“Where we have fiber, we win,” AT&T chief financial officer Pascal Desroches declared during his company’s second-quarter earnings call Wednesday, an occasion where the wireless giant once again pushed what it calls its “convergence opportunity” to sell fiber home internet and mobile broadband together. 

As this slide presented during AT&T’s earnings call shows, its wireless market share keeps rising in the slowly growing coverage areas in which it can offer both fiber home internet and mobile service, reaching 39.5% in Q2.

AT&T did add an impressive 239,000 fiber-to-the-home subscribers from April to June. However, the Dallas-based wireless giant still only reaches around 12% of the U.S. with fiber. And some of the neighborhoods and towns it does serve with fiber remain a hodgepodge, with some individual streets covered and some not. 

Also Read: Cable Controlled 75% of U.S. Mobile Growth in Q1, Is Exploiting Convergence Advantage Over Wireless, Analyst Says

Forget for a moment that AT&T doesn't generate cost savings by delivering both services to the same customers, certainly not one that offsets the discount it's giving to subscribers who bundle.

As TMT equity analyst Craig Moffett once again noted Wednesday, the limited fiber reach makes it very hard for AT&T to market converged services.

“Put simply, if convergence ‘wins’ then Cable wins,“ Moffett wrote in a letter to investors. ”Cable, and only Cable, can offer a converged offering everywhere. And they do derive a cost benefit from convergence, in the form of offloaded mobile traffic that directly reduces their marginal costs under the MVNO agreement with Verizon. They pass along those cost savings to consumers in the form of lower prices … and voila, with lower prices comes higher market share. There’s a reason why Cable keeps capturing the majority of the growth in the wireless market (last quarter they captured 75%); it’s because their prices are lower.“

Nonetheless, AT&T CEO John Stankey indicated Wednesday that the company will keep going.

“I do see further runway and opportunity there for us to do more,” Stankey said. “And we're active in that space. And you should expect that as we move forward and we continue this race to convergence. It’s one of the tools we’re going to do to put distance between ourselves and everybody else.”

UPDATED: AT&T responded to our story (and our snarky headline) with these points:

* AT&T has the largest fiber network in the country, with nearly 28 million locations and is on track to pass 30+ million by the end of 2025 (with potential to go beyond those targets by 10-15 million additional locations). There is plenty of room to offer converged service to this large population, and they can go further by expanding efficiently with Gigapower. 

* Fiber connectivity is also a superior product to cable – and customers are willing to pay for faster connections, which will be increasingly more important as data use continues to grow.  So, it’s not just about price.

 Just weeks after Charter Communications slashed prices for its Spectrum Mobile offering to $29.99 per month, chairman and CEO Tom Rutledge said charges for wireless cable offerings could drop further as the cost to provide service continues to decline.

“I think the mobile opportunity is very similar to the wireline opportunity that existed 15 years ago,” Rutledge said at the virtual/in-person Liberty Media Investor Day in New York. “Look at what happened there — we had a high-priced wireline phone service — in the metro area here, it was about $72 a month. That product now is less than $15 a month. And the biggest wireline phone companies in America are Comcast and Charter. So, I think the opportunity in mobile is similar. It’s got its own complexities, but the opportunity is there to create value for consumers. Consumers actually save money and we make money. That’s a pretty attractive business model that is available to us. And yeah, I think it leads toward convergence.” 

Charter introduced its $29.99 price point — for a minimum of two lines each — in October, a big discount from its previous charge of $45 per month, per line. That price reduction came on the heels of Comcast introducing a $30 per line service (for a minimum of four lines) which took effect in April. 

In a research note, Bernstein media analyst Peter Supino wrote that Rutledge’s comments provided “a muscular reminder of Charter’s ambitions and competitive advantages.” 

“Charter will sell wireless as aggressively as necessary to ensure that it achieves growth of customers and EBITDA per customer,” Supino added.

Also: Analyst Says It’s Time to Take Cable Wireless Seriously

Liberty Media chairman John Malone said that while convergence of fixed and wireless assets is common in Europe, where Liberty, a major Charter shareholder, has substantial holdings, it hasn’t yet taken hold in the U.S. While European companies have made bigger strides in deploying fiber networks compared to their U.S. counterparts, Malone stressed that every company and every market is different. 

