Here’s AT&T’s $14B plan to kill its copper network and leave rural America behind

AT&T is done with its copper telephone network and copper DSL business, according to its CEO and chairman Randall Stephenson, who spoke Wednesday at an analyst conference in New York City. The company believes that an all-IP network is the path to more profitable future.  Given the millions of subscribers that are dependent on the copper telephone lines and copper DSL products, AT&T has offered a $14 billion fringe benefit for those customers and the regulators who will likely balk at the idea of AT&T stopping its investment in copper.

AT&T said it will invest $14 billion in its networks over the next three years, with those dollars going into wireless, business services and the fiber-to-the-node U-verse product. Those three product lines make up 81 percent of AT&T’s revenue and collectively are growing at 6 percent a year. AT&T expects to spend $8 billion for wireless initiatives and $6 billion for wireline initiatives. Total capital spending is expected to be approximately $22 billion for each of the next three years. (Several people are noting that U-verse is copper-based at the last mile, which is true, but I’m referring to the stand-alone DSL product as opposed to U-Verse, which AT&T is clearly investing in.)

For those worried about losing their access to communications, AT&T said with the new investment, its LTE network will reach 300 million people or 99 percent of the U.S. , while its wireline U-Verse network will expand to cover 75 percent of the current customer locations — or 57 million people.

The premise being that the remaining 25 percent of its customer territory will subscribe to LTE broadband, which comes at a much higher cost and has onerous caps that DSL access and AT&T phone lines do not have.

Essentially those living in rural areas are screwed when it comes to broadband, with Stephenson saying that he believes that in an IP age, wireline broadband will still be profitable in markets of “reasonable density.” He further went on to say that “The best service is delivered through an IP-only service with a streamlined product set,” which clearly doesn’t include copper telephone lines and DSL.

This news will have huge ramifications for Americans in rural areas as well as those who still rely on their wireline copper-based telephones for burglar alarms, emergencies and fire alarm systems. Competitive local exchange carriers in many regions will also woke up this morning wondering how they will continue to offer their products over AT&T’s copper pipes. Instead AT&T will use its fiber network and LTE to deploy broadband to smaller cities and towns. These decisions also mean the end of network upgrades to the copper network, although it’s not clear how exactly Ma Bell will back away from copper from its network, and it will have to do so with regulatory approvals.

But it’s clear that AT&T is running from copper like I’d run from a PR person waving a social media pitch, so now it’s up to the Federal Communications Commission to take a hard look at what the loss of copper means for consumers and for the marketplace.

From AT&T’s perspective this is a good move financially, because it will eliminate a high-cost product that delivers low revenues, while also allowing it to streamline its network and reduce the complexity of both the applications and networks it operates. I can’t blame the company for taking these steps, and it’s at least trying to engage the FCC on the regulatory front as opposed to selling off its DSL business as Verizon has done, but as it moves forward we need to look at who is left behind.