AT&T Is Spending Billions to Wire U.S. for Fast Internet as Rivals Take Different Path; Telecom company broadens its network of fiber-optic cables amid slowdown in mobile growth

For AT&T, the fastest home internet needs wires.

The telecommunications company is expanding its network of fiber-optic cables to deliver fast internet speeds for customers, including those in places where it doesn't already provide broadband.

The plan doesn't come cheap. It will cost billions of dollars over the next several years, a price tag that the company—whose debt load outstrips its annual revenue—doesn't want to carry alone. AT&T has tapped an outside investor and wants to access government funding to accelerate the build-out.

Doubling down on cable sets AT&T on a different path than its rivals Verizon and T-Mobile US, which are relying on improved technology that beams broadband service from the same cellular towers that link their millions of smartphone customers. AT&T is testing a similar service but on a smaller scale, and executives say fiber remains the long-term focus.

AT&T spent about $24 billion on its fiber and 5G networks last year, and it forecast a similar level of spending this year. At AT&T's annual meeting on Thursday, Chairman Bill Kennard said the board is pleased with the company's renewed focus on 5G and fiber . "We think that it's really made a difference," he said.

The Dallas-based company and its peers face heightened competition in the cellphone business—their core profit engine. After the Covid-19 pandemic brought a surge in new accounts, the cellphone business has cooled , pushing companies to seek alternate paths for growth. AT&T, which has nearly 14 million consumer broadband customers, has provided internet service for years, and executives say that keeping customers plugged in requires faster connections as more data is used.

"We should be putting more fiber out faster, quicker and in more places than anybody else," AT&T Chief Executive John Stankey said in a recent interview. "If we do that, that means our network is always going to be ahead of anybody else's."

Fiber-optic cables, wired directly to or near Americans' homes, contain easy-to-upgrade glass strands that can carry much more data than radio waves. That higher capacity is crucial for video calls, streaming, videogames and other services, which use more internet data than most smartphone apps. As of last year, fiber was available at some 63 million homes, or more than half of primary residences, according to the Fiber Broadband Association.

AT&T wants its fiber network to cover more than 30 million homes and businesses within its current service area by the end of 2025. In many cases, fiber will replace internet connections over copper wirelines.

Laying the fiber is one thing, but progress in getting customer sign-ups has been slower than some analysts expected. In the first three months of the year, AT&T signed up 272,000 home fiber subscribers, a deceleration from the December quarter and the same period last year.

The results also marked the fourth straight quarter during which residential fiber sign-ups failed to offset declines in broadband customers overall. Stankey said he isn't expecting the trend to reverse this year.

AT&T offers its fiber service at various speed tiers, starting at $55 a month for downloads up to 300 megabits a second. Prices run as high as $180 a month for 5-gigabit speeds.

In the March quarter, the average AT&T fiber internet customer paid about $66 a month. That total was up 9% from last year but still slightly less than the sums paid by customers of cable rivals Charter Communications and Comcast, according to Roger Entner, the founder of Recon Analytics.

The average amount customers are paying for AT&T fiber has been trending upward, and few customers drop the service once they sign up, Stankey said during AT&T's annual meeting. "That's kind of the golden thread of any subscription business," he said.

While AT&T's fiber build-out continues, it hopes its Internet Air service—which uses cell towers to beam broadband to homes—can stem customer defections in the short term. The service, which costs $55 a month, isn't yet widely available, said Stankey, who took over as CEO in 2020 and unwound AT&T's bet on entertainment .

The company's experiment with home internet over the air relies on technology that AT&T Chief Financial Officer Pascal Desroches played down earlier this year. "Long term, it's not a solution we want to put a lot of resources behind," Desroches said of fixed wireless, at an analyst event in February.

Stankey has more recently struck a different tone, acknowledging that some Americans might opt for the service even if offered fiber.

Verizon and T-Mobile both charge $50 a month for their fixed wireless offerings, but the prices are lower when bundled with mobile plans. Data speeds can vary, but T-Mobile says it delivers average speeds of about 145 megabits a second.

"There are some that are going to say, 'It's a lot less expensive right now and for where I am in my lifestyle, maybe that's good enough,' " Stankey said.

Rivals are watching AT&T's fiber progress. T-Mobile is "open-minded" about fiber, but it would likely look for partners to keep its own investment limited, finance chief Peter Osvaldik said in an interview last month. T-Mobile recently expanded a pilot program that provides fiber internet service using a local provider's network in New York City and two cities in Colorado.

Helping bolster AT&T's fiber ambitions is a $42.5 billion federal construction program. However, the government investments are rolling out slowly amid issues including labor shortages and permitting delays , said Garrett Baker, telecom and media investment banker at Lazard.

The company also formed a joint venture with asset-management company BlackRock to build fiber in metro areas around the country. AT&T and BlackRock have collectively invested $1.5 billion in the venture—named Gigapower—so far, the company said.

AT&T will serve as the anchor tenant of the Gigapower network, but other companies could also provide internet service over the network. That so-called open-access model has become common throughout Europe, but has yet to be widely embraced in the U.S.

Gigapower recently introduced plans to build fiber in Las Vegas, northeastern Pennsylvania and parts of Arizona, Alabama and Florida.

Some fiber companies have warned that build-out costs, from labor to supplies, are on the rise, leaving investors concerned that returns could be more muted than earlier forecasts.

"We're going to have no trouble getting the return on the investment," said Gigapower CEO Bill Hogg.