AT&T announced Thursday that it has reached an agreement with an alliance of municipalities and universities that would enable the company to begin rolling out ultra-high-speed Internet service to parts of the Triangle and the Triad.
The agreement identifies Carrboro, Cary, Chapel Hill, Durham, Raleigh and Winston-Salem as cities where the company believes there is enough customer demand and local government support to warrant making the costly fiber installations that are necessary for such a network.
The agreement must be ratified by the six municipalities, all of which are members of the N.C. Next Generation Network. The network, which also includes UNC-Chapel Hill, Duke University, N.C. State University and Wake Forest University, has been negotiating separately with eight private companies to build a “gigabit” network, in part by using existing fiber-optic lines, underground conduits and data centers.
Time Warner Cable, which is being acquired by Comcast, and AT&T are the only two companies that have publicly acknowledged being involved in the negotiations, and AT&T is the first company to reach an agreement.
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“This is a huge milestone and I think a really important recognition that gigabit networks are not just something of the future but something we all have to be paying attention to today if we want to be competitive in the new marketplace,” said Tracy Futhey, chair of the network’s steering committee and Duke University’s chief information officer.
It’s also a sign that Triangle consumers may ultimately benefit from increased competition in a business that has historically been dominated by Time Warner Cable.
Google in February identified the Triangle as one of nine metropolitan areas where the search giant is considering expanding its high-speed Internet and TV service known as Google Fiber. The company expects to decide by the end of the year which markets it will enter.
The five Triangle cities targeted by AT&T are also being considered by Google. Google has asked the municipalities to work through a checklist of items designed to expedite the construction of a fiber-optic network. AT&T’s agreement with NCNGN covers similar ground.
“What they have stated to us is they would help ensure that we had streamlined processes that would prevent delays and costs in deploying the network,” said Vanessa Harrison, president of AT&T North Carolina. “They would also work with us as we go through this to ensure any roadblocks were removed.”
AT&T’s gigabit service, called GigaPower, offers speeds that are about 20 times faster than most broadband connections. The service is currently available in only one market: Austin, Texas. The company says it has signed up tens of thousands of customers in that city since it began offering the service in December, with demand outpacing expectations.
“We’re hoping that will happen here and expedite further expansion,” Harrison said.
AT&T declined to provide a time frame for when it might move forward with building its network and signing up customers. The timing will depend in part on how quickly the municipalities ratify the agreement with the company.
Google a catalyst
AT&T introduced GigaPower in Austin after Google Fiber announced its intention to enter the market.
Harrison said AT&T’s efforts to bring the service to the Triangle and Triad shouldn’t be viewed simply as a response to Google. She noted that while Google plans to offer its service only to residential customers initially, GigaPower will be offered to both businesses and homes. She said AT&T had been in negotiations with NCNGN since May, well before Google announced its intentions.
But Jeff Heynen, a Wake Forest-based analyst with Infonetics Research, said there’s little doubt that Google’s actions are prodding other players to act.
“Obviously Google has been this catalyst for AT&T and others to respond to what they’ve done in Kansas City and Austin,” he said. “Here’s an opportunity really for AT&T and Time Warner to respond and get ahead.”
Heynen said the Triangle is an ideal market for rolling out a high-speed network. The region has the large universities and high-tech workers that drive demand, and the efforts of NCNGN are making it more economical for companies to build a network over a sizable area.
“Other areas of the country, it’s either been a university initiative or individual towns or municipalities,” he said. “This is a fairly unique situation where you’ve got a number of towns that have signed on to it as well as universities.”
While building a high-speed fiber network requires a considerable investment upfront, Heynen said the profit margins on the service can be as much as 60 percent or more.
AT&T, in particular, may have an advantage over its competitors, he said, because it has already deployed quite a bit of fiber in Triangle neighborhoods while it rolled out its U-verse cable television service.
GigaPower provides customers download and upload speeds of up to 1-gigabit. By comparison, AT&T’s existing Internet service in the Triangle offers download speeds of 45 megabits-per-second and upload speeds of 6 megabits-per-second.
AT&T charges as low as $70 a month for the service in Austin, according to the company’s marketing materials. In Kansas City, the first market that Google Fiber entered, the company is charging $70 a month for 1-gigabit-per-second uploads and downloads.
Heynen said the presence of multiple competitors should ultimately lead to lower prices, particularly given how aggressive Google has been in offering its service at a low cost.
“This is certainly one of those regions where competition, especially on the fiber side, would be welcomed from all of us as consumers because it’s going to keep pricing down,” he said.