The common wisdom as wireless took off and VoIP took root was that the established phone companies would have to reinvent themselves from both a technical and business standpoint if they were to survive. That process has been ongoing during the past few years.
It's interesting to look at the first-quarter results from AT&T in that context. To put first things first, the numbers -- the ultimate arbiter of whether a strategy has succeeded or failed -- are good: Revenues rose 6.1 percent and beat the composite Wall Street forecast, $30.7 billion to $30.6 billion. Other positive financial results are highlighted in the Reuters report.
The second thing to consider is where the success is coming from. Through its status as the exclusive carrier for the iPhone, AT&T added 1.3 million wireless subscribers and drove wireless revenue 18.3 percent above the year-ago quarter. The company added 148,000 subscribers to its fiber-based U-verse broadband service. The total now is 379,000; more than 1 million are expected by year's end, the story says.
Conversely, consumer-access lines, the part of the business that is seen as fading, fell 6.2 percent. That number was 1.3 percent higher than in the previous quarter. The bottom line is that the company had a good quarter despite the fact that its traditional bread and butter -- wired access lines -- fell off a cliff.
AT&T's results are not the only sign that the industry is meeting the future aggressively: Verizon has decided to move up to Gigabit Passive Optical Networks (GPON) for all new deployments of its FiOS service and as capacity in existing broadband passive optical networks (BPON) is exhausted. (Verizon will not be getting its GPON gear from Tellabs, one of its major suppliers, according to Communications Online.)
Indeed, the theme of this xchange piece about Verizon's rollout of symmetric 20 megabits-per-second (Mbps) service in its FiOS markets is that it has "knocked arch rival Comcast Corp. back on its heels." The piece, which is based mostly on the comments of Infonetics analyst Jeff Heynen, suggests that the telco is smartly exploiting the upstream bandwidth constraints under which cable operators struggle. In the bigger context, the idea is that Verizon and the others seem to have adjusted to the competitive environment quite nicely.
It is impossible to discuss the proactive approach being taken by the telcos without at least touching upon their competition with cable operators. Ike Elliott at Telecosm has an interesting take on how that is playing out. He suggests that telcos' use of PON technology -- he singles out Verizon -- is pressuring the cable industry to replace its hybrid fiber coax (HFC) architecture with fiber of its own. His view is that cable operators' move toward higher capacity through the third iteration of the Data Over Cable Service Interface Specification (DOCSIS 3.0) really is an attempt to buy a few years' grace period before going into this expensive rebuild.
It is not, however, an "either/or," Elliott says. Cable operators are experimenting with approaches in which a portion of the plant transitions to fiber, but the last mile into the home remains coaxial cable. This is an ironic twist: The telcos have spent the better part of the past decade trying to squeeze every last ounce of capacity out of its legacy in-home copper cabling through various digital subscriber line (DSL) approaches.
The intricacies of fiber infrastructure -- a nice guide through the labyrinth is available here -- and quarter to quarter results are important. The bigger picture, however, is that in a just a few years the telephone industry seems to have largely shaken off its status as a stodgy and unimaginative monopolist.