“I’d start by reminding everybody that Europe is largely converged, the broadband companies are also wireless companies,” Malone said at the Investor Day. “That’s been true in every market we’re still operating in. In terms of technology, existing network structure, the nature of technological upgrade, the pressure from competition, etc. Every market is different.”

Malone added that in the U.K. for example, Liberty overbuilt itself with fiber, initially to capture more B2B business and because it was relatively cheap to build. The U.K., he said, also is relatively underbuilt — there isn’t a lot of fiber capacity and areas will be built out as opportunities present themselves. In the U.S., Malone said the biggest area for growth could be in boosting upstream capacity. 

“That may be more of a political reality than a business reality in the near term,” Malone said.  “And the cable industry contemplated that, and does have the capability of vastly expanding the upstream capacity.”

Malone said outside of the U.S., there has been a movement toward collectively building networks.

“In some places there is only one fiber backbone network that will be built and everyone will share and use it. So the models vary and in each location it depends on capital efficiency, the current state of play, cooperation between multiple players. It’s not uncommon. For instance in the U.K. there are four meaningful cell phone providers but only two networks, and those four competitors share  those two 2 nets as a matter of capital efficiency.”

Liberty CEO Greg Maffei added that the path U.S. cable companies have taken by upgrading using DOCSIS and other technologies to boost capacity and efficiency gives them some leeway before having to decide whether to go deeper into fiber expansion.     

“It’s a long ride for U.S. cable,” Maffei said. ■ 

With the cable industry in probably its greatest period of change since the invention of hybrid fiber coax, small and midsized cable operators are set to converge on San Antonio, Texas, next week (Feb. 12-13) for the National Cable Television Cooperative’s annual Winter Educational Conference. Themed “Break the Rules,” the conference offers networking opportunities as attendees engage with peers and experts in the technology, legislative and business fields to share ideas and best practices. NCTC president Rich Fickle spoke with Multichannel News about the conference and some of the topics that are top of mind for small and midsized cable operators across the country. Here are highlights.

MCN: What do you see as the biggest issues facing small and medium-sized operators today, and how are you addressing them at this conference?
Rich Fickle: On the video front, our focus based on members’ input is to help them get to a video platform that is low cost, but has very competitive features. One of the main themes that you will see at the show is we’re encouraging members to think about going app-based. In other words, you don’t have to have a set-top, you can download an app onto Roku or an Android set top or Apple TV and it will have the cable operator’s lineup. That blends the content choices in with OTT offerings for the consumer.

The driver of that is twofold: One is lowering the cost structure, because programming costs are taking most of the money out of the video business; and secondly, in an IP world with consumer devices like that, you can get a lot more innovation than you can out of the traditional MPEG2 set-top-supplier world.

MCN: How is that going to lower costs? Is it just equipment — set-tops and the like — or is this going to mean lower costs for programming, too?
RF: I wish it would lower programming costs, but definitely the cost of set-tops. In our world, members have been paying $300 to $400 per home or more just for set-tops and in this environment you could choose to let the consumer provide the set-top or you could provide one that is a lot less, like $70 per TV. This type of transmission, using IP, is a lot more bandwidth-efficient, so it is going to save, over the long term, bandwidth. If you want to have a more robust on-demand offering, if you want to have a better mobile solution, these things are part of the whole offering. You don’t have to stand up a lot of new infrastructure to get that done. It’s just a lot easier to bring new features in without huge cost.

MCN: Do you think the time is ripe for this because broadband has taken such a front-and-center role, and cable appears to be the quality and capacity leader?
RF: If you’re going to put investments into your business, the best place to put it is in making sure your broadband network is robust and high capacity and things like helping customers with their home network and ensuring that the service quality is super high with wireless routers and monitoring capabilities. It’s much better to put your money in those things rather than legacy video set-tops or legacy video headend equipment.

MCN: What other things are you seeing that look promising on the tech front for smaller cable operators?
RF: The home networking side is looking pretty exciting because there are now a dozen new companies entering that space. The interesting part is the software control systems that monitor what’s happening in the house and make it easy to ensure the quality is really good.

[In] the network itself, there are a lot of interesting things going on with deep fiber, the idea of wireless to the home from the last couple of hundred feet — we have a few members testing that out already. So instead of running a cable drop, you’re setting up a wireless connection into that home and in some cases a business.

