The Road To Mesa Could be An Interesting One!

September 12, 2022 | A recent interview on Fox Business News with John Stankey (CEO of AT&T) and Wendall Weeks (CEO of Corning) offered some very interesting tidbits which (quite surprisingly) did not seem to get the attention it may have deserved from the Street. I say this because in this interview AT&T made a very big statement about its forward looking fiber strategy.

We all know that AT&T has aggressive ambitions for its fiber rollout within its franchise wireline footprint. But what came out of this little covered interview was these ambitions may cross outside its franchise lines. In minute 1:06 of this interview, Mr. Stankey talks about AT&T’s plans for fiber to the home rollout in Mesa, AZ.

Wait – huh? For those who remember the Baby Bell breakup map, Mesa is an old US West property. US West became part of Quest, and Quest was purchased by CenturyTel, now known as Lumen. Why does this even matter? Because while there have been many overbuilders planting the fiber flags around the US, there has always been a “gentleman’s agreement” per se between the telecom incumbents that they would not overbuild one another. Each of these incumbents have stayed within their proverbial swim lanes. Until now.

Mesa, AZ is a growing market and likely screens very well in terms of demographic checks for AT&T with population growth, an upward bias to household income, etc. But, importantly, this is not just about Mesa; it is about something much (much) bigger. What AT&T has done with this upcoming move is essentially a (loud) shout across the bow.

The logical next question is what markets are on the AT&T out of region fiber list beyond Mesa? If it is a long list of markets, this could be a looming threat to the other incumbents (some of whom – like Lumen – solely rely on broadband in its consumer push). Put simply, the incumbents are no longer standing shoulder to shoulder. AT&T is starting to pivot. AT&T is finding points of vulnerability outside its wireline footprint where it can make broadband “hay” and – if so – Mesa, AZ may be the (tip) top of the sword.

This move could become all the more pronounced if recent trade press is to be believed and AT&T is seeking outside capital from infrastructure funds to help with its fiber build. Outside capital will allow this strategy to move faster and without the ‘dividend handcuffs’ that have limited AT&T in the past.

While this may be a surprising move to some, taking a step back, it does stand to reason. If the long talked about trend of wireless and wireline bundling were to (finally) take shape, there are a lot of AT&T Wireless customers that live outside the AT&T wireline footprint (cities such as Minneapolis, Portland, Phoenix, NYC, and Boston, all come to mind). AT&T wireless subscribers who live in these important markets do NOT have a wireline bundle opportunity with their wireless vendor. It is fair to assume that AT&T Wireless has 25-30 percent wireless share in some of these larger cities. Fiber may be a way to make this customer touchpoint all the deeper.

Stating the obvious, this is not just a trend impacting AT&T. If the AT&T out of region fiber ‘hit list’ is longer than just good ol’ Mesa, the implications of this move will be felt by many players (incumbent telco, cable operators and overbuilders alike) well beyond AT&T.

Get the popcorn out – this movie is about to take an interesting plot turn!

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