiber, and we can compliment our wireless business with fiber. There’s opportunities for us to take communications further than what we’ve traditionally done at AT&T. And I think that business should be recognized for being a leading global communications business, like it is, very uniquely positioned with more fiber than any other communications company on the face of the planet, with a great wireless asset domestically in the U.S. and in Mexico, an opportunity to bring those things together, and run it incredibly effectively as a focused business. I think we’ve got a great story there.
I think AT&T is in a great position moving forward. I think the industry frankly is in a great position. I think there’s tremendous promise right now in what ubiquitous high capacity bandwidth with the kind of capabilities that 5G brings in terms of the density that it can afford, the number of devices, the ability to use technology to do things like network slice (requires 5G SA core network which Microsoft is building for AT&T) and begin to differentiate the network. I think this is going to be great for society. I think this is going to be great for the U.S. economy as a whole. If I had to bet, we don’t have the numbers for 2021, certainly can’t project 2022, but I have a sense of where this industry is going. (This author totally disagrees, largely because real, standards based 5G has yet to be deployed as there is only a standard for the RAN which doesn’t meet URLLC performance requirements. No standard for 5G SA core network.).
We’re probably going to see record infrastructure investment coming out of this industry in this period of time. And I think it’s going to equip the United States and our economy and our infrastructure in a way that we’ve never seen. I think that’s going to be incredibly powerful. And I think it’s not only going to be good for AT&T, because I think we have the right kind of wherewithal and the right kind of capability to be right alongside others that are investing at a high clip to bring that infrastructure forward. I think we’ll do just fine with where we are there. I believe when unleashed we have some of the best network minds in the country. I believe that dense fiber footprint that we have that’s denser than anybody else in the United States when engineered properly on top of a great spectrum assets and a great wireless business, it’s going to make our combined product offer and our business even better and more capable to deal with what customers need to do. So, I feel really comfortable about that. And I can do nothing more than not ask you to look at my prognostications, but look at how we’re performing in the market today.
We’ve now started doing some things quietly behind the scenes. We have another muscle to build here, which is how do we begin to work on software to differentiate our products and services in a way that makes our product better than what our competitors can do, because we do have a different asset base, and we are able to serve every corner of the market from the largest of enterprises to the smallest apartment somewhere in the United States. And I don’t think we’ve done as much as we can do in that vein, to actually make that real for our customers and the right products and the right services and the right offers. And so, rebuilding that product engine that we can do that and begin to differentiate allows us to do things that won’t necessarily just hinge on, can I get an attractive handset?
Brett Feldman: I believe your fiber network passes something around 15 million customer locations right now, you’re targeting to ultimately get to 30 million by 2025, that would still only be about half roughly half of the customer locations in the AT&T wireline footprint. Question we’ve gotten is how did you decide what the right target was? Why is it 30? And what really dictates the pace at which you build out fiber?
Stankey replied: Getting this kind of an engine (fiber optic build-out) ramped up to go from building 3 million to 4 million to 5 million homes (locations) past, working through the supply chain, all the logistics that are necessary to build network, it’s not a real simple undertaking. And as I’ve said, my goal is I feel very comfortable, we have places we can go to build 30 million homes (he really means residential and business locations combined) right now on an owned and operated basis, that have very attractive returns in the mid to upper teens. We’re demonstrating every day with our existing base, that we can operate that more effectively, we’ve now crossed over places where we have scale where we’re taking cost out of the business based on fiber replacement, the old infrastructure, we’re seeing that flow through in lower call rates, lower repair rates, better churn, all those things are going to continue to give us goodness moving forward.
Do I think there’s a magic number of 30? No, I don’t. I think there’s a combination of things. One is unlike the investment base, to recognize the good work we’ve been doing. And then in fact, we are building and adding value back to our shareholders. And when they start to recognize that in the form of the equity in the stock, do I believe my credibility and the team’s credibility goes up? Yes, do I believe there’s going to be other opportunities for us to come out, as we hit those scaling metrics that we have in place, the supply chain metrics that we might be able to go in and say, there’s more that we could possibly attack, I’d love to be in that position to do that. And I’ve kind of put that out as a challenge to the management team to say the only thing that stands in the way between you doing 30 million and doing more is your execution and performance.
