With the rise of agentic AI poised to alter network data demands and requirements, AT&T seems to be saying, “bring it on.”
AT&T President and CEO John Stankey used portions of today’s Q2 earnings call to provide assurance that the company’s wireline and wireless networks are well positioned – particularly in the wireless upstream – to meet the challenges of agentic AI. That challenge centers on an anticipated surge in enterprise and consumer traffic in the coming decade. Cisco Systems’ first report on the impact of AI on wide area networks predicts that consumer-driven network traffic will grow by about 6.6x by 2035, with AI inference traffic expected to represent 25% of total network traffic by that time.
“The rise of agentic AI is fundamentally reshaping network traffic, not just in volume, [but] shape and symmetry and criticality,” Stankey said, citing emerging use cases spanning drones, autonomous driving, robotics and AR glasses. That, Stankey added, “is driving a fundamental change in [customer] expectation for connectivity.”
That means more investment at the edge of the network paired with ongoing fiber network buildouts and wireless networks that emphasize improved performance in the upstream, he said.
“You need to build better upstream” in the wireless network to account for AI, Stankey said. That, he explained, ties into the reasons why it moved to acquire spectrum from EchoStar and to lean hard into the 600MHz band.
Managing a robust upstream in an agentic environment requires “a really strong lowband position,” he said.
AT&T is already deploying midband spectrum it’s acquiring from EchoStar, but AT&T’s rollout of 600MHz lowband spectrum will take years. Stankey said he expects the EchoStar spectrum transaction to close by the end of July.
Fiber and FWA subs continue to climb
AT&T continued to rake in subscribers in an “advanced connectivity” segment that includes fiber-to-the-premises (FTTP) and AT&T Internet Air, its relatively new 5G-powered fixed wireless access (FWA) offering.
AT&T added 215,000 Internet Air subs, up slightly from a year-ago gain of 203,000, for a grand total of 1.95 million. AT&T tacked on 279,000 total FWA subs in Q2, for a total of 2.61 million.
The company also added 344,000 residential fiber customers in Q2, up from a year-ago gain of 243,000, and aided by AT&T’s acquisition of Lumen’s fiber assets. AT&T ended the quarter with 12.14 million residential fiber customers. Stankey said fiber adds this period were AT&T’s best ever for a second quarter.
With DSL and other non-fiber subs factored in, AT&T added 90,000 consumer wireline broadband subs in the quarter, improving from a year-ago loss of 60,000.
Convergence strategy stresses fiber ARPU
AT&T’s fiber average revenue per user (ARPU) for Q2 was $72.29, down from $73.26 a year ago. CFO Pascal Desroches said that reflected the company’s focus on growing converged customer accounts that feature discounted pricing.
Desroches, who is set to retire at the end of the year and be succeeded by Jennifer Biry, said the convergence strategy will continue to put near-term pressure on fiber ARPU, but he stressed that the bigger goal is not to maximize the ARPU of individual products but to maximize total connectivity revenues.
AT&T Fiber and Internet Air customers who also take AT&T wireless grew to 5.98 million versus 4.53 million a year earlier, marking a penetration rate of 42.5%. Excluding the newly acquired Lumen footprint, AT&T’s convergence rate was 45%.
In the advanced connectivity segment, residential home Internet revenues for Q2 hit $2.92 billion, up from $2.29 billion a year earlier. Residential fiber revenues rose to $2.59 billion (versus $2.13 billion a year ago), and AT&T Internet Air revenues jumped to $333 million (versus $163 million a year earlier).
Some analysts aren’t as bullish about AT&T’s convergence strategy. “As we’ve warned many times, ‘convergence’ simply means ‘discounts.’ The product doesn’t work any differently. And the costs of providing mobility and FTTH together aren’t any lower than they are apart,” MoffettNathanson analyst Craig Moffett said in a research note (registration required) issued after today’s call.
Fiber builds, copper retirement
AT&T added 1.1 million consumer and business fiber locations in the quarter for a total of 38.6 million, including 32.1 million consumer fiber connections. That total comprises 33.7 million AT&T owned-and-operated fiber locations and 4.9 million through ventures such as Gigapower, the JV with BlackRock focused on builds outside of AT&T’s legacy wireline footprint; and Forged Fiber 37, the brand for the unit formed from AT&T’s acquisition of Lumen’s fiber assets. Forged Fiber 37 is a fully owned subsidiary today, but AT&T expects to sell a piece of this asset to a yet-unnamed equity partner.
AT&T’s current plan is to pass 60 million locations with fiber by 2030 via in-footprint builds, JVs and a handful of deals with open access providers.
Stankey also touted AT&T’s plan to retire its power-hungry copper network.
AT&T expects to turn down copper services to the bulk of its footprint (excluding California) by 2030, and has approval to disconnect legacy services in more than 30% of its wire centers, effective by late 2026. Stankey said AT&T expects that about 200 wire centers will have zero customers on them by year-end.
AT&T also has FCC clearance to discontinue copper in 60% of its wire centers in California. AT&T recently sued to preempt state requirements, arguing that they conflict with new FCC rules. However, AT&T’s plan for California was dealt a setback when a federal judge ruled that the operator must continue to offer legacy copper services to new customers in the state.