MCN: Tell me what else is in store for conference attendees?
RF: We’ve got some great speakers. Jonathan Taplin, who wrote a book [Move Fast and Break Things] about breaking the rules. He’s kind of a renegade in the media world; he should be a provocative opening speaker. We also have the editor-in-chief [Nicholas Thompson] from Wired magazine. The other item that we are focusing on in this show is more sales and marketing. We’ve got a couple of really good sessions and a dynamic speaker to talk about, in this world of more competition, how do you change your approach to sales and marketing. Plus, we’re going to have fun. A big part of the reason people come is they want to share ideas and it’s where they learn what’s working and what’s not working.

NCTC’s WEC at a Glance

Where: Marriott Rivercenter, San Antonio, Texas When: Feb. 12-13 Key Speakers: Jonathan Taplin, director emeritus of the Annenberg Innovation Lab at the USC Annenberg School for Communication and Journalism and author of Move Fast and Break Things; Wired magazine editor-in-chief Nicholas Thompson; Meridith Elliott Powell, author and business strategist; Matt Polka, ACA president; Gerard Kunkel, founder/managing partner, Next Media Partners.

RELATED:Pay TV's 'New Normal': Brahm Eiley on Convergence Consulting’s ‘The Battle for the North American Couch Potato’ Study

Canadian research company Convergence Consulting Group estimated that 1.13 million U.S. TV households cut the cord in 2015, about four times the pace of 2014, with another 1.11 million expected to cancel their pay TV subscriptions in 2016 as over-the-top and mobile services continue to grow.

In its annual research report – The Battle for the North America Couch Potato – Convergence said that although pay TV revenue rose 3% in 2015 to $105 billion and should  increase another 2% to $107 billion in 2016, it was far below the pace of OTT services. Convergence estimated that OTT revenue increased 29% to $5.1 billion in 2015, rising another 30% to $6.7 billion in 2016.

The pay TV universe continued to shrink – the report estimates that there was a decline of 1.13 million U.S. TV  subscribers in 2015 (compared to 283,000 in 2014). Cord never/cord cutter households – those that do not subscribe to a pay TV service – also were on the rise to 24.6 million in 2015 from 22.5 million in 2014. Convergence estimates that 26.7 million households (an increase of 2.1 million homes) will join the cord-never/cord-cutter ranks in 2016.

Content spend increased for both traditional and online networks in 2015, with Convergence  predicting traditional networks spent about $53.1 billion on content in 2015 (up 8%) while new players like Amazon, Apple and Netflix spent an estimated $7.1 billion in 2015 up 27% over the prior year. Increased spending is expected to continue for both sectors – Convergence estimates traditional networks will shell out $57.2 billion for programming in 2016 (up 7.7%), while non-linear providers will spend $8.7 billion this year, up 22.5%.

San Francisco -- Even more than "convergence," the terms "clustering," "bundling" and "stickiness" were the buzzwords at the CTAM Summit here last week, as marketers gathered to discuss the challenges facing them in stepping up introductions of digital cable, telephone and high-speed Internet products.

The annual Cable and Telecommunications Association for Marketing conference drew a better-than-projected crowd of more than 2,600. General-session speakers such as AT&T Broadband & Internet Services CEO Leo J. Hindery Jr., CNET CEO Halsey Minor and Benchmark Capital general partner Bruce Dunlevie drew standing-room-only crowds in the large ballroom at the San Francisco Marriott.

Not all of the attendees were cable marketers: Because of its proximity to Silicon Valley, the summit drew attendees who were interested in the anticipated convergence between television and the Internet.

The show also drew a healthy number of international cable executives who were interested in hearing U.S. success stories. And there were more than a few well-known former cable and satellite executives between jobs who were as quick to exchange resumes as others traded business cards.

But their out-of-work status carried no stigma at the CTAM Summit, considering the fact that one of the more popular masters of ceremony there, CTAM Summit co-chair Lou Borrelli, is himself without a full-time gig.

Cable marketers were urged to get their operational houses in order before they move too quickly to new product launches.

"It's hard to do many things at once well," Dunlevie cautioned, saying MSOs would be wiser to improve customer service or programming than to branch out into local telephony.

