AT&T may use LTE in revamped rural access strategy

AT&T's (NYSE:T) plan to announce its rural strategy next month is prompting widespread speculation that wireless broadband, in the form of LTE, will be part of the operator's overhauled service plan.

AT&T disclosed earlier this year that would review noncore and low-performing assets over a 12-24-month period, with an eye toward selling or restructuring them. The company has since sped up its review and is expected to release plans from its rural access line business in November.

George Notter at Jefferies & Company is predicting AT&T will announce on Nov. 7 that some 3 million of 18 million access lines will be upgraded to the operator's fiber-to-the-node (FTTN) U-Verse service, while other rural customers could be served by LTE. Notter, whose forecast was disclosed by DSL Reports, also said Alcatel-Lucent (NASDAQ:ALU) would likely win any U-Verse expansion contract given that the vendor supplied the FTTN gear for AT&T's original U-verse rollout.

In May, AT&T CEO Randall Stephenson indicated the operator was eyeing DSLAM technology as an possibility for serving rural customers, but it is unclear whether that option is still on the table.

Regarding AT&T's rural wireless strategy, Notter's forecast did not indicate whether AT&T is eyeing fixed or mobile LTE offerings for customers in sparsely populated areas, but a copycat effort that resembles Verizon Wireless' (NYSE:VZ) HomeFusion fixed LTE offering is conceivable. AT&T does not offer a home-based wireless DSL replacement service, but in August the company introduced AT&T Wireless Home Phone, a service that lets a user plug a traditional phone device supplied by ZTE into a standard electrical outlet and get voice service via AT&T's wireless network.

In September at that Goldman Sachs Cornucopia conference, AT&T CEO Randall Stephenson gave a possible hint regarding AT&T wireless plans when he confirmed the company was eyeing fixed LTE for rural areas. "LTE can become a fixed-line replacement or even better than what you get from fixed line," said Stephenson, who was quoted at the time in a Dow Jones Newswires article.

Fitch Ratings earlier this month said it also expects AT&T to revamp its rural local exchange properties rather than sell them. "Rural access lines have underperformed, primarily due to the lack of a competitive broadband offering," said Fitch, noting deployment of U-verse FTTN service in urban and suburban areas has enabled AT&T to perform more strongly in those areas. "Over U-verse, AT&T has been able to offer voice, video and high speed data services, primarily in competition against cable operators," said Fitch.

AT&T could opt to fund rural access line upgrades via the FCC's Connect America Fund, though the company did not participate in Phase 1 of the program. However, any lines that cannot receive broadband at speeds of at least 4 Mbps downstream and 1 Mbps upstream by the time Phase 2 of the CAF program launches will be targeted by the FCC for an upgrade. If AT&T were to decline doing the necessary upgrades, the FCC would hold a reverse auction and give financial support to the company that bids to build out broadband service in the targeted areas at the lowest level of support, said Telecompetitor.

It is unclear whether a fixed LTE offering would meet FCC goals if the speed goals were met but usage amounts were capped.

For more:
- see this DSLReports article
- see this Telecompetitor article

Related articles:
AT&T's Stephens: Hope to have decision on rural wireline assets by end of the year
Verizon closer to wrapping LTE blitz as it hits 75% coverage
AT&T believes IP DSLAMs could solve its rural broadband problem
Verizon HomeFusion fixed LTE service launched nationwide

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