AT&T has long since been associated with telephones. So it came as a bit of a surprise that the telecom giant wrote a letter to the FCC in 2009 asking for permission to phase out their analog landline service.[1] It came as even more of a surprise when AT&T started declaring their intention to end copper POTS (Plain Old Telephone Service) by the year 2020.[2]

In both cases, AT&T has been promoting the idea that POTS and PSTN (public switched telephone network) are “relics of a bygone era.” To be fair, it’s easy to understand why — digital telephone service is almost assuredly the way of the future. It’s commonly accepted by consumer groups and telecoms alike that VoIP is the way of the future — the only question isn’t “if,” but “when.”

AT&T already offers digital telephone service in many areas, as well as a highly-integrated digital telephone service that it bundles with its U-verse system (soon to be re-branded “AT&T Internet”). It seems unlikely that AT&T has any interest in abandoning droves of loyal consumers, as the market is far too competitive to pass up monthly revenues from millions of customers. The question is, how will this transition happen in a way that works for both the company and the customers?

Change is Good for AT&T

Anyone who has ever owned an older car for any length of time has probably learned two things:

  1. Older cars break down more frequently as they age.
  2. Finding parts for older cars becomes more difficult and expensive over time.

This is a fitting analogy for AT&T’s investment in older analog devices that service PTSNs. Additionally, finding personnel capable of managing these aging systems is becoming harder, thus driving up the premium that AT&T has to pay for their services.

In short, maintaining and connecting two separate networks — one based on digital packet switching technologies and the other a PTSN — is an expensive proposition riddled with technical limitations. It’s difficult to justify investing serious capital into a system that is not expected to be relevant within three years.

Adding to AT&T’s network challenges, Congress has been pursuing a goal of universal broadband access for years now, which can be difficult for telecom giants to meet due to the technical restrictions that arise from mixing digital and analog technologies. The size and age of AT&T’s network certainly works against it in this regard, as it includes decades of “technical debt” from maintaining outdated and underused technologies.

While it’s easy to feel frustrated by the high revenues telecoms pull in, it’s hard to hold them accountable for customers who aren’t profitable since they are, for the time being, publicly traded companies with an obligation to their shareholders to behave in a fiscally responsible manner. This fiscal responsibility remains a primary concern even if it means that they forsake low-income areas and/or regions with low population densities. To date, attempts to find a middle ground between the free market and the FCC’s “universal access” goal have led to frustrating legal battles more frequently than satisfactory consumer ratings. [3]

It’s also worth noting that profits from POTS have been declining steadily since the start of the new millennium. In 2000, POTS systems in America generated a staggering $178.6 billion in total revenue, but only managed to eek out $130.8 billion in 2007. Factoring in depreciation of the U.S. Dollar, that is underwhelming. Of course, AT&T would probably be able to offer its U-verse service to countless new consumers, and that would certainly help improve their bottom line despite their renewed emphasis on their wireless services over their other offerings. [4]

Will switching to VoIP be a win for Consumers, Telecoms, or both?

Broadband access is critically important to the future of America in much the same way that electricity was only a few generations ago. Falling further behind in the broadband race is simply not an option, which puts AT&T in a tough place when it comes to spending money on outdated infrastructure to support a relative minority of customers. This could spur temporary job growth, which might be ideally timed given the economic crisis that grips America at this time.

What About Subsidies?

The obvious answer to inequality in communications provided by for-profit companies is subsidies. Namely, the FCC’s Universal Service Fund (USF), which subsidizes the services receive by millions of old POTS/PSTN subscribers. Unfortunately, subsidies are an area that has been mired in partisan debate and abuse for years — the outcry about so-called “Obamaphones” being the most recent example, in spite of the program being introduced under Bush II and a small handful of obscure telecom corporations being the main beneficiaries.

Fiber for all: AT&T’s Long Game

An old Chinese proverb states that there are many ways to move forward, but only one way to stand still. As AT&T moves towards a consolidated all-digital network, what will the future bring? Fiber optics might be the answer, as competitors such as Verizon have repeatedly demonstrated that they can increase the performance of existing fiber optic systems at prices only a slender fraction of what it would cost for a comparable upgrade to even an all-digital wired network.

For now, AT&T does seem to be following a similar course as Verizon, working towards a fiber-based network for wired service alongside their well-known wireless services.

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Jessica Sims

Jessica Sims

Jessica Sims is a technology blogger and broadband industry veteran. Her background as an administrator and customer support employee for a major ISP informs her passion for helping consumers understand their service options.

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