This story was written by Keith Dawson for UBM DeusM’s community Web site Develop in the Cloud, sponsored by AT&T. It is archived here for informational purposes only because the Develop in the Cloud site is no more. This material is Copyright 2012 by UBM DeusM.

Ditching Copper

Copper will languish as AT&T announces investments in LTE & U-verse fiber.

AT&T won't be doing much with its copper infrastructure in the future, investing instead in wireless LTE and U-verse fiber. Rural areas are on their own.

Yesterday AT&T (sponsor of this site) held a press event in New York to announce a $14 billion investment over three years to beef up its LTE coverage nationwide and to expand availability of its fiber-to-the-node U-verse product. By the end of 2014, the company says, LTE will reach 300 million people, including 99 percent of the population in the 22 states where AT&T now offers wireline service (in the west, mid-south, southeast, and parts of the midwest). This represents an increase on AT&T's previous plan to cover 250 million with LTE by the end of next year. On the new plan, U-verse will also be expanded to reach 75 percent of the company's current wireline locations, or 57 million people.

AT&T and other phone companies have been burying copper in the ground and hanging it on poles for the last 120 years. This copper is used for a few purposes beyond plain old telephone service (POTS) on which dialup Internet access depends. DSL runs over copper, as do burglar and fire alarm systems. Copper-based POTS has another critical advantage over wireless systems when emergencies arise, as the recent post-hurricane experience in the northeast demonstrated most graphically: it is powered by robust batteries in the central office, and tends to work even when electrical power has failed.

Barely broadband
In the current age, DSL service barely qualifies as broadband. Cable and fiber Internet access, where available, is 5 or 10 or 20 times faster. Even 3G wireless Internet outruns DSL, and LTE (a.k.a. "4G") service blows it away. DSL is distance-limited: customers must be within a few miles of a telephone company central office for it to work.

Still, for many people in rural areas, DSL is the best of not a whole lot of options. Some areas are served by wireless ISPs, and where available this service can be competitive with DSL (sample pricing here). Just about the only other choice in many rural parts of this large country is satellite Internet. But this option usually needs to be paired with something like DSL for the upstream link; and the latency makes many applications completely impractical, for example gaming.

GigaOM points out that the choices for the 25 percent of AT&T's customers who will not be reached by U-verse service are less than ideal. They can sign up for wireless LTE service -- and pay far more than POTS and DSL now cost, and suffer under restrictive data caps. Or -- there is no or. They can watch their copper corrode in the ground and on the poles.

Good business sense
AT&T's plans make perfect sense from the point of view of shareholders. Customers drop away from low-margin, high-maintenance copper services and sign up for high-margin wireless. When they hit data caps they pay surcharges.

For comparison, AT&T's main competitor Verizon has been following a similar strategy for some time now, minus the promise of major investment in fiber and LTE. Verizon has sold its copper-based businesses in some areas to smaller local providers. The company has entered a marketing deal with the cable industry in which they all but encourage their DSL customers to flee into the arms of cable. Most of Verizon's plant investment has been on the wireless side; the buildout of FiOS fiber-to-the-home is essentially at an end.

Both companies offer a wireless phone service for home use.

Attentive members of this community will have noted that I am a fan of municipal fiber, whether enabled by the likes of Google as in Kansas City, or home-grown as in Chattanooga. Local initiatives seem to me to offer the best alternatives for the parts of the country that will never be served in an economical fashion by the large telecom providers.