AT&T (NYSE: T) and Verizon (NYSE: VZ) may continue to tout the capabilities and growth their respective U-verse and FiOS deployments, but a DSL Prime report revealed that both service providers actually cut back on wireline broadband spending this year.
Thus far, Verizon reduced its wireline capex budget by about $2 billion this year and $7 billion over the past four years, while AT&T reduced U-Verse investments by one-third in 2009. Verizon, for instance, said earlier this year that it would focus on enhancing existing FiOS markets.
Although it's true that both AT&T and Verizon may have made some cutbacks, Burstein believes that they are nothing more than scare tactics.
"These multi-billion dollar cuts came after the U.S. enacted a stimulus program and now is talking about huge subsidies supposedly for broadband," wrote Dave Burstein. "Ivan is a smart guy who told investors that he thinks the government will pay up if he doesn't invest. The stimulus, as Tom Hazlett predicted, resulted in fewer new broadband connections as company after company reduced spending hoping the government will pay instead. Verizon is claiming 20-30% of their lines require a subsidy and asking for billions or they might discontinue voice service."
Unlike fellow RBOC Qwest, neither AT&T nor Verizon applied for broadband stimulus funding, but decided to focus on getting funding through a revamped Universal Service Fund (USF). Even though these cuts are making Wall Street investors happy, they come with the price of cable successfully winning over more AT&T and Verizon DSL customers with triple play packages in their non U-verse and FiOS markets.
These factors have forced both AT&T and Verizon alike to introduce lower-priced bare bones DSL bundle packages.
- Broadband DSL Reports summarizes the spending cycles
Verizon's Q2 wireline losses offset by broadband, business service gains
Verizon FiOS deployment drive to focus on established communities
Verizon lures dial-up users with new DSL bundles
AT&T lowers DSL prices to battle subscriber loss
AT&T's Q2: IPTV, business services save the wireline day