Is AT&T's 1 Gig response to Google Fiber real or fantasy?

Sean Buckley, FierceTelecomAT&T (NYSE: T) did not take too long to respond to Google Fiber's (Nasdaq: GOOG) much anticipated move to make Austin the next stop on its fiber to the premises (FTTP) network train.

While it did not provide a specific timeline, AT&T said in a very carefully crafted press release that "it is prepared to build an advanced fiber optic infrastructure in Austin, Texas, capable of delivering speeds up to 1 gigabit per second." Google said it will begin rolling out services until mid-2014.

The other caveat that AT&T put in the release is that they expect to get the same right of way permitting concessions that Google Fiber received in Kansas City to install fiber cable on existing utility poles. 

"AT&T's expanded fiber plans in Austin anticipate it will be granted the same terms and conditions as Google on issues such as geographic scope of offerings, rights of way, permitting, state licenses and any investment incentives," AT&T said in a release about their 1 Gbps plans. By comparison, Google won't start delivering service until 2014.

Karl Bode of Broadband Reports is skeptical of AT&T's announcement. He wrote that AT&T's moves to get out of legacy TDM-based service regulations have actually resulted in "higher prices and worse service." He adds that these factors are "courtesy of limited competition and regulatory capture, two things that Google Fiber will at least chip away at on a small, local scale."

Unlike fellow RBOC Verizon (NYSE: VZ) and its FTTP-based FiOS network, AT&T opted for the safer hybrid copper/fiber fiber to the node (FTTN) approach that brings fiber to a remote terminal cabinet and then delivers U-verse broadband and data via existing copper to the customer. Given the inherent limitations of the copper plant, the telco typically delivers a maximum of 24 Mbps, though it with plans to offer 45 and even 75 Mbps via VDSL2 with bonding and vectoring later this year.

But even if AT&T finally does expand its copper-based FTTN network to the higher speeds it will trail local cable operator Time Warner Cable (NYSE: TWC), which can offer 50 and even 100 Mbps over its existing HFC-based DOCSIS networks.  

That's not to say AT&T isn't a believer in FTTP. For the most part, AT&T has targeted Greenfield higher-income housing developments with FTTP, but according to users in Broadband Reports' end-user forum, bandwidth allocations were capped at 18/1.5 Mbps, and some have been bumped up to 24/3 Mbps.

Google's plan, on the other hand, is far from perfect. Financial analysts don't see how Google is going to effectively make a large-scale rollout of its FTTP service work, either.

Carlos Kirjner and Ram Parameswaran of Bernstein Research said in a recent research note that the idea of Google expanding its FTTP network on a large scale would be very capital intensive. They estimate that if Google were to build a fiber network to cover another 20 million homes by the year 2018, it would cost over $11 billion before it connected even one home.

"We remain skeptical that Google will find a scalable and economically feasible model to extend its build out to a large portion of the US, as costs would be substantial, regulatory and competitive barriers material, and in the end the effort would have limited impact on the global trajectory of the business," they wrote in a research note.

One of the other questions that AT&T's 1 Gbps claim will spark is that the carrier said that the FTTP investment won't "alter AT&T's anticipated 2013 capital expenditures," meaning that it could be bringing this service again to some Greenfield developments that may want such a service. Also, if it does deliver the service, will AT&T be able to price it competitively with Google's $70 a month Internet-only option?

While it will take time to see if the telco's 1 Gbps plans are real or fantasy, it's clear that Google is driving AT&T and other competitors to respond to its high-speed challenge.--Sean

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