October 26, 2007 12:32 PM
AT&T; – Missing the Boat or a Company on the Cutting Edge?
Another highlight of my journey to TelcoTV was a keynote address on Wednesday given by Peter Hill, VP of video and converged services for AT&T; Labs.
He gave what was described as the first U-Verse demo to an audience of that size that included a variety of forward looking technologies and possibilities not yet found in AT&T;’s current IPTV deployment.
Rather than attempt to do my own rundown, I thought it easier to link to a couple of articles that have already scaled that molehill. My favorite was this Telephony Online article. Also enjoyable was this Multichannel article and this Telecompetitor article.
Overall there were a number of interesting initiatives Hill demonstrated, many of which were beyond anything I’ve seen from other major network operators and most of which sought to leverage existing web assets by bringing them to the TV through the U-Verse interface. More than anything, the presentation really drove home AT&T;’s aggressive push to flesh out and build upon the IP portion of their IPTV offering.
The fact that AT&T; is pushing the technological envelope on what’s possible over the Internet on a TV set may be surprising to many, but it arguably shouldn’t be.
Let’s take a moment to consider AT&T;’s HomeZone product. The HomeZone set-top box combines a satellite receiver for broadcast TV with a DSL connection for on-demand. The interesting thing is that the on-demand content supplied by Movielink and Akimbo is pulled from the same servers as if you were to access their sites through a computer. So in many ways, other than the Xbox Live Marketplace—which allows Xbox owners to buy and download video through their gaming consoles—HomeZone is the most widely distributed bridge between the Internet and the TV out there.
Now they’re pushing the envelope again with this array of new IP services. Despite their reputation for being a slow-moving giant, they seem to be the operator who may be investing the most in the idea that the next major battlefield of the broadband wars will be fought based on value-added services and not purely on speed and cost.
Building off of these thoughts, I’ve been meaning to share with you all another revelation I had at the KMB conference a few weeks back when an AT&T; representative discussed their fiber-to-the-node strategy.
After the presentation, an audience member began his comments by stating his belief that AT&T; had made a colossal mistake in not pushing fiber all the way to the home, a potentially fatal one at that.
Before that presentation and subsequent comment, I fell into that same camp. I know you have to respect your shareholders, but FTTH is just such a no-brainer, necessary, future-proof investment in my mind that I couldn’t understand why they wouldn’t do it.
But something clicked while watching as the speaker walked us through a series of slides that showed how AT&T;’s been building out its fiber optic network closer and closer to homes over time, every generation getting one step closer.
First off, the speaker didn’t rule out the possibility of deploying fiber all the way to the home at some point down the line. So it’s not like they’ve said no to FTTH, it’s more that they don’t think the time is right now for them to do so.
Secondly, I began considering the competitive landscape, where their main competition isn’t the FTTH of Verizon’s FiOS, it’s the coax networks of cable companies.
In large part, U-Verse’s FTTN is quite competitive in terms of speed/cost/service to cable systems. True, cable companies are increasing speeds to maintain an advantage, but they won’t be speeding up their networks too dramatically until the introduction of DOCSIS 3.0, which has promised to allow cable companies to offer 100Mbps speeds on their existing copper networks but which will also require another round of investment in their network in order to realize its potential.
So one can argue that AT&T; has some time before needing the full speed of fiber to stay competitive.
And thirdly, looking at all these different angles, it started to dawn on me that perhaps what AT&T; has decided to do is focus less on investing all their time and resources into deploying FTTH today and moreso on developing the services that run over these networks.
From this perspective, I’m not sure if this is such a poor strategic decision. I personally do believe that the next broadband battle will be over services/apps and not just speeds, so instead of being a devastatingly wrong decision, perhaps AT&T; may be positioning itself better than anyone has given them credit for.
That said, there are some potential pitfalls to this strategy.
First off, there’s the fair chance that they’ll be a long ways away from finishing deploying U-Verse and FTTN when the need to upgrade to FTTH will appear. If this happens, then it may ultimately be more expensive overall to first do FTTN and then FTTH as much of the cost in laying fiber is in the labor, and it’s often cheaper to do everything in one shot than in fits and starts. (At the same time, the cost of components is always going down, and even more so with the massive investment of Verizon, so this may offset additional install/labor costs.)
Secondly, while a primary stated reason for not pursuing FTTH at this time was the overall cost and the negative reaction of Wall Street to that investment, if you look at Verizon you’ll see that though their stock price did take a hit initially, they’re now on the rebound as consumers are demanding FiOS across the country and analysts are beginning to realize that FiOS is a solid investment in Verizon’s future. If these trends continue, then there’s the chance eventually Wall Street may begin to punish AT&T; for their decision to not pursue FTTH initially.
Thirdly, while Hill demo’d a lot of great things, I got the sense that they were almost trying to recreate everything someone does on the computer with the Internet today on the TV through the U-Verse interface.
I think this could be a challenge moving forward because, as Hill alluded to, there are so many directions they can take this product and build out new feature sets that it may be easy to get distracted trying to do too much, trying to do things that are better suited for the computer, and/or having to guess at what are the best things to be working on first.
So, like every network operator, there are some significant challenges left for AT&T; to face, of which I’ve only scratched the surface in this article. But at the very least I wanted to shed some new perspective on what they’re doing and whether or not they’re making the right decisions.
My tentative judgment? They may not be so off track after all.
