Investing in a broadband future-plugged-in

By Frank Bernhard

With all the recent fanfare paid to wireless data and applications alike, one might begin to wonder if the horizon for wired broadband is simply fading to a bleak mural of a yesteryear gone by. Not so, if companies like AT&T and Verizon have a say. New capital investments and a stealth retooling of their operational systems could imply that wireline carriers recognize the strategic value of ownership in the broadband last mile.

Adding new subscribers has proven challenging for most operators, especially in light of a downturn in discretionary spending for services among U.S. domestic households since Q2, 2008. The inflection point in Q1, 2009, however, shows a reversal in consumer behavior as many opt to consolidate services such as cable content, VoIP over TDM wires, and services that ante up better utility of telecom purchases. A positive uptick in momentum for bundling voice and data, along with digital content services, is turning a new corner on just how consumers plan to slog through the recession while staying connected. Clearly, this ebb of stagnate consumerism is different by the way in which consumers value the telecom influence.

In a nationally syndicated survey of U.S. households in March, nearly 23.1 percent of the respondents stated that they would go without another commonplace service such as cable television, landscape maintenance, or weekly newspaper delivery before letting go of their broadband connection. The strong sentiment of bias toward broadband says something about America's reliance on connectivity to drive their own personal economy-and a marked degree of success that carrier's have made in capturing consumer wallets.

For this to continue, operators must ensure that investments in IP-based architecture and fiber continue to deliver the results of profitability and adoptions that many naysayers said could not happen in a relatively short window. Just this week, AT&T announced their expansion of U-verse branded bundling in Florida with upgrade to a voice package on the heels of its 2008 TV launch. Tapping into the demand for consolidated billing of broadband, wireless, and television, the carrier is pushing the envelope of a phenomenon we label a master reference account (MRA) provider-where customers select to buy otherwise individual services from a sole-source entity.

Taken a few steps further, the broadband consumer portal lays the groundwork for a commerce base that few other than VISA or MasterCard can rival. That is why the strategic imperative of wired broadband makes sense-driving liquidity through quality access to the premises with network-afforded services while capturing wallet share. The return on assets (ROA) scenario for the existing infrastructure and expansive new FTTx nodes rests on future revenue mining opportunities.  Whether it be fiber in the ground, or updated remote terminal facilities, the operator's core goal hinges upon subscriber ownership and service capacity.

Commenting to questions addressed at an analyst presentation, Verizon believes firmly in the past decade of its FiOS (Fiber-Optic Television) investments as we now see the average monthly bills eclipse $130 despite an otherwise negative quarter of consumerism retreat.  Perhaps this speaks to the relative affluence of communities with the FiOS service, but the road ahead is winding the path of conservative expansion in those areas best-served with delivery capability. And that brings with it data that either affirms or refutes the notion that wired access matters in the next phase of connected networks.

From our vantage point, wired and wireless broadband will indeed synergistically morph together in the not too distant era of true convergence. But rather the hand to be won stands on how strong competing access technology cards are played in favor of the consumer preference.

Frank J. Bernhard is a technology economist and managing principal for OMNI Consulting Group's telecommunications practice based in Davis, California.

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