An Ignoble Experiment

AT&T (NYSE: T) is launching its much-talked-about 45/6 Mbps High Speed Internet Power option in California and Nevada to challenge incumbent cable operators Comcast (Nasdaq: CMCSA) and Charter Communications (Nasdaq: CHTR).

News of the new 45 Mbps offering should not be surprising. AT&T CFO John Stephens outlined the 45 Mbps service option during its Q2 2013 earnings call, adding that it plans to introduce a 75 Mbps and 100 Mbps option later this year.

The 45/6 Mbps option is part of the telco's Project VIP investment where it will expand and enhance its wireline IP network to about 57 million customer locations in its service territory by the end of the year 2015. As of the end of the second quarter, AT&T said it had expanded its wireline IP-based network build by "a total of 1.8 million U-verse broadband customer locations, including 500,000 U-verse video customer locations."

Eligible residential customers will be able to get the service at the introductory rate of $49.95 a month for up to 24 months when they bundle the broadband service with U-verse TV and voice services. Existing U-verse customers will have the option to upgrade their existing broadband package and get a $10 off their bill for 12 months.

After the introductory period ends, the Power tier will be offered at $76 per month.

In related news, AT&T announced that it is enhancing its U-verse TV U200 TV and U-verse Internet Max Plus bundle by offering HBO and streaming video service HBO Go on a promotional basis for up to 24 months. Customers who subscribe to the U-verse TV U300 package will get access to HBO and a number of other premium content stations for 24 months, including Starz and Starz Play, Encore and Encore Play, Showtime and The Movie Channel.

They can also purchase a $114 triple play bundle for up to 24 months that includes the U-verse TV U300 package, 18 Mbps Internet Max Plus, and U-verse voice.

Bundling was once again a factor in AT&T's Q2 2013 consumer wireline results.

The telco reported that about 90 percent of new U-verse TV customers also signed up for U-verse broadband, while about 70 percent of AT&T U-verse TV subscribers take three or four services from AT&T.

During the quarter, AT&T added 233,000 U-verse TV and 641,000 broadband U-verse customers, bringing it to a total of 5 million U-verse TV and 9.1 million broadband customers.

Second quarter U-verse revenues, including business, were $5.6 billion, up 2.4 percent year-over-year and up 1.8 percent from Q1 2013. U-verse now represents 51 percent of consumer revenues, up from 41 percent in the same quarter last year.

For more:
- see this release
- and the HBO announcement

Special Report: Wireline telecom earnings in the second quarter of 2013

Read more about: U-verse, Internet Speeds
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2. Alcatel-Lucent's IP division revenues rise 25 percent to $824M

By Sean Buckley

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Alcatel-Lucent (NYSE: ALU) may still be working through the company's restructuring process set by new CEO Michel Combes, but the company's IP division sales continued to be the star performer in the vendor's portfolio, rising over 25 percent year-over-year to $827 million.

Driven by the IP networking growth and gains in the North America market, overall company revenues were $4.7 million, up 1.9 percent year-over-year.

From a regional market perspective, Alcatel-Lucent reported that North America grew the fastest at almost 20 percent, while the Middle East and Africa grew 9 percent. In Asia Pacific, the vendor said weak sales in China were offset by "good traction" in Japan.

One of the major initiatives that Alcatel-Lucent took during the quarter was to implement Combe's "Shift Plan." Under this new program, Alcatel-Lucent will target around $1.34 billion in cost savings and plans to gain another $1.34 billion in unspecified asset sales. It will also focus its efforts on key areas such as IP networking and wireless.

Despite the revenue increase, the vendor suffered a net loss of $1.2 billion, or $.51 a share. The losses included restructuring charges of $257 million from the Shift Plan, an impairment charge of $732 million resulting from the impairment test review of its assets carried at the end of the quarter.

