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The AT&T of Tomorrow

By Jeff Kagan E-Commerce Times ECT News Network
Nov 15, 2012 5:00 AM PT

Last week, AT&T held a meeting for investment analysts. It will increase capital spending by about 16 percent to US$22 billion a year over the next three years to upgrade its wireless and wireline networks. As executives discussed the company's plans, I had an idea. This would be a perfect advertising campaign.

The AT&T of Tomorrow

AT&T should consider creating an entire marketing and advertising campaign around these expansion and update plans -- talking about where we've come from, where we are today, and where we are heading tomorrow. This is something no other communications company is doing.

My Pick of the Week is AT&T's about-face, allowing FaceTime on its wireless network for all data plans. This is interesting.

What's Next?

Customers and investors need to better understand the changes that are occurring and the path we are on. This is the kind of move leading companies need to make in order to remain leading companies. During the meeting, AT&T said it would acquire more wireless spectrum and use spectrum more efficiently. This is part of its plan to continually improve mobile Internet connections.

Landline connections are shrinking and wireless is growing. Local phone lines are still copper connecting to the customer. Wireless is not just about handsets and smartphones -- it is also about many other industries, such as the automotive industry, home security and much more.

Even though they are changing, companies like AT&T can't simply shut down yesterday's wireline network. Today, roughly 30 percent of the market has given up wireline altogether and gone wireless, and that number continues to grow. However, wireline is still important to many customers. This is the industry transformation we are in the middle of right now.

Ten years ago, telephone companies focused on telephone, but no more. Today the growth in their business comes from wireless, Internet, IPTV and more. That's why at last week's meeting, AT&T said that over the next three years it planned to invest $8 billion to expand wireless and $6 billion to update wireline for a total of around $14 billion dollars.

Of course politics always plays a role.

AT&T CEO Randall Stephenson told the analyst community that with the U.S. presidential election behind us, he hoped the government would focus on resolving the fiscal cliff, which is throttling the country's growth. I hope President Obama heard him. Actually the president can hear the same thing from countless CEOs in every industry.

Stephenson also said AT&T has the opportunity to improve revenue growth and cost structure for the future, which would create substantial value for shareholders.

Major Expansion

AT&T plans to upgrade and expand its wireline network with fiber to reach another 1 million business customers and provide high-speed Internet to 75 percent of wireline customers. It will also expand U-verse television and Internet by one-third to cover 43 percent of the network by the end of 2015. This is good news for many other companies as well. These upgrades will help equipment partners like Alcatel-Lucent and Ericsson.

AT&T Mobility CEO Ralph de la Vega said the upgrade will be much deeper than Verizon's, noting that the automotive industry and home security could become new billion dollar annual revenue opportunities in the next few years. That's right -- other industries are using wireless to transform themselves.

AT&T also plans to expand its 4G LTE high-speed wireless data services to reach 300 million people -- that is, most of the U.S. -- by the end of 2014.

Doesn't this sound like a great advertising and marketing campaign? I think this is a great opportunity for AT&T.

Don't get confused by all the 4G mumbo-jumbo. Remember, all this 4G talk is just part of the natural growth wave of the wireless industry. It started with 1G, then 2G, 2.5G, 3G and is now moving toward 4G. Coming next are 5G, 6G and so on. This is all part of a continual upgrade.

In the coming new world, regulation will have to be updated. Old regulation centered around one company having all the copper. Going forward, there are many competitors -- and they don't have the same restrictions.

So companies like AT&T and Verizon should have the same freedom as their competitors. After all, they are losing local phone lines competing with wireless and VoIP companies like cable television. Right now, unregulated competitors like Comcast, Time Warner, Cox and others have an unfair advantage.

It's important to realize that wireline networks are not disappearing. The future may be all about wireless going forward, but wireless is only wireless until the customer connects to the network on a cell site. From that point forward, the call is a wireline call over hard wires. So even if we were totally wireless today, we would always need national wireline networks carrying voice and data.

We also want to make sure that rural areas have access to wireless, Internet and television, but we have to make sure the solution is financially fair to all competitors.

Going forward, we have to take a fresh look at our changing industry's new technology, new competition and changed regulations. That's the message we, as an industry, have to present to customers, investors, regulators, competitors, partners and so on.
Jeff Kagan's Pick of the Week

My Pick of the Week is AT&T's about-face, allowing the video-conferencing app FaceTime on its wireless network for all data plans. This will allow customers with an LTE-capable iOS device on a tiered or shared data plan to use the Apple FaceTime service.

Prior to this, use of the FaceTime app over AT&T's wireless networks was limited to customers who switched to its new, shared data plans. Others could use it, but only over a WiFi connection. The reason was simple. AT&T wanted to make sure customers would continue to get good quality.

Remember the incredible strain on AT&T's network caused by iPhone customers just a few years ago? That problem has been solved, but FaceTime uses lots of wireless bandwidth.

AT&T has more iPhones on its network than any other carrier, so when Apple rolls out new changes, as it did with iOS 6, they hit AT&T faster and harder than other networks, said Jim Cicconi, AT&T's senior EVP of external and legislative affairs.

So expect AT&T to roll this out over the next two to three months. It has also begun rolling out several new billing plans designed to allow deaf and hard-of-hearing customers to use FaceTime. AT&T will continue to gather and assess the network data on this issue over the next few months, Cicconi said, and it anticipates expanding the availability of FaceTime.

E-Commerce Times columnist Jeff Kagan is an industry analyst and consultant who enjoys sharing his colorful perspectives on the changing industry he's been watching for 25 years. Email him at

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