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AT&T’s next move

Posted by: on Sep 7, 2007 | No Comments

Telephone companies and cable companies are the major broadband providers in the US: Cable companies have an extensive existing network that pipes both cable TV and internet, while phone companies have an even more extensive network whose loops can be upgraded to serve DSL as well as phones. Since everything is digital now, cable companies have rolled out landline phone service over their cables, while phone providers have begun to experiment with multimedia delivery.

However, the two companies have different core businesses supporting their networks. One — cable — is thriving, while the other — landline phone service — is dying. They are victims of their success: mobile phones have taken off in a big way, but they don’t need the last-mile loops that enable broadband, and an increasing number of households (including mine) don’t bother to use landline phones. So last-mile loops — which each constitute a separate service — are on the decline, and people don’t want to subscribe to landline service just to get DSL.

So that brings me to the flyer I got in the mail yesterday. The upshot is this: Now AT&T sells “AT&T Yahoo! High Speed Internet Direct Express” (i.e., its DSL service) decoupled from landline phone service. They sweeten the pot with “no termination fees,” “no term limits,” and a substantially lower monthly fee than cable broadband. From a consumer point of view, this lower pricing makes a lot of sense because cable broadband has higher speeds. But from AT&T’s point of view, things are not so sweet: for the households that join, the cost of installing and maintaining the last mile will be borne entirely by that lower fee. What was once the core revenue stream has been left for dead. Cable companies, meanwhile, can maintain their network with their thriving core revenue stream as well as their broadband business.

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