AT&T saw a whopping 57% growth rate in fiber-to-the-premises (FTTP) subscribers over the last year, according to a new research note about AT&T fiber subscriber growth from financial analysts at Moffett Nathanson. The company’s broadband market share hasn’t increased commensurately, however, according to the researchers.
“Despite the dramatic growth at AT&T Fiber, AT&T’s broader IP broadband category has posted only modest subscriber gains over the past year,” the researchers wrote. An obvious explanation, according to the researchers, is that “AT&T’s fiber gains are simply migrations of their existing customer base from one product to another.”
AT&T Fiber Subscriber Growth
AT&T has seen a steady erosion in its base of traditional digital subscriber line (DSL) customers in recent years, as traditional DSL technology can only support relatively low broadband speeds. The company has upgraded connections in some DSL areas to either fiber-to-the-neighborhood (for somewhat of a speed boost) or fiber-to-the-premises (for a bigger speed boost), which has enabled the company to keep some of those customers.
As of now, AT&T has relatively few traditional DSL subscribers, and the MoffettNathanson analysts hypothesize that the company also has been seeing the erosion of its FTTN base as it upgrades some FTTN connections to FTTP.
“There was a time when this tier of telco service was considered competitively insulated from cable’s superior infrastructure,” the analysts wrote about FTTN. “Speeds in the range of 10 Mbps to 25 Mbps were considered ‘good enough.'”
The researchers add, though, that “Developments in the broadband market have clearly moved in the direction of higher demanded speeds. Today market share of these ‘middle tier’ broadband services is clearly falling. By upgrading many of these subscribers to fiber before they are lost, AT&T may simply be acknowledging the obvious: if they don’t, they will lose them.”
AT&T’s pricing strategy also may be contributing to the shift from FTTN to FTTP.
The researchers note, for example, that the company charges $60 monthly for the highest speed available over FTTN in an area. The exact speed varies depending on distance from the central office but a chart provided by MoffettNathanson shows it as anywhere from 10 Mbps downstream and 1 Mbps upstream to 100/20 Mbps.
AT&T FTTH speeds begin at 80-100 Mbps symmetrical for $60, offering customers an incentive to shift.
“Even if a customer doesn’t really need faster upload speeds, if AT&T offers to upgrade a customer for no added cost why wouldn’t they switch?” the researchers asked. Some customers also may upgrade to higher speeds – up to 1 Gbps for $100 monthly – offering AT&T an increase in average revenue per user (ARPU), even though the number of subscribers may be relatively unchanged.
The upshot, the researchers said, is that AT&T fiber upgrades could have an impact on competitive market share eventually but haven’t had much impact yet.