AT&T CEO Stankey: Fiber is the juice behind every network

fiber
AT&T CEO John Stankey says he will put his foot on the fiber gas pedal once the the deployments can be engineered in a way that benefits all of the telco's services and applications. (Pixabay)

On AT&T's third quarter earnings call Thursday morning, AT&T CEO John Stankey reiterated his appetite for fiber, but said the telco is taking a measured approach.

Years ago, AT&T mainly lit fiber up in central offices or select geographic areas, but now fiber fuels its 5G, AT&T Fiber, HBO Max and AT&T TV services as well its wholesale business unit. In short, Stankey said fiber was the juice behind every network and that the lines between wired and wireless were blurring more and more.

Going forward, AT&T has a different type of fiber build in mind, given all of the services and applications that fiber enables.

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"We're not looking at our investment on a customer segment by customer segment basis, but we're looking at it as every trench foot of fiber that we put in has a bunch of different access technologies that hang off the end of it," he said on the earnings call Thursday morning. "Sometimes it happens to be a millimeter wave site. Sometimes it happens to be a big cell tower with four occupants on it that we sell wholesale into. Sometimes it happens to be a strip mall, where some of those customers want to be served with a fixed connection. And some can get by with simply having a credit card reader attached to a wireless network. Sometimes it's a single-family household.

"But we can be the best at doing that."

Last year, AT&T surpassed the 12.5 million customer locations that the FCC required it to serve with fiber as a condition of the company's DirecTV acquisition. After it passed that milestone, AT&T appeared to ease off of on the pace of its fiber deployments.

According to a question posed during the earnings call Q&A, AT&T has 60 million customer locations in its landline region with about 25% of them having fiber access today. Stankey was asked when AT&T would put its foot on the fiber gas pedal?

"What I would say from a perspective of step on the gas and what we are working on internally, and what I've had the team focused on, our company is in a very unique position of anybody that we compete with," Stankey said. "In our competitive set, we serve everybody from the smallest residential customer up to the largest corporation and everything in between. We run one of the largest footprints that still has customers that want to connect to the network on a fixed basis.

"We should be in a very unique position for every trench foot of fiber that we put in the ground of putting more traffic on that fiber and monetizing it more effectively than anybody else, given the breadth of the customer base that we serve, and the footprint that we serve."

Stankey said AT&T has the opportunity to do some economic fill-in with its fiber deployments while also shortening the cycle from investment to cash, but it needs to be engineered the right way.

"What I am trying to drive this business forward on is getting much more artful in our engineering to ensure that every trench foot of fiber that we're putting in, we are serving every segment as effectively as we can," he said. "When I am confident that we are actually engineering and executing in that fashion, I will step on the gas in a way that I think everybody will look at it to say 'Those returns are so darn good. Why wouldn't you do that?'

"The millimeter wave dynamic will drive to the integrated fiber network, and we should be the leader in that space. And when I'm confident that we're engineering and operating that way then I will be very, very robust in how I think about funding our business to do that."

Stankey said that AT&T had a lot of fallow fiber that it can sell into ahead of any additional fiber deployments.

For the third quarter, AT&T added 357,000 AT&T Fiber subscribers and had 158,000 net broadband adds. Stankey said AT&T was on track to grow its fiber base by 25% en route to adding 1 million new subscribers this year. AT&T Fiber currently has 4.7 million fiber subscribers and a 33% penetration of fiber homes passed. AT&T Fiber passes 14 million homes.

During July's second quarter earnings report, which was impacted by Covid-19, AT&T lost 102,000 broadband subscribers, but gained more than 220,000 fiber subscribers.

Policy watch in election year

Stankey said some changes to policy, including changes to the Universal Service Fund, could provide AT&T with even more incentive to drive its fiber into more areas to bridge the digital divide. While the current administration is amiable to infrastructure investments, that could change after the presidential election. Either way, Stankey said AT&T would still move forward with its fiber deployments once it makes sense to do so.

"I don't think we need policy to get better," he said. "We just need to ensure that the policy doesn't whipsaw back to someplace that is inconsistent with incenting investment in infrastructure.

“I believe some of these architectures that are coming out, and frankly if policy gets right, that you can open up some of these places for growth. If the universal service program gets reformed in an effective fashion, which I think it’s time, that from a policy perspective in our country, we should look at that, it makes fixed broadband more affordable.”

RELATED: CWA calls out AT&T's lack of fiber in its DSL footprint

From a policy perspective, Stankey said AT&T provides meaningful middle-class jobs that include benefits, which policymakers would look favorably on. On the flip side, the Communications Workers of America (CWA) has taken AT&T to task for cutting jobs as part of its plan to reduce operational costs by $6 billion.

On AT&T's fourth quarter earnings call, Stankey said AT&T was targeting a 4% reduction in labor-related costs including benefits and contract employees in 2020.

Since receiving $21 billion from the Tax Cuts and Jobs Act of 2017, AT&T has steadily cut jobs each quarter, despite promises to create 7,000 new jobs. Overall, AT&T has eliminated more than 40,000 jobs, according to the CWA.

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