Print 30 comment(s) - last by OKMIJN4455.. on Jan 24 at 6:28 AM

AT&T may need to spend as much as $7B to catch Verizon's network

When it comes to wireless networks in the U.S. there are many claims bandied about by the various providers. Each clams to have the nation's fastest or most reliable network; and each claim is seemingly backed up by little verifiable data for the most part.

AT&T is the second largest wireless provider in America behind Verizon. AT&T is also one of the most maligned networks in the country thanks to what is widely perceived as a shoddy 3G network. In many cities large and small, the 3G coverage of AT&T is spotty and at times non-existent making for many irate customers. AT&T's wireless network ranked last in customer satisfaction in a Consumer Reports study conducted in December 2009.

AT&T maintains that the poor performance in some of its markets for its 3G network is due in part the huge amount of bandwidth that iPhone wielding customers consume. AT&T has seemingly brought the ire of analysts and customers on itself and also reportedly spends less on their wireless infrastructure than Verizon and third place Sprint per customer.

PC World reports that analysts from research firm TownHall investment Research estimate that AT&T needs to spend about $5 billion on its wireless network to catch up to the coverage that Verizon offers.

TownHall reports that AT&T has spent $308 per customer on its network over the last three years compared to $353 per customer from Verizon and $310 per customer from Sprint. AT&T spends more on its wired network than it does on its wireless network according to analysts.

Ironically, the wired network makes less money for AT&T than its wireless services. AT&T is said to get 57% of its operating income from wireless and only 35% from wired services. At the same time, wireless services only get 34% of AT&T's capital expenditure while wired services get 65%. AT&T apparently wants to change that situation though.

AT&T has asked the FCC to drop regulations that require it to support its aging wired network despite the fact that the use of the network is declining. AT&T has asked the FCC to provide a deadline for phasing out wired service around the country. If the FCC agrees, AT&T will have much more funds available for its wireless network. Whether or not the FCC will agree to the request is unknown.

TownHall's Gerard Hallaren figures that the amount AT&T needs to spend on its network could balloon to $7 billion thanks to the need for additional backhaul capability. AT&T is already adding additional backhaul capability to its towers in preparation for rolling out its faster HSPA 7.2 service and the transition to LTE networks starting in 2011.

Hallaren says, "This is going to be a juggling act for them [AT&T]."

The iPhone has been keeping many customers tied to AT&T thanks to the exclusive deal between AT&T and Apple. That exclusive arrangement is expected to end by the middle of 2010 – at that point, many expect to see a mass exodus of customers as they move from the AT&T network .

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By namechamps on 1/20/2010 11:39:32 AM , Rating: 5
Who would spend $5B today on 3G with LTE right around the corner.

Likely ATT will use iphone exclusive, termination fees, and sweet renewal deals to lock customers in for next 18 months despite crappy network and then look to upgrade to LTE in 2011.

Yeah they will do some token upgrades to 7.2mbps 3G but it will be just that a token upgrade.

By dubldwn on 1/20/2010 11:45:03 AM , Rating: 2
My iPhone contract goes until mid-2011 and I’ll hang with AT&T if they do make that token upgrade. 7.2 down on a phone is pretty fast. Plus, if a lot of the iPhone people leave, maybe my overall service will be better.

By Samus on 1/20/2010 12:22:10 PM , Rating: 1
Plus, if a lot of the iPhone people leave, maybe my overall service will be better.

Hah, funny how that works. Like if people drove less, gas would be cheaper.

By Targon on 1/20/2010 1:46:43 PM , Rating: 3
No, it is like saying that if fewer people drove cars, the roads wouldn't be as congested, and people could get places faster. A part of the problem that AT&T has is the bandwidth demand from iPhone users really IS very very very high, and no matter what Verizon may claim, once they start getting all the bandwidth hogs running to THEIR network, things will slow down over there too.

By Jalek on 1/20/2010 8:35:23 PM , Rating: 2
I've heard that many, many times. My original model's over 3 years old, and it's data totals are 35MB sent, 470MB received.

That's with some streaming webcasts and things, but I also connect to any open wireless I come across.

I'd allow that it's probably low, the person I got it from hardly streams anything, but half a gig of traffic in three years doesn't sound excessive.

By Ammohunt on 1/20/2010 2:18:40 PM , Rating: 2
Um thats exactly what happens. Gas prices are controlled primarily by supply and demand becasue of limited refining capacity

By JediJeb on 1/20/2010 3:36:04 PM , Rating: 3
Except when OPEC lowers supply as demand lowers to keep the price high.

