AT&T Launches GigaPower in Kansas City: Important Test of Market Dynamics Looms

We soon will find out what the dynamics of a three-provider fixed network high speed access market look like, as AT&T has launched it “GigaPower” 1-Gbps access service in parts of Kansas City, Mo., parts of Leawood, Lenexa, Olathe, Overland Park, Kan. and in surrounding communities located throughout the metro area.

AT&T also has plans to expand the service to Independence, Mo. and Shawnee, Kan.

Perhaps the only issue is what share the new market might take, as some surveys suggest Google Fiber gets as much as 50 percent take rates. If that happens, the former market share leaders--Time Warner Cable and AT&T, might easily have lost half of their respective customers for high speed access.

Whether even a triple-play provider can sustain itself on just 25 percent take rates is the issue now to be tested. Survival would not seem to be out of the question, but profit margins would be very squeezed.

Splitting the high speed access market, AT&T and Time Warner Cable might have gotten between 20 percent and perhaps 40 percent profit margins on high speed access service (allocated overhead across voice, video and high speed access is somewhat arbitrary).

It might not be unreasonable to suggest profit margins have been sliced to a range of 10 percent to 20 percent after the loss of customer share.

U-verse High Speed Internet 1Gbps costs $70 per month, and AT&T is waiving equipment, installation and activation fees, as well as offering a three year price guarantee.

U-verse High Speed Internet 1Gbps with subscription video starts at $120 a month.

A U-verse triple play starts at $150 per month.

Kansas City will be one battleground where we begin to see how the business model for a triple play services provider changes in a three-provider market.
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