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The Death Star is looking vulnerable these days.

Obi Wan MindTrickAT&T Inc (T) COO Randall Stephenson, speaking yesterday at Bank of America’s 2006 Media, Entertainment and Telecommunications conference attempted to exercise his marketing skills with a poor attempt at a Jedi Mind Trick.

From IP Democracy:

In terms of Lightspeed’s ability to push through hundreds of video channels, including high-def video, “we’re not constrained by bandwidth. You’re not constrained by the size of the pipe anymore,�? Stephenson said, referring to the switched-video capacity of the network which delivers only one service to a single customer at a time.

“In the foreseeable future, having a 15 Mbps Internet capability is irrelevant because the backbone doesn’t transport at those speeds,�? he told the conference attendees. Stephenson said that AT&T’s field tests have shown “no discernable difference�? between AT&T’s 1.5 Mbps service and Comcast’s 6 Mbps because the problem is not in the last mile but in the backbone.

This is total nonsense. Verizon delivers 15mbs consistently to my home. This is the latest of many odd and obtuse statements from AT&T which, to me, are begining to sound more and more like excuses rather than logical explanations. All of these statements clearly indicate to me that Project Lightspeed is not going very well.

Why this man is being forced to make a fool of himself?

AT&T (SBC originated the program) made a big gamble with Project Lightspeed when it decided not to build fiber directly to the home. Instead, AT&T brings fiber ‘almost’ to your home, then spans the last 1000 meters or less using conventional DSL technology to deliver next generation video and data services. The only major benefit to this approach, as opposed to using FTTH, is it eliminates the need to install new cabling to each and every home, saving install costs. AT&T’s approach is 1/3 to 1/2 the cost of putting fiber directly into the home.

The downsides could fill an entire page:

  • Inconsistent performance of DSL makes it hard to predict actual bandwidth after installation
  • DSL technology limited to 20-30Mbs
  • Requires a set top box for each TV in the home. Cable ready TV’s can’t tune IPTV
  • More expensive and complex IPTV head end hardware and software. Verizon FiOS and NTT’s approach copy Cable’s logical architecture exactly.
  • Requires more electronics in the field, more operational expenses
  • Requires use of MPEG-4 video compression, which doesn’t look as good as MPEG-2
  • Limited number of video channels can be viewed in the home at one time. Only one HD signal can be viewed in household at any given point

The theory is SBC has more underground wiring, where Verizon Communications (VZ) is more aerial. Installing new fiber aerially is much cheaper than trenching- so some say Verizon had the luxury of using FTTH given the nature their infrastructure. AT&T is using FTTH for greenfield installs as it is now common knowledge that installing FTTH in new home developments is cheaper than copper when you take into consideration future operational expenses.

In short, AT&T is deploying a very complex architecture with major limitations in the interest of saving money. The major problem with this approach is it offers nothing better than what the incumbent cablecos can provide. Cable’s broadband is faster. Cable customers don’t need to worry about how many channels a household is watching simultaneously. Verizon’s approach delivers a user experience equivalent to cable with the ability to radically surpass it by deploying new bandwidth hungry applications as they emerge.

The only defense offered by AT&T is “IPTV is better”, and yes they are right - it is. IPTV gives you wide flexibility in content distrubution. But AT&T is using IPTV because they have to, not because they want to. The drinking straw bandwidth provided by DSL forces them to broadcast a few specific channels at a time. IPTV isn’t a technological strength, it is a technology deployed in order to make up for the inherent weakness of their DSL based approach. Nothing precludes building an IPTV infrastructure over fiber, or even DOCSIS 3.0 based cable modems.

AT&T is now preparing to trial the service. Assuming they can successfully navigate all of the above pitfalls, they will emerge with a product that is marginally better than the one offered by cable, and have done little to address the long term requirement of putting high bandwidth infrastructure into the home.

Verizon is making a major investment in FTTH, but I would bet the fiber they are installing will be in use for 100 years - they can just upgrade the equipment at each end. The complex hardware and electronics AT&T are deploying ‘near’ your home will junked within 10 years when they too are forced to put fiber through the last mile. Sure, they are saving money now - but the investment will have a much shorter timeline.

Hopefully, AT&T will stop the charade that their short-sighted investment is superior to FTTH and stop wasting capital on what is clearly a stopgap measure. When the Jedi Mind Tricks eventually wear off in the investment community the markets will extract their pound of flesh.

Nothing is so fatiguing as the eternal hanging on of an uncompleted task. - William James

Source: AT&T Project Lightspeed and the Jedi Mind Trick (T, VZ)