AT&T's Elbaz says fiber deployment costs 'are getting better'

A large percentage of AT&T’s fiber deployment will be overbuilding its own existing VDSL infrastructure. (UBS screenshot)

AT&T plans to boost its fiber build over the next several years. Immediately, it plans to increase its 15 million fiber customers by 3 million more customers across 90 metro areas this year. AT&T’s SVP of Wireless and Access Technology Igal Elbaz, who spoke at a UBS investor conference this morning, said, “We will continue at that pace to the point where we’re going to be able to cover 30 million customer locations by the end of 2025.”

The company’s publicly disclosed gross capex is $21 billion this year, and it’s going to ramp that to $24 billion over the next three years to pay for its fiber ambitions as well as its C-band wireless spectrum deployments.

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One of the most interesting questions that the UBS analysts asked Elbaz today related to the cost to deploy fiber to a home. Analyst John Hodulik said that about 15 years ago when Verizon was deploying Fios, “the economics weren’t that great.” He said at that time “we were talking at least $1,500 to pass a home with fiber.”

Elbaz declined to put any numbers around AT&T’s cost to deploy fiber to a home. He said, “There’s no doubt that the cost structure is getting better.” Part of this he attributed to AT&T’s strategy to deploy fiber for multiple purposes including backhaul for its wireless network. And he also cited benefits from “economies of scale.”

He said a large percentage of AT&T’s fiber deployment will be overbuilding its own existing VDSL infrastructure to expand its U-Verse fiber footprint.

“The good portion of what we’re going to build is over our already existing VDSL infrastructure, or you can call it brownfield or overbuild,” said Elbaz. “You’re seeing a lot of pockets of whether we either didn’t build or the economics in the past were not good enough or we under performed in those areas. So there’s a lot of opportunities around coming in and now filling those gaps. You will see this as the majority of what we’re going to do.”

But he said AT&T is also “absolutely going to get into some greenfield areas” with new fiber deployments. “We’re going to do our analysis. And based on the success of the build and the customer adoption, we’ll continue to understand and analyze what’s the right ratio between brownfield overbuild and greenfield,” said Elbaz.

Cost to deploy FTTH

In a recent in-depth analysis of Lumen Technologies, which looked at that company’s prospects for building FTTH, the analysts at MoffettNathanson said, “Lumen has not shared any information whatsoever regarding its FTTH deployment costs.” But based on the fact that Lumen is pursuing a micro-targeting strategy, which entails building to the lowest cost, highest return opportunities, Moffett thinks it might be spending about $600 to pass a home and $725 to connect to a home.

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So at $1,325 per home, a company would have to spend almost $4 billion in capex to pass 3 million homes.

AT&T must have better economics than that, because it’s only increasing its yearly capex by $3 billion, and some of that money presumably needs to also go toward its C-band deployments.

AT&T’s integrated fiber build

AT&T is touting its integrated fiber build that will lay fiber for its mobility network and fiber to homes and businesses along the same routes. “This is why we’re reiterating that our approach is this hybrid fixed and wireless network,” said Elbaz.

And he said the integration brings a lot of efficiencies to AT&T’s internal planning and engineering teams.

In terms of customer demand for fiber, he pointed out that broadband data consumption is going up, both on wireless and on fixed networks. But the pace of growth on fixed networks is growing at a higher rate, driven by Covid, which kept people at home rather than on the move. And consumers are connecting more devices in the home.

“The other trend that we’re seeing is that the uplink growth in data is growing at a higher rate than the downlink,” said Elbaz. Uplink demand has largely been driven by videoconferencing.

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Cable companies struggle with their hybrid fiber coax infrastructure because it does not provide symmetrical speeds. Whereas fiber has the beauty of download and upload symmetry, along with high speeds.

“You can have a 1 gig uplink, which is pretty much 20 times what you can get from cable,” said Elbaz. Our fiber product is probably the highest NPS [net promoter score] across all of our portfolio. It’s higher than any of our competitors.”