By callmeroy on 1/21/2010 1:06:05 PM , Rating: 2
Or when speculators get involved like what happened last time we were knocking on the door to $4/gallon gas here on the East Coast.

By Regs on 1/20/2010 12:44:42 PM , Rating: 2
Who would spend $5B today on 3G with LTE right around the corner.

Since At&T did such a wonderful job of forecasting the demand for bandwidth use of a 3G network, I can imagine them doing even better with LTE. (sarcasm). And what does it matter? At&T will just barely meat the specs for "4G" or "LTE" and again fall short on bandwidth demand.

To me it sounds like they're trying to limit investment to keep up with the shorter life cycles in technology while also keeping their debt to equity ratio in check. Smaller upgrades take less time to roll out so you can keep the revenue stream open before the next product life cycle ends. After all, 4G is nothing more than a marketed term for a hopeful unified standard. If it is just a series of upgrades, who's to know any different when they come out with their press releases?

My worry with At&T is that they are ultra conservative (tight a**es). If they fall short of their potential or forecasts then they are going to lose out on a lot of money again come "4G". Then again, if something even better comes quickly down the pike after 4G and they all ready borrowed so much....

By The0ne on 1/20/2010 1:56:04 PM , Rating: 2
No one will for $5B. That would be insane ignorance.

By quiksilvr on 1/20/2010 7:38:57 PM , Rating: 2
Yeah, they would much rather spend 2.3 Billion dollars on advertising instead of improving their infrastructure.

Even with LTE around the corner, that doesn't automatically mean every 3G phone that AT&T watches over will magically transition to LTE overnight. They need to at least make SOME effort to improve their 3G network.

LTE is around the corner, but it will take a LONG time to expand.

Betwen a rock and a hard place
By 3minence on 1/20/2010 12:18:39 PM , Rating: 3
AT&T is in a tough spot. The government requires them to maintain a non-profitable wired network. To pay for this they offer a sub-par wireless network that charges full price while giving half service.

I understand why it's in the communities interest to have a wired network, but it puts AT&T at a serious disadvantage. At some point the government is going to have to financially support AT&T. It will be politically impossible to allow the wired infrastructure to die, and financially impossible for AT&T to keep it on life support.

Note, I'm not saying this is good, fair, or anything else, I'm simply pointing out possible political realities.

RE: Betwen a rock and a hard place
By Shig on 1/20/2010 1:13:38 PM , Rating: 2
FCC regulations definately need some updating, that is for sure.

I also hope that in the future there is some sort of program setup so the telecoms can buy and sell bandwidth on demand between each other. I can dream.

RE: Betwen a rock and a hard place
By docmilo on 1/20/2010 1:41:35 PM , Rating: 2
AT&T just needs to convince the US Govt. to invest in Magic Jacks. The Govt. could offers $19 rebates for the devices for home phone service and then those people could spend the money they used to on land lines on wired or wireless internet service. Large businesses should have enough bandwidth to move to internet based phone systems. There is zero need for land lines anymore.

RE: Betwen a rock and a hard place
By theapparition on 1/20/2010 2:55:04 PM , Rating: 2
And do tell, what does that Magic Jack plug into? Most of the country still recieves IP traffic over wired phone lines.

What was completely left out of this article is that Verizon and Sprint are also responsible for maintaining thier hardline infrastructure. Yes, even Sprint has a large hardline presence.

Why is it Verizon and Sprint can do it, yet AT&T has problems?

RE: Betwen a rock and a hard place
By JediJeb on 1/20/2010 3:47:19 PM , Rating: 3
I think it is funny that once AT&T was split up because it was a monopoly, and now it is buying up all the companies it split off into which are mainly wired telecoms, and then complains about having to upkeep them. If they hadn't tried to rebuild the old company and just shifted focus to wireless then they would not have the wired infrastructure to worry about.

Also I don't see how they could drop support for the wired or the government even allow it, because there are so many places that have wired service that have never had any kind of wireless service available. When there are places where houses are 5-10 miles apart, I think it is still cheaper to run a wire to them than put up a cell tower that might support 3 or 4 users.

By Mojo the Monkey on 1/21/2010 6:22:49 PM , Rating: 2
I wonder whats stopping ATT from just setting up a quick second corporation in charge of JUST the landlines. Call it UBERTELCOMGLOBODYNE and underfund it, stack the board with idiots, have a pure-IPO to prevent obligation to existing shareholders, sever all financial ties, and kick it off the deep end.

problem solved.

