AT&T says it needs to invest in FTTP where it makes economic sense

AT&T (NYSE: T) is seeing that the rollout of fiber-to-the-premises (FTTP) is the only way it can realistically compete with both existing cable operators and emerging players, such as Google Fiber (NASDAQ: GOOG), that are offering higher speeds than it can deliver on a fiber-to-the-node (FTTN) architecture.

"Demand is growing for faster broadband speeds than AT&T, or anyone else for that matter, can deliver with FTTN, which cannot match the highest speed tiers being offered by cable and other rivals in the marketplace," AT&T wrote in an FCC filing. "From an engineering perspective, cable technology offers more bandwidth that can be allocated to faster download speeds. Comcast already offers broadband download speeds over 100 Mbps in all of its markets, and other broadband providers are in the process of widely deploying much higher speed offerings."

Google Fiber has ignited the awareness of higher-speed broadband with its rollout of 1 Gbps service in various markets, prompting AT&T, CenturyLink (NYSE: CTL) and now Comcast (NASDAQ: CMCSA) to offer similar services.

Over the past two weeks, Comcast upped the ante in the competitive broadband game by introducing a 2 Gbps service in three regions: Atlanta, California and Florida. At the same time, AT&T has also been introducing its GigaPower 1 Gbps service in other markets, including Cupertino, Calif., and plans to penetrate the Chicago metro area.

"Comcast is rolling out a 2 Gbps product, and Google, Cox, Bright House, and CenturyLink already have 1 Gbps service available," AT&T wrote. "Even the relative speed laggards among AT&T's rivals already offer services of 200 Mbps or higher. Indeed, in some areas, multiple providers are competing to provide broadband service at these high speeds."

Despite the advantages that FTTP has over an FTTN network, AT&T realizes that building an FTTP network is extraordinarily costly.

However, the company said that the cost issue will be somewhat resolved when it completes its acquisition of DirecTV, because it will immediately broaden the scale of its video offering.

The service provider reiterated that once the acquisition closes, it will be committed to deploying fiber-to-the-premises (FTTP) services to 2 million homes.

"Based on the expected content cost savings alone, AT&T concluded that it will have an economically viable business case to justify expanding FTTP GigaPower's reach to at least two million additional customer locations that would not meet investment thresholds absent the merger, and AT&T has committed to do exactly that within four years of the closing of the merger," AT&T wrote. "Significantly, this 'lift' in the economic viability of FTTP GigaPower service from the transaction is in addition to any further expansion justified by changes in the constantly evolving competitive landscape."

For more:
- see the FCC filing

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