NEW YORK (TheStreet) -- So far, customers are giving AT&T  (T - Get Report) the strength to get out of the copper-line phone business.

The company's finances are like the ocean, seemingly flat but roiling underneath. So-called "legacy" revenue, from the "Telephone and Telegraph" in the AT&T initials, continues to fall. But for now it's more than offset by gains in high-profit Internet Protocol, or IP, business and cellular.

For the quarter ending in March, AT&T reported earnings of 71 cents per share, beating estimates by a penny, on revenue of $32.5 billion, which was in line with estimates

According to the company's 8-K, wireless revenue was up 7% year-over-year, and the company gained 1.062 million net new wireless subscribers, selling 5.8 million smartphones to what are now 116 million accounts.

Its NEXT upgrade program, under which customers pay off phones in 20 months through their bills rather than getting a discount in exchange for a contract, is proving popular with both customers and AT&T accountants.

Shares fell overnight, but had risen earlier in the day on news the company is launching a new streaming video service with the Chernin Group, headed by a former President of News Corp. (NWSA - Get Report)

The Chernin deal, headlined by an investment of $500 million, and the mobile phone gains are symbols of much bigger things happening on AT&T's balance sheet -- like the investments it still has to make in order to maintain its current 5.1% yield. Some of this was discussed in its earnings release.

AT&T had $5.8 billion in capital expenditure spending during the first quarter. It generated almost $8.8 billion in cash flow from operations. It needs almost $2.4 billion in earnings to fund its 46 cent per share quarterly dividend, and its board recently authorized a 300 million share buyback program, which could cost another $2.5 billion each quarter.

Must of that CapEx must go to its wireless service, where the company faces increased competition from T-Mobile (TMUS - Get Report) and the deep pockets of Sprint's (S - Get Report) new majority owner, Softbank, which is plowing gains from its investment in China's Alibaba back into the company in a bid to break the AT&T-Verizon (VZ - Get Report) duopoly.

Part of the threat in wireless comes from the coming FCC auction of old TV spectrum. AT&T is threatening to skip the auction if its actions are limited by agency desires to bring new entrants to the business. But can it really afford to do that and let Sprint take the prize?

Throughout the 20th century AT&T was, simply, the phone company. It was a closely regulated monopoly offering both local and long distance service. The company was the wire going into your home, but with profit limited by government.

The Internet is changing that, and AT&T badly wants the government to scrap the old regulations, treating it like just another Internet service provider, a scrappy underdog against Comcast (CMCSA - Get Report) and Google (GOOG - Get Report).

FCC chairman Tom Wheeler calls this the "IP Transition," and in January AT&T won the right to start trials of IP networks as a replacement for what is called the Public Switched Telephone Network, which the company wants to ditch.

Dropping the PSTN would eliminate both price controls and any obligation for universal service, so AT&T is drawing opposition to its plans in the form of filings before the agency. Still, it called the January vote a "bold leap forward."

To keep up the momentum in state capitols, AT&T has promised to bring 1 Gbps "Gigapower" service to 100 cities. Critics call this "fiber to the press release" since it includes few new builds and requires that states "selected" for upgrades let it bypass oversight over the rates it charges older customers on copper lines. But that plan, too, is succeeding

How long AT&T can maintain its 5.1% yield, its rich buyback program and its capital spending, while walking the wire of government regulation? That's the key question for investors.

Based on its latest quarter, however, AT&T has a long future ahead.

At the time of publication, the author held shares of GOOG and CMCSA but held no positions in any of the other stocks mentioned.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.