Brett Feldman: Speaking of execution, execution really has two pieces. It’s deploying the network, and then it’s driving penetration of that network. I believe you had about 5.4 million fiber subscribers as of your most recent quarters, that’s about 35% penetration [1.]. What do you think is the right target for your fiber penetration and how are you going to get there?
Note 1. Fiber-based broadband has clearly established itself as a growth engine for AT&T, which added another 246,000 fiber subscribers in Q2 2021, ending the period with 5.43 million. With about 80% of new fiber subscriber additions new to AT&T, overall broadband revenue growth at the company has finally surpassed declines in its legacy, non-fiber-to-the-premises (FTTP) broadband business.
Stankey replied: If I look what’s happening right now, and kind of where we are in our maturity scale, one of the things I’m most excited about is our new net adds to fiber right now good, almost 80% of them are new to AT&T. So, we’ve now gotten to this place where we’ve been managing the base. And we’re now shifting over where got a lot of new customers coming in. And in fact, as you saw last quarter, we’re starting to get ourselves to a point where that consumer business is a growth business today, despite the legacy drag on historic telecom products, parts and the like of legacy data products, that the fiber growth is beginning to outstrip that where we have real growth in that business. And we’re now starting to turn that corner real EBITDA growth in that business. And so, I would tell you as I step back from that, we’re going to see consistent growth. But I’m not going to be happy until we have a 50:50 share split in places where there’s two capable broadband providers. And I think there’s no reason with the product is capable as what we have out there and how fiber performs and what we’re able to do and the differentials we see in our customer satisfaction to our most significant competitor often cable in those markets, we were looking at 10, 15 points of difference in satisfaction levels, between other players in the market and ourselves, that we shouldn’t be able to achieve that over time.
Brett Feldman: You had earlier made a slight adjustment to your fiber deployment for this year, you were hoping to do 3 million homes, it’s going to be closer to two and half million and you noted some of the well reported supply chain issues as being a factor. Any update there, is there any further disruption in your supply chains and your ability to secure labor?
And we’re talking about what’s probably effectively about a 90 day delay for us to hit those numbers, and really primarily in this case, got to fiber assemblies. The way fibers built in the distribution network is we engineer it, we provide detailed engineering to our manufacturer, the manufacturer in the manufacturing facility, pre-splices and pre-assembles some of that fiber before we receive it. So, when it goes in, we’re doing less field splicing. And we’re able to basically put it up in the air or bring it through infrastructure in a way that lowers labor costs coming in. And we’re having some supply issues in the factory partly labor driven because of COVID, individuals getting sick not being able to run enough shifts, and carry through and partly some raw material issues. But those have been worked through right now our deliveries over the last 30 days have tracked to what our expectations are.
So, we feel like we’re through that dynamic right now. We should be fine with it. But look the supply chain is fragile at all levels. It’s fragile on everything. Last week, it was the number of generators, we’re deploying for power backup on cell sites, there’s, we’re going to miss a target on some of those by a couple 100 because there’s a resin base connector in the harness and we can’t get the resin. And that resin base connector, it’s a $15,000 generator that’s been held up on something that’s $0.25 part, you see these things popping up, left and right, every corner of the business. So, I don’t know what next week brings, we’re aggressively managing it. We’ve got a great supply chain organization. We’re a scaled provider, with all of our vendors. So, we lean into that, we were able to work through the fiber dynamics because we are the largest consumer of fiber in the United States. We use that ability and that expertise to make sure we get what we need to move through. So, I feel we’re managing through it, okay. I don’t think there’s anything around the challenges we’re dealing with, it gives me concern on guidance where we stand right now, but it’s going to be choppy and a little bumpy moving forward on some of these things as we move through the years.
Typical fiber optic deployment to multiple homes via underground and aerial cable
Stankey wouldn’t say how the proposed U.S. infrastructure bill might also alter AT&T’s outlook in a way that encourages the company to explore a buildout that goes beyond 30 million locations.
