- AT&T CEO John Stankey thinks the telecom industry is going to undergo “structural changes,” which he’s trying to anticipate
- He seems to think that open-access networks will be part of this structural change
- He alluded to these changes on the company Q3 2024 earnings call
AT&T’s CEO John Stankey doesn't leave work at the office. Instead, he said on an earnings call this week, he likes to think about the future of the telecommunications industry and AT&T’s place in it as he drives home. And one thought that's been front and center has been the idea that open-access broadband networks might play a big role in structural changes that are happening in the industry.
AT&T is gaining expertise as an open-access provider due to its partnership with BlackRock for the Gigapower joint venture. The JV is building networks outside of AT&T’s footprint. During the third quarter, AT&T and BlackRock announced they want to grow their Gigapower fiber joint venture more than originally planned. AT&T also announced four new partnerships with open-access providers: Boldyn Networks, Digital Infrastructure Group, PRIME FiBER and Ubiquity.
Yesterday, Stankey was asked whether AT&T was looking at other “out of region” opportunities for open-access networks.
He said that AT&T has “been very mindful” about how it constructs the product offerings with Gigapower and how it works with partners and leverages its distribution strength. And it’s doing all its work with Gigapower with an eye toward developing a model and processes which it could, if it chooses, repeat in other places.
He mentioned “investing in relationships” over time that can be “mutually productive” and that could expand the total addressable market for companies like AT&T. And he noted that structural changes that are occurring in the industry will result in converged capabilities and that partnerships will be important for AT&T to help deliver new types of services.
“I think you're seeing just the front end of it right now. As I've said before, I don't believe this is a two or three year dynamic. I think this is what the industry structure will emerge to over the next decade. And that's the play that I'm kind of focusing the business on.”
Of Stankey’s comments, Recon Analytics principal Roger Enter said, “Gigapower is not a flash in the pan, but it’s a marathon run. I think AT&T wants to play outside their traditional footprint a lot more, and this is the vehicle for them to do that. I would be terribly disappointed if there’s not more announcements coming.”
Although Stankey didn’t specify exactly what kinds of products or opportunities (besides fiber connectivity) that these out-of-footprint, open-access fiber networks might provide, he said, “I'm trying to think about as we allocate capital to ensure that over the next decade, AT&T is positioned in the right way as this industry restructures in a very different way than what we've seen in the previous decade.”
More insight into Gigapower
Stankey added the joint venture is actually doing as well as AT&T’s fiber offering within its own footprint.
“I think what we can safely say is everything at the front end, customer acquisition, ARPUs, our rate of penetration, all those things, are looking very, very similar to what's happening in-region,” he said.
He noted this was rather unexpected and that he originally thought that there might be slower penetration out-of-region “given that the brand hadn't necessarily been in those markets.” AT&T also expected that maybe there would be ARPU dynamics that we have to price differently in order to penetrate. But that's not happening.
“It's looking more like the in-region business case and that only makes it more compelling,” he said.
Wholesaling its own network
Finally, Stankey also alluded to the possibility that AT&T could, in future, wholesale its own in-footprint network.
The analysts at New Street Research said, "Stankey stunned us this morning by saying that AT&T would consider wholesaling its fiber network in the future. He seemed to say that they wanted to be the sole retail brand on the network for the moment, but that in future they were open to the possibility that they could increase the returns they capture over fiber by wholesaling it."
To be clear, Stankey didn’t say AT&T would wholesale fiber; he just said he was open to it. Will that happen? We'll be watching closely.