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AT&T’s Neutrality Reply a Red Herring

November, 2014

While on the surface, it is commendable that a large player such as AT&T is taking on the US government on net neutrality, its response is totally self-serving. The carrier knows that it will make relatively little money in providing fiber to residential customers. Plus, the biggest cause of network congestion does not come from uploads and downloads to and from the home; it is about the interconnection of data centers for high-volume content.

Verizon’s concentration with fiber to the home was in areas that had large enterprises nearby. It divested a lot of its other lines that did not fall into this category. Verizon saw an opportunity to disguise aggressively going after the very lucrative business customers from the regulators – and FTTB subsidized FTTH.

To this day, lots of people in the industry would prefer to believe Verizon was just crazy to do so much FTTH, especially several years ago when it was truly uneconomical. For whatever reason, an explanation based on rationality continues to be widely dismissed.

While AT&T in its incumbent territory does not have the same geographic advantages as Verizon in terms of achieving networking economies with large metropolitan areas so adjacent to each other, the former could have adopted a similar strategy, such as along the California coast. The problem is that AT&T has retained too much of the old Ma Bell mentality. At least, it has started to move in a direction of selling off less attractive portions of its incumbent territory.

All in all, the FCC should be suspicious of AT&T’s explanation of putting its FTTH plans on hold. Nevertheless, given its pledge with the DirecTV pickup to connect two million subscribers with FTTH, it buys the service provider some time.

[written by Mark Lutkowitz]

To get a sense of AT&T's bureaucratic situation, please click here.)

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