“There’s a degree of uncertainty there,” he said of the bill. “But in its current form [and if] it does actually make its way into law, that’s going to change the landscape of the broadband business in this country … It will also change my posture and point of view on where we should be playing as a company.”
AT&T Communications has signed a strategic agreement with OneWeb, the low Earth orbit (LEO) satellite communications company, to harness the capabilities of satellite technology to improve access for AT&T business customers into remote and challenging geographic locations. The new connectivity will complement existing AT&T access technologies.
Why is this important? AT&T’s leading business fiber network enables high-speed connections to over 2.5 million U.S. business customer locations. Nationwide, more than 9 million business customer locations are within 1,000 feet of AT&T fiber. However, there are still remote areas that existing networks can’t reach with the high-speed, low-latency broadband essential to business operations.
Who can use this: AT&T will use this technology to enhance connectivity when connecting to its enterprise, small and medium-sized business and government customers as well as hard-to-reach cell towers.
Where will it work: AT&T says that more than 9 million business customer locations are within 1,000 feet of its fiber network, but that there are remote areas that remain out of reach. By riding OneWeb’s LEO-based broadband satellite constellation, AT&T believes it will be able to deliver high-speed, low-latency services to small, medium and enterprise-sized business customers in those locations.
The AT&T service will be supported by OneWeb’s network of satellites. OneWeb has launched 288 satellites and expects to attain global coverage with a total fleet of 648 satellites by the end of 2022. AT&T business and government customers in Alaska and northern U.S. states will be covered later this year.
Image source: Roscosmos, Space-Center-Vostochny and TsENKi
What are people saying:
“Working with OneWeb, we’ll be able to enhance high-speed connectivity in places that we don’t serve today and meet our customers wherever they are,” said Scott Mair, President, Network Engineering and Operations, AT&T. “We’re expanding our network with one more option to help ensure that our business customers have the high-speed, low-latency connectivity they need to thrive as the nation recovers from COVID-19.”
“OneWeb’s enterprise-grade network has a unique capability to serve hard-to-reach businesses and communities. Our work with AT&T will focus on how satellite technology can support improved capacity and coverage in remote, rural and challenging geographic locations,” said Neil Masterson, OneWeb Chief Executive Officer. “Today’s agreement with AT&T demonstrates OneWeb’s execution momentum and the confidence customers such as AT&T have in its services and offering.”
OneWeb is a global communications network powered from space, headquartered in London, enabling connectivity for governments, businesses, and communities. It is implementing a constellation of Low Earth Orbit satellites with a network of global gateway stations and a range of user terminals to provide an affordable, fast, high-bandwidth and low-latency communications service, connected to the IoT future and a pathway to 5G for everyone, everywhere. Find out more at http://www.oneweb.world
OneWeb’s win with AT&T also surfaces amid growing competition in the satellite broadband sector.
Enterprise and business customers are among the targets for Viasat, which is in the process of providing global coverage with a growing fleet of high-power geosynchronous (GEO) satellites. SES also focuses on the business and government services market, and intends to hit those markets harder as it moves ahead with O3b mPower, a new global connectivity platform that will ultimately comprise a constellation of 11 medium Earth-orbit (MEO) satellites. Starlink, SpaceX’s LEO-based satellite broadband service, has largely focused on the home broadband market, but has hinted at ambitions to serve connectivity to planes, trucks and other moving vehicles.
OneWeb recently landed a $300 million investment from South Korean conglomerate Hanwha Systems, which secured an 8.8% stake in OneWeb and a board seat. Other investors include India’s Bharti Airtel (35% stake), the UK government (almost 20%), and Japan’s SoftBank Group, France’s Eutelsat and Hughes Network Systems.
Earlier this month, OneWeb inked a $1 billion-plus insurance agreement through broker/risk advisor Marsh as it prepares for its next phase of deployments.
About AT&T Communications:
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AT&T has experienced recent disruptions in the supply of fiber optic cable, which has caused the company to trim back its planned fiber-to-the-premises (FTTP) buildout for 2021, according to senior EVP and CFO Pascal Desroches.
