Fiber at the Core of AT&T’s Convergence Strategy

John Stankey, AT&T, Inc. CEO, outlined the carrier’s strategy for competing with the cable companies through convergence in his conversation with Brett Feldman, Equity Research Analyst at Goldman Sachs, at Goldman Sachs Communacopia + Technology Conference this week in San Francisco. Building out fiber as fast as possible is at the core of the carrier’s convergence strategy.

Competing with cable demands convergence, which demands a product strategy and a network strategy, because the “product is the network,” Stankey said. “We are seeing the advantages that come with having fiber in the market and how it helps our wireless business,” he said. “We are now at the early days of being able to find the places where we can consolidate the two products in one household. We drive up lifetime values for those customers. We lower churn on both products.” 

Stankey described the fiber buildout as a “race to scale” and the carrier remains committed to passing 30 million homes and businesses by 2025 with fiber. “We really like how our fiber business is performing and the economics that are coming in,” he said.

Stankey pointed to a number of advantages that AT&T has through ownership of both fiber and wireless networks, compared with cable companies, which have to use a wireless carrier’s network in order to provide macrocellular coverage. In particular, he noted that cable companies will never enjoy the same margins reselling airtime.

“You can’t be in a position in a business like ours where your marginal cost structure is out of whack, especially when you’re seeing the kind of growth that we are seeing,” Stankey said. “You have to own and operate assets to keep your marginal cost structure low.”

Stankey addressed the oft-discussed topic of convergence, which ends up being marketed as bundling of multiple fixed and wireless products. He said the concept of separate fixed networks and wireless networks is a misconception. The reality is convergence means fiber networks with different access technologies on the end of them, according to Stankey.

“The different types of access technology … may include a broadband router, a cell site, or a managed router in a business, but you need to be able to do all those things in a scaled network business. And that’s where I believe the domestic U.S. market is moving over time,” Stankey said.

Stankey also mentioned the importance of providing users with security to transact business and privacy tools, such as blocking unwanted calls. “Networks, when they’re managed on a cohesive level, meaning both fixed and wireless come together, allow you to do things around security and privacy that you can’t do when you don’t own and operate your own network,” he said.

By J. Sharpe Smith, Inside Towers Technology Editor

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