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Summary:

AT&T this morning said its earnings rose 25 percent in the fourth quarter thanks to its wireless business, and told consumers, if not investors, what they wanted to hear by detailing plans to spend $18-$19 billion in capital expenditures, with $2 billion more for wireless backhaul.

Updated: AT&T this morning said its earnings rose 25 percent in the fourth quarter thanks to its wireless business, and told consumers, if not investors, what they wanted to hear by detailing plans to spend $18-$19 billion in capital expenditures, with a $2 billion increase aimed at the wireless network and backhaul. The carrier, which has the dubious honor of being the exclusive provider of the iPhone, has been the target of much ire on the part of its customers due to the poor performance of its network, especially in major cities.

Yet in Apple’s own earnings call on Monday an executive at the iPhone maker said AT&T had shown it its plans for improving its network, and that Apple was pleased. It must have been, as yesterday Apple said that AT&T would once again provide a data plan for its latest gadget, a tablet called the iPad. For a detailed look at AT&T’s past network improvements and how the iPad may affect its network, check out out our GigaOM Pro item from yesterday (subscription required).

So far, network performance hasn’t been up to par, and AT&T included charts today in its earnings presentation detailing how far off the mark service is in Manhattan and San Francisco. Additionally AT&T released stats showing that in December 2008 more than one out of every 100 calls was dropped. Now almost one out of every 100 calls is dropped, but such calls are still heavily concentrated in a few major cities (or wherever a bunch of people with iPhones gather). Update: However an AT&T executive stressed on the earnings call, that according to third party data, its dropped call rate of 1.32% is only two tenths of one percent behind the national leader.

Fixing the problem will require more capital expenditures, and AT&T said it will spend $2 billion more in wireless network upgrades and backhaul to connect its towers and base stations to the Internet (although not all of that will be fiber). It’s also adding more radio network controllers or swapping old ones out in certain areas to better use the spectrum, and is still deploying its HSPA 7.2 upgrades to deliver faster speeds and more capacity.

Such measure, plus the efforts AT&T made last year, will help, but carriers need to start looking at how to manage their networks holistically now that these large data-consuming devices are coming onto them. So while AT&T is bandaging its wounded network, and could succeed, carriers around the world need to think about how to manage data so they avoid such injuries in the first place.

  1. Fully agree that carriers around the world need to think about how to manage data, even while planning for the significant and capital-intensive upgrades. Flat rate data plans by all accounts are self defeating because they defy the laws of economics. Carriers need to implement applications-based, rather than volume-based data plans so that users understand what they are buying. Policy management can further refine the offers by advising users of surcharges in real time on the basis of network contention. For example, a music or video download at the height of the rush hour should cost more than in the off-hours. Now is the time for carriers to condition users to this economically sound business model, so that it becomes the norm as 3G matures and even higher capacity broadband services come online.

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  2. I love the line charts that don’t have any labeling on the vertical axis.

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  3. “but carriers need to start looking at how to manage their networks holistically now that these large data-consuming devices are coming onto them. So while AT&T is bandaging its wounded network, and could succeed, carriers around the world need to think about how to manage data so they avoid such injuries in the first place.”

    What does this mean? You first cite how the iPhone and probably the iPad are the very embodiments of disruptive devices, in terms of sudden explosions of activity, often concentrated in geographic locales that aren’t totally predictable. And who is going to construct a brand new paradigm for network management (whatever that means) when it takes dozens of billions to make the incremental changes? Would that mean scrapping existing network functionality, and all the sunk costs associated with them?

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    1. Of course not. It means implementing software to help manage network traffic at cells on a real-time basis, considering alternatives for offloading video, influencing users with pricing plans that drive as much traffic as possible to less congested networks and doing it as proactively as possible. AT&T has reacted well with Wi-Fi, but an analyst estimates that only 10-20 percent of the iPhone data consumption is traveling on Wi-Fi networks and experience from app makers backs that up. Can they encourage even more Wi-Fi usage? How can they work with app makers to make sure the applications are efficient users of the network? There’s a ton of stuff here and carriers should have and implement a plan that understands how all these pieces can work together on the network, rather than wait for problems and toss one of these solutions at it. Such a plan would also help shape customer expectations.

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      1. Don’t forget economic incentives/disincentives for usage, whereby the policy management is tied to both OSS on the network side and BSS for billing, customer care type of back office functions.

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  4. What’s really going to have to start happening is, the carriers need to get proactively out in front of the consumption curve. Don’t wait until customers start bitching about how bad the network is, stop thinking that reacting to current trends is sufficient… analyze the trend out a year or two and build to THAT, not to today…. especially since ‘today’ is going to be ‘at least a year ago’ by the time significant changes are made.

    T (and the other telcos) need to give assurance to both investors and customers that they’re getting a handle on the fact that we’re in the very early stages of a complete rethink of communication infrastructure and policy; that they have good reason to believe that (X) will be the short- to mid-term trend (why?), what impact that would have on their system given current management styles and trends, and what changes in management, policy and provisioning need be made to support (X) – including how much it’s going to cost, and who’s going to pay how much for it.

    And, especially, please, PLEASE be honest when you’re blindsided and hornswoggled by a truly unexpected series of events in the marketplace; we investors and customers know that management is only human, and appreciate the occasional humble admission of that fact. But be blindsided too often, too severely, and you start to look incompetent. Even so, you’ll look less incompetent than if you don’t initiate and participate in open and frank communication – in other words, if you pursue policies of the too-recent past.

    One of the things I took away from the iPad announcement was that yes, AT&T is the default carrier in the US, as other carriers will be in various countries around the world — but, by selling an unlocked device with a near-future-standard 3FF SIM, Apple is putting the telecom industry on notice that the consumer does, or will, have options. This is one of the biggest changes between the iPhone era and the iPad. I join what are no doubt millions of others in hoping that the next iPhone is similarly customer-friendlier than the current model.

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  5. Um. I find this information useless when ATT can’t even provide simple SMS (Not MMS…) service in a football stadium located in the middle of Seattle during a game.

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  6. [...] he figures Ma Bell will have the chance to make the last year and half’s network problems a thing of the past in the minds of consumers as it pulls out all the stops in boosting network [...]

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  7. [...] doesn’t happen again. No doubt, AT&T is taking steps to galvanize its network (which it knows is in trouble already) against the demand increase it has to have anticipated as a result of the iPad’s [...]

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  8. [...] I’ll have more analysis on the numbers later, but here are the bare bone stats, which should be enough to knock your socks off — or strike terror into the hearts of mobile operators — some of which can’t even handle the data deluge caused by the iPhone. [...]

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  9. [...] doesn’t happen again. No doubt, AT&T is taking steps to galvanize its network (which it knows is in trouble already) against the demand increase it has to have anticipated as a result of the iPad’s [...]

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  10. [...] may find itself racing to keep margins high for mobile broadband as usage increases. On its fourth-quarter earnings call at the end of January, Ma Bell admitted that its data traffic had doubled while the costs to send [...]

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