John Paczkowski

Recent Posts by John Paczkowski

AT&T’s Mottoes: “Profit Over Performance” and “We’ve Got You by the Calls” [UPDATED]

January 20, 2010 at 6:00 am PT

  • Share
  • Print

iphonecallfailAt least $5 billion, and perhaps as much as $7 billion. That’s what it would cost AT&T to match Verizon’s current level of investment in network infrastructure and, presumably, match its performance.

According to TownHall Investment Research, AT&T (T) spent about $21.6 billion on its wireless network from 2006 through September 2009. Meanwhile, Verizon (VZ) spent $25.4 billion. That disparity in investment, says TownHall Investment Research analyst Gerard Hallaren, has caused AT&T’s network to perform poorly compared with Verizon’s, particularly as it struggles to meet the data demands of devices like Apple’s (AAPL) iPhone.

Making matters worse, AT&T invests more in its wired infrastructure than in its wireless network, says Hallaren. Though 57 percent of the company’s operating income comes from wireless and only 35 percent from wired services, wireless gets only 34 percent of the capital expenditures, while wired receives 65 percent.

Attmega

In other words, AT&T has been shortchanging wireless at the expense of wired. And it’s been shortchanging its customers above all. According to Hallaren, AT&T spent $308 per subscriber on network improvements from 2006 through Sept. 2009. Verizon spent $353 per subscriber. Sprint spent $310.

That’s exactly the sort of network capital expenditure strategy that lands you in the pages of Consumer Reports–for all the wrong reasons.

To be fair, though, AT&T is increasing investment in its network. According to the Columbia Institute for Tele-Information’s Broadband in America Report, a study prepared for the Federal Communications Commission this past November, the carrier plans to spend $5.625 billion in 2010, $5.875 billion in 2011, $6.114 billion in 2012 and $6.347 in 2013. (See tables above; click to enlarge. The full report appears below.)

UPDATE: Reached for comment, AT&T took issue with TownHall’s report and its research methods.

“Town Hall does not provide a complete picture of AT&T’s significant investments to support our mobile broadband leadership,” a spokesperson told me. “They draw their conclusions on incomplete information. For example, fiber and bandwidth to cell sites are the most significant investments for mobile broadband, but they are booked to wireline. In 2009 we deployed five times the number of fiber-optic backhaul connections than we did in 2008. We spend time on a regular basis speaking with analysts about these issues, and we’d welcome time to do the same with Town Hall. AT&T supports 21 percent of the world’s 3G HSPA broadband customers, more than any other HSPA carrier worldwide (GSMA, August 2009) and twice the number of smartphone customers than any other U.S. provider. We would not be in a global leadership position without aggressive investment in our mobile broadband network.”


Broadband in America -2009 –

[Image credit: Columbia Institute for Tele-Information, Broadband in America Report, 11.11.2009]

Tagged with: Apple, AT&T, Broadband in America Report, capital expenditures, carrier, Columbia Institute for Tele-Information, Consumer Reports, current level, customers, data demands, digital, Federal Communications Commission, financial, Gerard Hallaren, improvements, infrastructure, Internet, investment, iPhone, John Paczkowski, network, operating income, performance, services, Sprint, strategy, subscriber, telecom, TownHall Investment Research, Verizon, Wired, wireless

comments so far. Add yours.

  • Anonymous

    I’ll be surprised if there is not a lawsuit at some point. ATT is woefully behind in terms of 3G, and I for one waited until the iPhone 3G to jump on board, only after asking ATT when 3G would be available in my area. They had been telling me it was coming for 2 years … still not here. In fact, very little of Michigan is covered at all (not even Kalamazoo). I am paying $30 a month for pretty much nothing, except padding ATT’s bank account. I am fed up with ATT, have complained to the presidential office, and no results. Latest excuse is they have to wait for government approval. Note to ATT … it’s 2010, not 1910.

  • demodave

    AT&T's big investment push right now appears to be UVerse, which is wired, which might explain some of the disparity. I'm entirely in favor of that investment plan because of my personal DSL situation, so I know I am biased, but I also see that investment working – literally – as cable is being strung this week. (Yay!) I would think that improving those wired services would allow more devices to use WiFi instead of 3G, so it should help the wireless segment at least a little. I don't know, but I also suspect, that in the greater DFW area, Verizon is doing a lot of its investment in new-lot (suburban development) areas. I can't say whether that's more profitable, but I suspect it does have a better ROI because it doesn't require patching.

  • jamesfisher

    James Fisher from Sprint here. One note about Sprint's spending on our dependable wireless network: We peaked in spending a couple of years ago as we built out our 3G network capacity and to be honest, we've had to spend less in recent years because we have available capacity due to customer declines. However, going forward, we are making significant investments where it's going to count — in 4G. We're way ahead of the competition there, but our investments are made through Clearwire, of which we are a majority owner, and are not reflected in Sprint's capex.

  • bordeauxNY

    Infrastructure investment by these two companies for wireless networks is not an apples to apples comparison. ATT uses GSM and VZW uses CDMA. CDMA cell sites cover a much wider area, thus allowing deeper outside coverage. ATT needs multiple cell sites to cover the same area covered by a CDMA cell site. In reality, ATT would have to invest at least 3x if not more than Verizons to even come close. Start to make sense why ATTs 3g coverage is so….limited?

  • JohnDoey

    Verizon's investment may be 25% more than AT&T, but so are their fees. And Verizon's network runs half the speed of AT&T, and runs about 0.5% of the phones. So what are they getting for that money aside from vendor lock-in?

    AT&T may be investing badly, but Verizon is not investing well either.