AT&T's Stankey: The wireline portion of Project VIP is on track

AT&T (NYSE: T) is on track with completing the upgrades to its last mile network to support both new U-verse video and broadband customers and new fiber-based connections as part of its Project VIP initiative.

John Stankey AT&T


That was the message at the Bank of America Merrill Lynch Media, Communications and Entertainment Conference, where John Stankey, group president and chief strategy officer for AT&T, told investors that it still has work to do on the wireline portion.

"We're on pace with everything we said we wanted to do on the business side with fiber to the building," Stankey said. "We're on pace with everything we said we wanted to do in additional U-verse coverage as well as additional broadband coverage on the consumer side."

While he did not provide specific numbers, Stankey said that the company is seeing positive take-up of fiber-based business services and U-verse services in the areas it rolled out service.

"The penetration assumptions we made in the business case are tracking to our expectations," Stankey said. "The ARPUs are tracking to our expectations and in some cases we're ahead of plan so we feel really good that the validation of investing in broadband and investing in additional bandwidth and infrastructure was the right thing to do and is bearing the fruits we need to do with it."

One of the key elements of driving out costs in the Project VIP initiative is its ongoing migration of business customers from TDM to IP-based services.

"We've had really good success getting the plans built and we're starting to see the momentum in the enterprise space moving customers off those legacy services," Stankey said. "You're seeing that in our quarterly reporting of our growth in strategic services."

Each quarter the service provider continues to see the benefits of the legacy-to-IP service transition with the adoption of strategic services such as cloud and Ethernet.

Evidence of this trend took place during the second-quarter earnings season.

Despite seeing second-quarter overall business services decline 2.9 percent to $8.7 billion, AT&T reported next-gen business services--including VPNs, Ethernet, cloud, Ethernet, U-verse and security services--grew 13.5 percent versus the year-earlier quarter.

The service provider is also moving ahead with its two TDM-to-IP market trials in Alabama and Florida that it began in February.

These tests are designed to give the FCC more information on permitting AT&T and other traditional telcos to stop offering traditional wireline POTS service as more residential customers migrate toward wireless and over-the-top IP-based VoIP providers like Vonage (NYSE: VG) and Skype for voice service.  

"We're in the middle of the trials with the FCC and each state has a different view on it," Stankey said. "In my view, both technology and customer interest is on the right side of this ultimately happening, but we need to finish the work with the regulators of the actual rule set on how you shut down the TDM infrastructure once and for all and changing the cost structure."

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