July 2, 2008

AT&T pushes U-Verse into muni fiber hotbed
By Ed Gubbins

AT&T’s deployment of U-Verse services in Tennessee, commenced this week, could provide an unusual showcase of three-way competition in the country’s most active hotbed for municipal fiber-to-the-premises (FTTP).

This week AT&T pledged to spend $400 million rolling out U-Verse services to 56 Tennessee towns over the next two years. The announcement came with the enactment of a state law passed earlier this year granting statewide franchises for video services.

Tennessee has more municipal fiber projects than any other state, according to Michael Render, president of research firm RVA. (Only Washington state has as many public fiber projects, but many of its deployments are from public utility districts as opposed to municipalities, he said.) The state already has five active municipal broadband projects and more on the way. And at last count, municipalities there already had 33,000 video customers among them.

AT&T claims to have more than 1 million customers in the state. And Comcast is the dominant cable provider.

Consumers in some markets are already anticipating a competitive three-way market for residential telecom services.

“Tennessee will continue to be an excellent test bed to watch,” Render said.

The state’s largest muni fiber project is in Jackson, where the local utility company has been turning up FTTH customers since 2004, passing the 10,000 customer mark three years ago.

The municipal electric utility in Clarksville, CDE Lightband, has been rolling out fiber this year with the goal of offering voice, video and 10-Mb/s symmetrical broadband service to about 50,000 residences. So far, despite delays, hundreds of customers have been turned up, the company says.

Meanwhile, EPB, the electric utility in Chattanooga, recently secured a $26-million loan to fund triple-play services over its existing FTTP network. Like CDE Lightband, EPB helps justify the cost of fiber deployment by using the network initially for remote meter-reading. EPB expects to complete the network upgrade for telecom services this summer, launching service early next year. Its goal is to reach 80% of its utility customers in three years and all 167,000 of them in five years. And its plan assumes a 35% to 45% take rate.

AT&T may avoid those muni fiber markets for a time, said Teresa Mastrangelo, principal analyst with BroadbandTrends.com, citing the bandwidth disadvantage of the carrier’s FTTN architecture relative to FTTP. “Consumers in those markets are likely to stick with their local operator, plus they have the added benefit of FTTH rather than FTTN,” she said. “However, like all consumer products, price will be a factor, and if AT&T should offer U-verse in some of these markets, they might offer a bundle of services that are too good to be true, particularly with the wireless product bundled in.”

A spokesperson for EPB said that company hasn’t ruled out an eventual wireless bundle, either, and pointed to the superior bandwidth of FTTP as an important differentiator.

AT&T declined to estimate when it might launch services in any particular market.

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