AT&T

AT&T U-verse to Trial 2 High-Def Streams

AT&T is about to begin a trial roll-out of a U-verse service that could deliver two HD streams at once, something that hasn’t worked up to now. There are several ways in which AT&T is looking at this, one through increasingly aggressive compression and the other through upspeeding the loop. It is possible both will be tried. There is no indication of when the capability will be fully rolled out, but AT&T appears committed to it. They have to be; this would be a crippling problem for U-verse if it continued much into 2009. We believe AT&T has major problems with its TV strategy, this change notwithstanding, and that they will eventually be forced to move to another approach.

Verizon ups FiOS speed across footprint

Verizon says it will make its top-tier FiOS service, a 50/20Mbps pipe available over its whole footprint, which would make Verizon users some of the most empowered in the western world. The move comes as cable MSOs prepare an assault on DSL in further commercials.

<p>The combination of all of this puts enormous pressure on AT&T, which has no fiber offering.  But it also pressures Verizon to improve DSL services. Verizon reports DSL has tapered down as customers wait for FiOS, and we believe that Verizon will be offering incentives for users to adopt DSL to hold them over until FiOS is available in their area.

Telecom consolidation continues in U.S. and Europe

Verizon is in advanced talks with Alltel, aimed at acquiring the mobile player. The move would make Verizon the largest mobile operator in the U.S. and a more effective competitor to AT&T. It also signals yet again the shift in the mobile market.  Consolidation is not a move that is undertaken in a dynamic and growing market, but rather in one that is already facing commoditization. France Telecom has also announced negotiations to acquire Swedish phone company TeliaSonera, a move that would create the EU’s largest operator. All consolidation moves are aimed at creating economies of scale, and in FT’s case, these are targeted initially at operations costs and core network costs, since access networks are not generally overlapping and don’t generate any real consolidation economies. In the case of Alltel, we believe there will be a net reduction in mobile spending.

AT&T bids out GPON-based FTTH

AT&T is working through its bidding process for GPON-based FTTH for new developments, a move that takes the company further down the path Verizon has already taken. It is not known how much of the Verizon architecture AT&T will mimic, and in particular if it will use the same linear RF broadcast TV delivery program over its own channel-slot Microsoft TV approach. How this plays out will be of enormous importance to equipment vendors because the decision to use FTTH and PON in any form bends the budget decisively toward the access network and empowers players like Alcatel-Lucent who can bid there. The fact that GPON empowers Alcatel-Lucent has been the seed of the internal battle between the GPON group and the router group, who don’t want broadcast over fiber at all.