AT&T ramps up fibre rollout in wake of Verizon-Frontier deal

The US telco has partnered with no fewer than four wholesale operators, a move that will put its fibre services within reach of potentially millions of more premises over the coming months and years.

Its four new partners are neutral host provider Boldyn Networks; Digital Infrastructure Group; private equity-backed newcomer Prime Fiber; and Ubiquity, which operates networks in Arizona, California, Florida, Iowa, Nebraska and Texas.

AT&T said it selected these companies because each one provides distribution opportunities in new service areas that currently lack fibre services. As these wholesalers extend their respective footprints, AT&T said it will consider launching fibre in more new locations.

AT&T also said its wholesale fibre joint venture with Blackrock – called Gigapower – is performing better than expected.

Penetration rates are ahead of schedule, and adoption of 1-Gbps+ fibre speeds is higher compared to on-net customers. AT&T fibre customers using the Gigapower network are also adding wireless service at rates equal to or greater than the average across its entire fibre network.

AT&T and Blackrock said these KPIs have them to explore opportunities to expand Gigapower's fibre footprint beyond the initial 1.5 million locations announced in December 2022. The expansion plan may include growth within existing geographies as well as new ones.

"With our organic fibre build, we're seeing improving returns as we expand our network. In new service areas, Gigapower is ramping well, and we're targeting additional geographies for growth with the joint venture and other commercial open-access agreements," said AT&T CEO John Stankey.

"BlackRock is proud to partner with AT&T to bring high-speed Internet to more American households," added Blackrock CEO Larry Fink. "This continuing investment on behalf of our clients in Gigapower is helping bridge the digital divide and supporting economic growth in communities across America through expanded access to critical broadband services."

In addition to expanding its use of wholesale networks, AT&T is also considering ramping up its own fibre build, which is currently on track to pass more than 30 million homes and businesses by the end of 2025.

"The better-than-expected returns the company is seeing on its fibre investment potentially expands the opportunity to go beyond this target by roughly 10 million to 15 million additional in-footprint locations passed," AT&T said, adding the caveat that this plan "assumes similar build parameters and a regulatory environment that remains attractive to building infrastructure."

The timing of this announcement is particularly interesting.

Following mounting speculation, AT&T rival Verizon last week agreed to acquire pure-play fibre operator Frontier Communications in a deal valuing the latter at $20 billion.

Verizon said the combination will significantly expand its fibre footprint, putting it on course to pass 25 million premises.

Meanwhile, in July, T-Mobile got in on the act, partnering with private equity firm KKR to acquire fibre operator Metronet in a deal worth a shade under $5 billion. Metronet's network passes around 2 million premises spread across 17 states.

Similarly to Verizon's deal for Frontier, the acquisition was motivated by the promise of being able to rapidly expand T-Mobile's fibre footprint.

With its major rivals making moves, AT&T may have been feeling a bit of pressure.

Indeed, while this announcement was made with relatively little fanfare, the fact that it comes with canned quotes from the CEO suggests that the telco considers it important to respond to these developments.