AT&T had previously said it would build out its fiber network to an additional 3 million homes passed this year. But that’s now been reduced by 1/2 million.
“Since the start of the third quarter, we are seeing dislocation across the board, including in fiber supply. We’re probably going to come in a little bit light of 3 million homes passed, probably around 2.5 million,” Desroches said Tuesday at the Oppenheimer Technology, Internet & Communications Conference, according to this transcript.
An AT&T technician working on a fiber project
Specifically, this is what Pascal said:
But since the start of the third quarter, we are seeing dislocation across the board, including in fiber supply. And as a result of those dislocations, we had previously provided guidance of 3 million homes past this year (unedited- very bad grammar). We’re probably going to come in a little bit in light of that, probably around 2.5 million. We don’t think it’s going to impact us long term. But I think it’s really important context because if we’re feeling the pain of this, I can only imagine what others in the industry are experiencing.
John Stankey (AT&T CEO) has always been a believer in fiber. I think when he took over he identified that as a priority area because he understood from a technology standpoint, there is no better technology for connectivity. And therefore, in a world where the demands for symmetrical speed are increasing significantly, this is the technology to bet heavily on. And so we have a great position, and we are leaning into adding to that position. So it’s really a function of when you — and I think others are now recognizing it as a result of what you’ve seen in the last year in the pandemic, the need to do what we’re doing now, 2-way communication can only happen with symmetrical speed. So I think everyone has had an aha moment, like we need to deploy fiber. And so we’ve long believed that. John has long believed that, and this is just really leading into that opportunity.
As we deploy fiber, our goal is to get at least 40% penetration on homes passed. And we think in certain markets, we’ll have an opportunity to do better than that. And the other thing that is great about is when you lay fiber, you lay fiber to a community where there is both homes and businesses. So it also helps boost returns in your enterprise business. And so that’s why it is so critical that we roll this out because the ability to grow both your enterprise and your consumer business is attractive. And we think these investments will provide us with mid-teen returns over time.
I know we’re largest fiber purchaser in the country. And we have prices that are at the best and most competitive among the industry. So we feel really good about the ability to secure inventory, fiber inventory and at attractive price points and the ability to execute and the build-out at scale, something that many others don’t have.
Oppenheimer moderator question: “Can you talk a little bit about where your supply comes from, I guess, both the fiber and the optical components or any other key suppliers? Is that U.S. sourced? Or is it a lot of it outsourced internationally?”
Pascal’s answer: “It is a U.S. company which has locations both domestically and outside the U.S.” [We suspect that it’s Corning].
AT&T typically has had no problem getting fiber at a low cost, Desroches said. “We’re the largest fiber purchaser in the country and we have prices that are the best and most competitive in the industry,” he said. “We feel really good about the ability to secure fiber inventory at attractive price points and the ability to execute the buildout at scale, something that many others don’t have.”
AT&T expects to catch up to its original fiber-construction estimates in the years after 2021, largely because of what Desroches called its “preferred place in the supply chain” and “committed pricing.” As AT&T said in a news release yesterday, AT&T is “working closely with the broader fiber ecosystem to address this near-term dislocation” and “is confident it will achieve the company’s target of 30 million customer locations passed by the end of 2025.”
AT&T added another 246,000 fiber broadband subs in Q2 2021, extending its total to 5.43 million, and said last month it was on pace to add about 1 million net fiber subscribers for all of 2021.
AT&T has estimated that nearly 80% of new fiber subscribers are also new AT&T customers, reversing a previous trend that saw a sizable portion of its FTTP customer net adds coming from upgrades of existing AT&T high-speed Internet customers on older VDSL and DSL platforms (which have been largely discontinued).
Speaking on AT&T’s 2Q-2021 earnings call last month, Desroches stated that the company’s consumer wireline business had reached a “major inflection point” as broadband revenues continue to surpass legacy declines. Meanwhile, AT&T’s broadband average revenue per user (ARPU) reached $54.76 in Q2 2021, improving from $51.61 in the year-ago period.