As part of its now-completed acquisition of DirecTV, AT&T has promised to build fiber to 14 million customer locations in the next four years. But according to company executives, that buildout will be far quicker and less expensive than the company's initial fiber efforts. "We're not building under the previous fiber models used by some of our competitors," said John Stankey, CEO of AT&T's Entertainment and Internet Services division. "We've executed a variety of different market builds over the last 18 months. This is a new deployment model and it yields returns that were unachievable 10 years ago."
Stankey, speaking during AT&T's recent analyst day, boasted that the carrier's fiber and high-speed broadband network will eventually cover a total of 27 million customer locations with access speeds of 45 Mbps or higher.
During a question-and-answer session, Stankey explained exactly how AT&T would keep its fiber buildout costs lower. He said the lower costs that come alongside maturing technology will help. "We've gotten the typical improvements that come over time as a result of that GPON technology … as well as just the raw cost of what electronic components have dropped over 10 years ago. So you've got some benefit that occurs just in the cost of electronics and how it's engineered."
Stankey also said that most of AT&T's buildout will be in locations where it already has a fiber presence, meaning that the carrier won't have to pay for the initial buildout costs that are typical in entering new markets. "When you can go in and build in a metropolitan area where you already have a franchise constructed … you can be very disciplined. So we have a build opportunity here as we go in, we can stay down at the lower end of that [cost] continuum."
Another factor that Stankey said is driving costs down is the willingness of cities to obtain faster Internet services. "So part of this is the deployment model, working cooperatively with these municipalities that are very interested in seeing this advanced technology coming in," he said.
Finally, Stankey explained that AT&T's fiber buildout will generate revenues faster because Americans are buying fiber Internet access at a quicker clip than in previous years. Stankey said that it took three to four years for AT&T to sell its fiber services to 30 percent of eligible users. "That was a long ramp," he said. "We are not seeing those extended ramps when we go into these markets. We're getting to rates of penetration that are far, far superior. The uptake is significant."
"So you take all three of those things" -- cheap equipment, willing cities and faster rates of penetration -- "and you get a much different economic equation as a result of that," Stankey concluded.
As part of its analyst day, AT&T also updated its guidance for the rest of the year, and the next few years. AT&T raised its free cash flow expectations from around $12 billion for the full year 2015 to around $13 billion or better. And the carrier said its revenues this year will grow at a double-digit rate, faster than the company previously forecasted.
The company also increased its 2015 capital expense spending forecast for 2015 from $18 billion to $21 billion, largely to account for DirecTV's expected spending.
- see this AT&T release
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