AT&T CEO Says FCC Shouldn't Spend Time on Net Neutrality NPRM

AT&T reported 468,000 postpaid phone and 296,000 AT&T Fiber net adds in Q3, as it became the first of the major carriers to report. Other financial indicators were also mostly an improvement over last year. CEO John Stankey slammed the FCC’s expected vote later that day approving an NPRM on net neutrality (see 2310190020), suggesting policymakers should address other problems. “Why we would use taxpayer money and resources and political capital to chase a problem that doesn't exist is a bit of a mystery to me,” Stankey said Thursday.

“There's more choice every day in the broadband industry,” Stankey told analysts: “There's no indication that in the ISP segment there's any discrimination going on. We have an industry in aggregate that supports no blocking, no paid prioritization, no throttling, contrary to what we see going on with some platform apps that are out there that are choosing to do some of those things and how they operate their business.”

Policymakers should focus instead on “potential bipartisan issues” like a competitive spectrum policy for the U.S. that will “keep pace with places like China,” Stankey said. The FCC should also address “a broken” USF system. “These are bipartisan issues that need to be dealt with and solved, and I think that's where regulators should be spending their time,” he said.

Stankey said discrimination by ISPs is “the last of customers' concerns” and “no customers are complaining about what's going on.” AT&T plans to participate in the NPRM “constructively” and will submit data, he said. “I think the facts are pretty clear,” he said.

Stankey also hailed the results posted Thursday. Revenue was $30.4 billion, up 1% year over year. Operating income was $5.8 billion compared with $6 billion a year ago. Free cash flow (FCF), an issue in earlier quarters (see 2304200059), was $5.2 billion, compared with $4.78 billion in the year-ago quarter, beating analysts’ estimates of $4.6 billion. AT&T forecast full-year FCF of about $16.5 billion, compared with previous guidance of $16 billion or better.

Post-paid churn was .79%, an improvement over .84% last year. FirstNet connections hit 5.3 million across almost 27,000 agencies. Mobility service revenue was up 3.7%, the best-ever performance for the metric. “Our strategy is working and sets us up for continued sustainable and profitable growth,” Stankey said: “We're meeting rising data demand with best-in-class 5G and fiber solutions.”

The carrier launched AT&T Internet Air, its fixed wireless product, in August, Stankey noted. “We've been pleased with the positive early reception and have already added about 25,000 subscribers, pushing us back into positive territory for overall net broadband growth of 15,000 subscribers in the quarter,” he said.

MoffettNathanson’s Craig Moffett told investors AT&T still faces headwinds. “As much as we’d like to embrace the bull thesis -- there’s no disputing that the stock looks cheap -- in our view, the bad still outweighs the good,” he said. Among these challenges are pricing, he said: “While headline prices might be rising, so are promotional giveaways.”

The major carriers face a growing challenge from cable wireless and “there’s still the albatross that is AT&T’s Wireline business,” Moffett said. Carriers also may have to invest more in spectrum purchases “which aren’t counted as capital spending but should be,” he said: There’s also “the sheer quantum of debt, and the risk to earnings as that debt is steadily rolled at higher and higher yields.” Moffett also said he had questions about the FCF reported by AT&T.