"One of the key challenges I see is the healthy tension between deployment of new services and hanging on to our [current] customers," said David Watson, newly appointed executive vice president of sales and marketing and customer service for Comcast Corp.'s Comcast Cable Communications Inc.

Some of the things MSOs need to focus on operationally are answering the phones in a timely manner, solving customer problems and sending technicians out when they say they will, Watson said. "We have to do all of this right before we can go forward with the new services," he added.

At a Tuesday-afternoon panel, Watson recounted a complaint by a customer who had called Comcast with a problem only to have the operator hang up on him after saying, "I have nothing I can do for you."

Of course Comcast, like other MSOs, has started to deploy new services in some of its markets.

MSOs are doing so not just to put their collective marketing prowess to the test, but also as a defensive strategy against other communications industries and, probably more important, to make good on promises made to Wall Street.

Speaking of the importance of adding new services to help protect the core business, Hindery said, "Retention is always a challenge, especially in a fiercely competitive market. Our goal is to market bundled product and service packages that are so attractive and value-oriented that they become what I call 'sticky.'"

In a test in Fremont, Calif., AT&T Broadband is offering a 25 percent discount on long-distance and local telephone service for cable customers, although the bills are not yet bundled.

AT&T Broadband has 1.4 million digital-cable customers, with expectations of hitting 1.8 million by the end of the year, not including those expected to come over to it from MediaOne Group Inc. next year.

The MSO also aims to gain 25 percent penetration of homes passed for its AT&T@Home high-speed online service within the next five years, Hindery said.

Minor cautioned that the battle over open access to cable pipes could work against cable, advising cable marketers to remind potential data subscribers that other Internet brands are available through their broadband pipe.

"Open access is actually good because companies will pay cable operators for a place on their pipe, and it will make it good for consumers," he added.

Time Warner Cable, which just launched its first digital-cable markets earlier this summer, has already signed up nearly 40,000 customers in its first four markets, chairman and CEO Joe Collins said. The MSO is targeting a deployment of 400,000 digital set-top boxes by the end of the year, and it is in launch mode in 22 markets.

This fall, Time Warner will launch its Road Runner high-speed online service in Manhattan to heavy pent-up demand, Collins said. At the same time, the MSO will launch digital cable to New York City's outer boroughs, such as Brooklyn and Queens. Next year, Manhattan and the outer boroughs will have both services.

"The New York market is 1.2 million subscribers," Collins said. "We'd simply get overwhelmed if we offered our products to everyone all at once."

While continued clustering will help MSOs to advertise more efficiently across a given market, Collins expects that at least initially, Time Warner will only market as heavily as needed to fill the customer pipeline. "Otherwise, we have too many people in the backlog," he said, "and they get mad if they have to wait too long."

An early believer in the power of bundles, Cox Communications Inc. already has several-thousand customers who buy all three of its services -- voice, video and data -- although they're not yet bundled under a single bill.

"Ultimately, we want to give customers a choice of a single or multiple bills," Cox executive director of marketing David Pugliese said. "Some customers don't want to pay $150 at once for cash-flow reasons."

Pugliese added that Cox plans to offer bundles to drive revenues, to reduce acquisition costs by sending a single marketing piece instead of three, to discourage competitors from coming into its markets and "to make it difficult -- even painful -- for customers to downgrade" when they're pitched by direct-broadcast satellite, for example.

He stressed that brand extension would be crucial in the transition from a video-only provider to a supplier of multiple communications services.

"What good does it do you to offer new products and services if your customers only know you and trust you as a cable company?" Pugliese asked.

Even as MSOs protect their core video business and continue to roll out new services, they must keep at least one eye out for new consumer applications that are likely to gain force in the next five years, such as electronic commerce, video-on-demand and new services yet to be invented.

But not every new idea will win cable customers over.

"The saying, 'If we build it, they will come' just doesn't apply anymore," Oxygen Media CEO Geraldine Laybourne warned. "If you don't build it with the consumer in mind, they won't stay."

Collins gained some perspective on consumers' interactive buying habits through Time Warner's two-way Full Service Network trial in Orlando, Fla., in 1992.

Initially, it's hard to get customers to buy certain products, like clothing or curtains, online, Collins said, but consumers do like to buy stamps online.

"People don't like to go to the post office," he added. "It's kind of scary there."

Jim Forkan and Hank Kim contributed to this story.