AT&T's Stephenson: Google Fiber 'changed the game' for broadband buildout, but Title II rules could stall efforts

While AT&T's (NYSE: T) deployment of 1 Gbps fiber in Austin, Texas, is going well, Randall Stephenson, chairman and CEO of the carrier, credits Google with making the rollout a commercial success. "When Google (NASDAQ: GOOG) went into Kansas City and Austin, it changed the game for the industry … in a very peculiar way," he said at a Boston investor conference Monday.


"In the past if we wanted to go into a city environment, the requirement was you build out the entire city," Stephenson explained in a keynote at the J.P. Morgan Global Technology, Media and Telecom Conference. Doing that requires a huge capital investment, one that AT&T felt it couldn't make, he noted.

Google's entry into Austin, in particular, enabled AT&T to ask the city for the same terms as Google Fiber received. "Google came in and was very targeted in where they wanted to deploy fiber, and they got municipal endorsement (on that). …We said we'll take the same deal that Google got. And we got the same deal that Google got," Stephenson said.

Following the search engine giant's method of rolling out into select "fiberhoods" is much easier on capex and has led to a faster return on its fiber investment, Stephenson explained. Rather than building out an entire city within three years, "getting a baseline of fiber and expanding over time is how you want to do it."

AT&T, in fact, is already offering 1 Gbps service in Austin, along with Grande Communications, while Google is still months away from turning up its service in the city.

AT&T's overall broadband buildout is going well, Stephenson told investors, saying the consumer broadband business has been growing at 3 percent year-over-year for some time. The steady uptake has "given us the conviction that as we invest in broadband the payoffs will be really good," he said. Project VIP, for example, expanded its broadband and U-verse footprint to 57 million homes passed, a goal it achieved ahead of schedule.

However, he warned, new net neutrality regulations could put a stop to the cornucopia of fiber investment.

"I believe if the rules as passed were the rules of the land for next 10 years it would have a dramatic effect on investment," Stephenson said, adding that the rules as written and approved by the FCC are neither good for the industry nor sustainable. In the recent request to halt implementation of Title II-based rules, filed by several communications companies, Stephenson said that some broadband providers are already being affected. "If you read the stay you will see that several companies have broadband deployment plans and when Title II (was approved), the banks pulled down funding. So it does have an impact on investment."

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