This Could Send AT&T Stock Soaring
After the success of a little-known pilot program, AT&T, Inc. (NYSE:T) is ready to go into expansion mode. I’m looking for huge gains in T stock, as the company expands its delivery of Internet through fiber optic cables.
In case you’re unaware, this is the next revolution in Internet speed. By planting a direct fiber optic cable to your house, AT&T can create download speeds of one gigabit per second. To put that into perspective, you would be able to download dozens of songs in a single second or download a high-definition movie in half a minute. (Source: “AT&T GigaPower,” AT&T, Inc. web site, last accessed December 7, 2015.)
Buffering would be a thing of the past. The efficiency of Internet speeds will pick up enormously when AT&T has opted for fiber optic cables over the existing lines for cable TV and phone connections.
Those traditional methods of transmitting the Internet were used because the infrastructure was already in place. There was no need to build a whole new grid for the Internet when existing lines could be adapted to serve dual purposes.
But Internet service providers failed to account for how popular the Internet would become. We use it constantly. It’s become apparent that our Internet infrastructure—that is to say the servers, microprocessors, and network of cables—is not enough to match our appetite for Internet consumption.
But fear not, as AT&T is willing to cough up the upfront costs to catapult Internet speeds to the next level.
AT&T vs. Google: Who Will Win the Fiber Network Race?
The only other big player working in the same space as AT&T right now is Alphabet Inc (NASDAQ:GOOG), formerly known as Google Inc. Both companies picked obscure little towns in the middle of nowhere to test out their technology. In fact, the idea was originally from Google.
Back in 2010, Google unleashed its “Google Fiber” program on 500,000 residents. It was a bold and ambitious idea, but not necessarily one it could keep to itself.
As an existing service provider, AT&T was already operating across huge swaths of the United States. The company moved quickly to close the gap with Google and as of this week, AT&T has officially leapfrogged Google in terms of customers reached with its fiber network. All told, AT&T is rolling out the fiber option to 56 metro areas, including Los Angeles and Detroit. (Source: “More AT&T customers will soon get access to its fastest broadband option,” CNET, December 7, 2015.)
Taking the early lead could cement AT&T as the market leader in Internet service. Just think about it as a logical progression: 1) the Internet’s importance will only continue to grow; 2) people will be more intolerant of wait times and lags in speed; 3) they will seek a more reliable and faster source of Internet delivery. And since the fiber optic delivery system requires physical infrastructure, it will be difficult for a rival to supplant AT&T once it has enough cities under its belt. Although it may seem like heresy, even Google wouldn’t stand a chance.
The Potential for AT&T Stock
From my vantage, the math on T stock looks fairly easy. The only difficulty is the actual physical act of laying the fiber optic cable. It isn’t that thick, but laying anything underground in a downtown core would be troublesome.
There will probably be regulatory hurdles, zoning restrictions, and construction delays. But when you consider that faster Internet speeds will be an inevitable demand from consumers, the complexity of the problem changes.
At that point, the question becomes, what if someone else does it first? Current Internet service providers could be undercut if a third party disrupts their business model by offering this revolutionary, fast Internet (I’m looking at you Google!). Thus, it makes perfect sense to endure the hassle of planting new fiber optic cable.
Securing the market before all the rest have caught up promises big rewards for AT&T stock.