Some observers do not think the U.S. high-speed access market is competitive enough. And, up to this point, some might have argued that AT&T was sort of pedaling its own broadband access services.
AT&T’s “Project VIP” might be strategically important for both AT&T and the cable operators it competes against. The reason is that the investment brings into question an assumption that AT&T was going to let its fixed network business gradually decline, in favor of an emphasis on its mobile assets.
That isn’t to say Project VIP calls the “mobile first” strategy into question, only that it also suggests AT&T finally has decided that continued broadband share erosion has to be firmly resisted. You might say that is a key change of perspective.
One might well argue that, up to this point, the previous policy of slow broadband upgrades, leading to share loss to cable competitors, was one way of ceding share gradually, and not contesting cable’s role too aggressively. That might now be a view that is changing, at least to some extent.
That might, in part, be a reflection of broadband’s growing role as the anchor service for landline telcos and cable operators alike, in both consumer and business customer segments.
To be sure, revenue opportunities have to be kept in perspective. Cable is almost destined to lose share in video, as fixed network telcos lose share in voice. High-speed access has generally shifted in cable’s direction over the last decade.
And both telcos and cable now are focusing effort on business customer products, ranging from mobile backhaul to small business hosted voice to high-speed access and other business services based on machine-to-machine connections (the Internet of things).
But Project VIP might be taken as a sign that all those efforts, in both the business and consumer markets, increasingly hinge on the strength of high-speed access services.
To be certain, AT&T had to do something if it is to remain relevant in the fixed network market. Some estimates have U.S. cable operators holding 70 percent market share in the high-speed access market by about 2020. And if all the other revenue streams hinge on broadband, that would be a huge problem for AT&T and other telcos that compete with cable operators.
But efforts such as Google Fiber, among others, are a bit of a wild card.
Some would argue that broadband access profit margins are about double the profit margins of video service. For cable operators, declining video market share arguably is a bigger problem than profit margin.
So you might argue there are huge implications to Google Fiber in Kansas City, Mo. and Kansas City, Kan., since one might make an argument that Google Fiber initially will get about 30 percent market share in those markets, and might hope for adoption as high as 60 percent, eventually.
If broadband has high profit margins, and will be the lead service for cable operators and telcos alike, then competitive inroads by the likes of Google Fiber will be hugely destabilizing.
Project VIP might be some sort of acknowledgement by AT&T that the market background is changing, because of competition.
Edited by Brooke Neuman