AT&T Adds 1M Broadband Fiber Subs in 2020

As AT&T hits FTTH milestone, the provider sets plans to deepen penetration in existing and new markets. 

  • AT&T

AT&T is finding in markets where it does offer fiber-based broadband its message is resonating with users that desire higher speeds, a factor reflected in its fourth-quarter numbers and results for the year.

During the quarter, the service provider added 273,000 new AT&T Fiber additions and over 1 million for the full year.

Additionally, the service provider reported what it said was “solid IP broadband ARPU growth of 4.6 percent.”

“For the second year in a row, we added more than 1 million fiber subscribers as customers moved to our higher speed services,” said John Stankey, CEO of AT&T, during the fourth-quarter earnings call.

Along with Verizon, AT&T is driving the growth of FTTH in the U.S. market. The two telcos command a large majority of the nation’s homes passed.

“There are close to 40MM homes passed by FTTH today,” said New Street Research in its study There’s More Fiber Coming. “Verizon and AT&T account for more than 30 million of the homes passed by fiber.”

Deepening Fiber Penetration

While the COVID-19 pandemic certainly slowed service providers, AT&T was able to expand FTTH penetration during the quarter and the year.

As of the end of the fourth-quarter, AT&T FTTH penetration was at 34 percent.

Stankey said, “we’ll be building somewhere around 2 million fiber residential locations.”

He added that unlike the initial FTTH build, the next stage will focus on wire centers that already have fiber in them.

“The infrastructure is in place,” Stankey said. “We’re going back in and picking up the next adjacent neighborhood or the next successive area. And because of that, the speed to get up and moving is not the lift that it was the first time we started ramping up on this. So, we’ve got a little bit smoother dynamic around it than what you might think, because of the increase in the fiber dynamic.”

One area AT&T is keen on building off is its fiber-to-the-node VDSL footprint to potentially increase FTTH penetration as well. IP broadband ARPU rose 4.6% to $53.72.  

“So, if you think about our VDSL, if you think about our new greenfield builds, if you think about the neighborhoods next to the VDSL, there was next to where we’ve got fiber-to-the-prem, those are the opportunities,” said John Stephens, CFO of AT&T. “And that VDSL footprint is 35 million. And when you add the fiber to it, it’s greater than that. That will give you kind of a framework for something that we could efficiently do just what John said about building out the 2 million this year.”

Analysts maintain that AT&T will have to continue to invest in FTTH infrastructure to maintain broadband growth.

JPMorgan said in a report that AT&T needs to double its fiber footprint over the next five years by increasing fiber spending, starting this year, from $2 billion to $4 billion.

Rural Fiber Remains a Challenge

As AT&T moves forward with its FTTH build plans, the question for the telco will the 2 million build out plan be enough?

During the earnings call, one analyst observed that even with 2 million homes passed, it would still be a small subset of the number of customer locations in AT&T’s total wireline footprint and how long. Also, there’s questions about how it could keep adding 2 million homes a year to the FTTH footprint?

AT&T sees its FTTH penetration as being divided up into thirds.

In the first third of its FTTH build out strategy, AT&T will target what Stankey calls “the low-hanging fruit slam dunk that is the part of the customer base that you cut your teeth on, get your processes squared away on, get the vendor community up the first part of the cost curve.”

Right now, AT&T is in what it sees as the “middle innings” of the FTTH deployment. Stankey said this is the “next 30 percent to 60 percent of the customer base that we can work our way through, and you look at the economics around it that makes sense.”

However, Stankey said the last third, which typically includes rural markets that often lack any real broadband options, is the most difficult.

“If you wanted me to prognosticate on are you going to build fiber to that last third, I don’t think I’d want to prognosticate that that’s a place that we’re likely to go in the near term,” he said. “Absent of some kind of major subsidy construct that comes into place, I believe candidly even if there was subsidy put in, it would be a better use of taxpayer money to do something that was more hybrid-oriented than the technologies that are applied and not exclusively lean on fiber in that space.”

From an overall financial perspective, AT&T reported consolidated fourth quarter revenue of $45.7 billion, down from $46.8 billion in the same period a year ago.

The COVID-19 pandemic impacted revenues across most businesses, particularly WarnerMedia and domestic wireless service revenues, which were pressured from lower international roaming. It saw revenue declines from domestic video, Warner Bros. television and theatrical products, legacy wireline services, and Latin America, which includes foreign exchange pressure.

The telco said these declines “were partly offset by higher domestic wireless revenues, primarily from equipment sales.”

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