AT&T: Fiber Up but Broadband Still Down

Even though it signed up more than 300,000 FTTH subscribers in the second quarter, AT&T still managed to lose broadband customers because of heavy losses on its other Internet service platforms.

AT&T, the second-largest broadband provider in the US with 15.7 million subscribers, reported Wednesday morning that it netted 318,000 AT&T Fiber customers in the spring period, boosting its total to 3.4 million at the end of June. But it still lost data subscribers overall because its FTTN-delivered U-verse Internet service shed the same 318,000 total and its DSL service lost another 34,000 subs. That translates to an overall loss of 34,000 broadband customers, well off Wall Street's consensus forecast of a 124,000-sub gain.

AT&T did boost broadband revenues to $2.1 billion, up 6.5% from a year ago, and increased broadband ARPU (average revenue per unit) by 5.2% on a year-over-year basis. But these increases resulted primarily from price hikes, not subscriber growth, leading to doubts about the sustainability of the company's broadband revenue and ARPU growth.

"Their margin of 25.1% was only 50 bps higher than a year ago (apples to apples) despite sharp price increases and much lower spending on subscriber acquisition costs (one can assume)," wrote Craig Moffett, a principal analyst at MoffettNahanson, in a research note this morning. "We continue to expect margins to fall again when the drag from subscriber losses overtakes the sugar-high of price increases."

AT&T boasted in its earnings report that it now markets its FTTH network to nearly 14 million customer locations in parts of 85 major metro areas. It noted that broadband penetration rates in its fiber footprint continue to be "significantly higher" than in non-fiber areas, with those rates increasing over time.

The carrier also said more than 80% of its fiber broadband customers now opt for speeds of 100 Mbit/s or more. Overall, the number of broadband customers with speeds of 100 Mbit/s or faster have more than doubled over the past year.

For more on AT&T second-quarter earnings results, please visit our sister site, Light Reading. (See AT&T Video Sub Losses Hit Record Highs and AT&T Says Nationwide Low-Band 5G Will Arrive in 2020.)

— Alan Breznick, Cable/Video Practice Leader, Light Reading