Here's a breakdown of their key units:

IP: The IP division's results were once again buoyed by sales of its edge routers and Carrier Ethernet switches, particularly in the United States and Asia Pacific, in addition to new growth in EMEA. The vendor said it is also seeing interest in the combination of its IP and Optical platforms as seen by new customer wins including Wind Telecommunications in Italy and Epsilon in Singapore. Another key area of IP growth is coming from its new 7950 XRS core router platform. While still new to the core routing game, Alcatel-Lucent won a contract with DE-CIX in Frankfurt, Germany and has overall 10 customers are using its core routers. It also has 20 other service porviders trialing the core router platform. In addition to its hardware platforms, Alcatel-Lucent's Nuage Networks software defined networking (SDN) solutions venture has begun a number of active trials with service providers in North America and Europe.
Optics: Optical revenues declined 7 percent to $559 million year-over-year. However, it reported that mid-single digit growth in the WDM portfolio, mostly in the United States and APAC. WDM growth partly offset the continued declines in the legacy product lines, which now represent 25 percent of the vendor's optical revenues. One of the key products in the next-gen optical portfolio is the 1830 Photonic Service Switch, which represented 31 percent of the quarter's optical revenues. Finally, it saw that 100G WDM line card shipments now represent 27 percent of total shipments in Q2 2013, up from 19 percent from Q1 2013.
Fixed Networks: Driven by growth in its VDSL2 and vectoring platforms, especially in the U.S. and Europe, Fixed Networks division revenues were $620 million, up 3.3 percent year-over-year. Alcatel-Lucent said the growth of the copper-based products were offset by weakness in ONT fiber products, representing now less than 30 percent of fixed networks products. The vendor's VDSL2 vectoring products have been deployed by 13 customers, including 2 new contracts in the second quarter, and are in 45 trials. One of the highlights of the quarter was that it conducted a trial of its G.fast Vectoring solution with A1, a subsidiary of Telekom Austria Group, where it delivered speeds of up to 1 Gbps over existing copper.

Shares of Alcatel-Lucent were listed at $2.41, up 21 cents, or 9.55 percent, in Tuesday morning trading on the NYSE.

For more:
- see the earnings release

Special Report: Wireline telecom earnings in the second quarter of 2013

Read more about: Alcatel-Lucent
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3. Allstream's Strople takes seat on Metro Ethernet Forum board

By Sean Buckley

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Canadian business services provider Allstream expanded its influence on the Ethernet services market as Mike Strople, its chief operating officer, was elected to the Metro Ethernet Forum's (MEF) board of directors.

Strople (Image source: Allstream)

Strople is the only director from a Canadian company to be appointed to the board.

During the MEF's annual meeting in Montreal earlier this month, the organization elected three new members to the board, including Strople, Rob Rockell, VP of Engineering for Comcast (Nasdaq: CMCSA), and Shahar Steiff, AVP Business Operations at PCCW Global.

Strople's appointment to the MEF board comes at a transitional time for the service provider.

In May, Allstream's parent Manitoba Telecom Services (MTS) announced that it agreed to sell the business services unit to Accelero Capital, a move that will enable it to sharpen its focus on serving the enterprise services market.

Seeing the opportunity to serve its customers that have facilities in the United States and those that are expanding into Toronto, Allstream established a second point of presence (PoP) with Telx at its facility on Cermak Street in the South Loop of Chicago's Central Business District. This location will give Allstream and its customers access to 40 domestic and international carriers and physical connection points to other telecom networks and Internet backbones.

Its partnership with Telx complements the work Allstream has already done to extend its fiber network to about 3,000 buildings throughout Canada and U.S. connection points in Seattle, New York City, Buffalo and Chicago.

For more:
- see the release

Read more about: Metro Ethernet Forum
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4. BT splits retail division into consumer, business units

By Sean Buckley

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BT (NYSE: BT) is realigning its retail division into two separate businesses--BT Consumer and BT Business--an effort the incumbent telco says will enable it to improve customer service and deliver on its strategic priorities.

Under this new structure, the service provider plans to market broadband-based consumer services and enhance its brand awareness with UK-based small to medium enterprises (SMEs).

Leading BT Consumer as its CEO will be John Petter, the managing director of the Consumer unit within BT Retail, while BT Business' CEO will be Graham Sutherland, currently managing director of the Business unit within BT Retail.

Gavin Patterson, Retail CEO, said in a release that "It is time however for the business to be split in two given the intensely competitive nature of the consumer market and our strong ambitions in the business space."

Petter and Sutherland will continue to report to Patterson when he takes over the post of BT Group CEO from Ian Livingston in September.

Today, BT Retail consists of four customer-facing units: BT Consumer, BT Business (which supplies SMEs), BT Enterprises and BT Ireland.

When the transition is complete, Enterprises and Ireland will merge with BT Business to form the new BT Business division while BT Wi-fi and the consumer part of BT Ireland will transfer to BT Consumer.

For more:
- see the release

5. Sprint's wireline revenues rise to $910M with voice service gains

By Sean Buckley

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