As AT&T builds out fiber to more residential locations, the service provider says its customers are purchasing multiple services besides broadband, a factor that’s enhancing average revenue per user (ARPU).
John Stephens, CFO of AT&T, told investors during the MoffettNathanson Media and Communications Summit that customers in the fiber markets are purchasing multiservice bundles that incorporate either satellite or IPTV and wireless.
“The exciting part about fiber is what it’s doing to churn when you bundle it with wireless, when you bundle it with video and when it eliminates our position as one product offering to the home,” Stephenson said. “Now, with the video offering, I have the broadband to go with it.”
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Stephens added that “our quad play offerings, we are seeing some measureable reductions in churn.”
Meeting fiber investment targets, returns
AT&T’s fiber build continues to be on track. The service provider said it is on track to reach 6 million locations by the end of 2017.
While AT&T committed to build out fiber to 12.5 million premises by 2019, Stephens said AT&T is confident that it could possibly reach closer to 13 to 14 million locations.
Stephens said “that’s a really great opportunity.”
AT&T is seeing that it continues meet its return on investment (ROI) targets for its FTTH network investments.
“On the broadband standalone basis, the FTTH investment is meeting our investment and ROI projections,” Stephens said. “That’s a longer-term pad as most network investments are, but it’s seeing solid returns.”
DSL migrations continue
The question becomes, what about its legacy DSL business? Today, the service provider continues to bleed more legacy DSL customers that are either churning to cable or migrating to higher speed IP-based U-verse products, like its 75 Mbps offering or FTTH.
During the first quarter, AT&T’s Entertainment Group reported it added 242,000 IP broadband subscribers.
AT&T added a total of 115,000 total broadband customers, reflecting a loss of 127,000 DSL subscribers. Broadband revenues were up nearly 3% in the quarter with IP broadband growing by 7.7%.
Stephens said that the service provider has migrated a large portion of its legacy DSL base to IP-based broadband or fiber-based broadband.
“We’re getting through the legacy DSL business, which is now only 5-6% of our total broadband business and the rest is in IP-based broadband,” Stephens said. “We got through that migration process.”
Stephens said that broadband overall will continue to be a profitable business, but like other carriers growth rates will fluctuate in each quarter.
“From a long-term basis, broadband is a growth business, but on a quarter by quarter basis the second quarter has seasonal challenges,” Stephens said. “It is going to be a growth business for a lot of reasons.”