AT&T is looking to expand its Hyper-Gig Fiber services by partnering with BlackRock Alternatives to extend its footprint beyond its 21-state footprint nationwide.
AT&T's 21-state wireline footprint is the basis for its fiber optic expansion. Because 29 states are not being served by AT&T, customers have to go to the competition, such as Spectrum and Frontier. So last December, it formed a joint venture with BlackRock called Gigapower to provide a commercial fiber platform to internet service providers (ISPs) and other businesses across the United States.
Last year, AT&T announced that its fiber services were offering speeds of up to 5G bps across parts of its entire footprint of 100+ metro areas. The company offers three service speeds: 1 Gigabit ($80/month), 2 Gigabit ($110/month), and 5 Gigabit ($180/month).
At the end of last year, AT&T passed the 24 million customer locations mark and has set a goal of reaching 30 million by 2025. Even within those 21 states where AT&T has the legacy footprint, there are still plenty of greenfield opportunities, said Gordon Mansfield, vice president of Global Technology Planning for AT&T Services.
The opportunities for the company cover both consumer and business, although emphasis leans toward consumers, according to Mansfield. "There's certainly more consumer locations than business locations. It comes down to the density of customer locations along any one route. So it's about making sure we maximize the number of customer locations per fiber route that we put in," he said.
In addition to that, there is government money that is out for bid to build additional locations, so anything that AT&T wins there will be in addition to the 30 million as well as what it does with BlackRock, he said.
"The Gigapower joint venture the carrier is pursuing is a shrewd path to extend its fiber footprint without assuming all the risk," said Tammy Parker, principal analyst for Global Telecom Consumer Services at GlobalData. "The Gigapower joint venture enables highly leveraged AT&T to add even more fiber locations off of its balance sheet and indirectly accrue wholesale revenues from other ISPs that sign onto the platform."
Parker added that business customers will likely also consider AT&T a more appealing service provider option if they can access service in locations both within AT&T's 21-state footprint as well as new markets that AT&T services via the Gigapower buildout.
Fiber for Fast Uplinks
Fiber is notable because, unlike traditional DOCSIS cable modem technology, it has the same speed up as down. For the longest time, internet use didn't require considerable uplink speeds. You click on a link, and it sends up a few bytes requesting the URL. Then the page comes down, which can be several megabytes.
But if you look at what is happening today, there's actually a lot more interactivity requiring upstream speed, said Mansfield. "Think about people working from home. The reality is I'm on calls like that all day long with video, and that is absolutely just as intense uplink as it is down. When you think about the younger generation, they're creating as much content as they are consuming, and that is uplink-intensive," he said.
"So the old days of the internet being a very downlink-centric web browsing experience is no longer the case. In fact, we're starting to see from a symmetrical perspective, you know, it's not quite 50/50, but the uplink is growing at a faster pace than the downlink," he added.
Pullback on Fiber
Jason Blackwell, research director for consumer multiplay and SMB services at IDC, said AT&T has been extremely focused on fiber following the divestiture of non-core businesses like DirecTV and Warner. But the economy is not on its side.
"Many service providers are pulling back on fiber deployments in 2023 due to economic and budget constraints. AT&T also falls into that bucket, stating they will target 2 to 2.5 million locations per year now, compared to a goal of 5 million locations per year previously," he said.
Cost per location passed is a concern for all service providers right now, and AT&T executives have stated that the cost per passing is coming in higher than they originally expected, Blackwell noted. "The uptake rate for fiber services is much higher, so the company believes that the extra costs are being absorbed by the faster penetration they are seeing for fiber services," he said.
For those same reasons, the AT&T and BlackRock joint venture poses a competitive challenge to cable providers and regional fiber providers, whose broadband reaches are geographically restricted, though those carriers could possibly become tenants on Gigapower's shared infrastructure platform to extend their own footprints.
Gigapower will also help AT&T extend its fiber offerings to compete against the highly successful fixed wireless access (FWA) services being marketed by rivals T-Mobile US and Verizon to residential and business broadband customers that are both inside and outside of AT&T's existing wireline service area.
However, it will take time to see financial benefits from this long-term play. Furthermore, there is nothing to prevent rival service providers from also creating similar joint ventures with deep-pocketed partners. T-Mobile, in particular, is rumored to be considering a joint venture or commercial partnership that would enable it to build a fiber network as well.
Additionally, Gigapower is initially targeting only 1.5 million customer locations, a diminutive footprint. And once the joint venture is formally established, it will take time for Gigapower to begin deploying fiber in its 1.5 million targeted customer locations and ramp up operations. Fiber requires tremendous investments in equipment and labor, both of which have been in short supply due to supply chain disruptions and labor shortages.
Although Gigapower is envisioned as an open access platform that will provide wholesale service to ISPs and other businesses, it is unclear how many ISPs will be champing at the bit to ride atop shared infrastructure co-owned by AT&T, which may be a market rival.