More fuel for Big Red's fire...
By funkyd99 on 1/20/2010 1:06:12 PM , Rating: 2
First it was mandatory data plans on "advanced" dumb phones like the enV Touch... then it was $350 ETF's. Then the FCC started poking it's nose in uncomfortable places... why the $350 ETF's? Why the $1.99 data charges for pressing a wrong button, even when data is blocked?

To compensate, VZW drops the $350 ETF's and lowers the prices of unlimited plans to bring some good press their way. Oh, and they add mandatory $9.99 data charges for all but the most dated dumbphones and drop the connect and premium plans, making data on VZW basically mandatory and more expensive than any other carrier.

I have a feeling there's a limit to how far people will bend over for VZW, and we're reaching it pretty quickly.

RE: More fuel for Big Red's fire...
By bespoke on 1/20/2010 2:02:37 PM , Rating: 2
AT&T has picked up this practice as well. I was looking for an AT&T phone for my mother-in-law and only the most primitive phones do not require you to have a $20/month messaging or data plan.

By PitViper007 on 1/20/2010 3:33:25 PM , Rating: 2
Funny, my wife and I were just looking at new phones for her this morning, since she's due for a new one. I noticed that, like you said, all but the very BASIC phones required the $9.99 data plan.....Huh? A phone that at it's best, acts like an MP3 player needs a data plan? Geez.

By Bateluer on 1/20/2010 4:53:40 PM , Rating: 2
I had no problems walking through several of VZW's phones with only a voice plan, pay by the message texting and pay by the megabyte for data. It can be done, but the question is, why? Many of those features are fast becoming staple features.

The FCC poked at Verizon at the prodding of AT&T, nothing more. The 350 dollar ETF is high, but you know about it up front when you sign the contract, its not like they took any steps to hide it.

They might as well
By DEredita on 1/20/2010 11:21:13 AM , Rating: 1
They might as well make the investment. They can't keep up forever if they stick to the status quo.

RE: They might as well
By SublimeSimplicity on 1/20/2010 2:08:11 PM , Rating: 2
You realize we're talking about at&t, right?

They've been one of the largest companies (in one form or another) in America for over 100 years with a corporate mission statement of "stick to the status quo"... I might be wrong, but "status quo" may even be a trademark of theirs.

RE: They might as well
By mcnabney on 1/21/2010 11:29:28 PM , Rating: 2
They need a hell of a lot more than $5B to catch-up. AT&T is also very low on spectrum. Purchasing the spectrum to match Verizon's network would cost more than $25B (that is how much VZW spent in the last 700mhz auction). Add to that the need to spend a quarter million per tower to bring HSPA to all of the non-3G towers (about 30k) that is going to add another $10B. No, I don't see AT&T spending that money because they are already sending dump-trucks full of their cash over to Apple to desperately cling to their iPhone monopoly....

By zephyrxero on 1/22/2010 4:07:35 PM , Rating: 2
This article appears to be written a bit misleadingly at the end where it talks about AT&T wanting to get rid of their wired network. That's not what their FCC request was about at all...they want the FCC to quit forcing them to maintain copper lines so they can start pushing fiber lines more, not get rid of their wired network.

Stop wasting our money
By intelpatriot on 1/21/2010 4:37:16 AM , Rating: 1
Maybe Obummer should stop wasting our money on 'doing good' in Haiti and let AT&T get on with investing in their network.

By OKMIJN4455 on 1/24/10, Rating: 0
Govt is normally part of the problem
By AEvangel on 1/20/10, Rating: -1
RE: Govt is normally part of the problem
By JediJeb on 1/20/2010 4:53:09 PM , Rating: 1
To some extent yes, but remember that many years ago AT&T was split up and was mainly left in the long distance business and all of its local wired systems were independant companies. Then it started buying them up again knowing full well it would be required to upkeep the wired systems. I don't really feel sorry for AT&T because they knew the rules going into it.

If it wasn't for needing my phone at work, I would probably drop my cell service and only have my wired phone at home because the signal there is terrible and sometimes I have to stand outside in the yard to make a call on it. My co-worker up the road has no signal at all for the last mile to his house making wired phones there a necessity.

By Seemonkeyscanfly on 1/21/2010 9:33:11 AM , Rating: 2
you sound like you are deep in the country. Which is nice and open land... but down side are things like bad signals, no cable in many cases, and 20 plus miles to the nearest pizza delivery company. Everyone's location has benefits and negatives. Signal strength is on your negative list... However your neighbors probably never bother you, or something down that line.

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