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The Holes in AT&T’s $14 Billion Network Expansion


AT&T today announced plans to invest $14 billion over the next three years to significantly expand and enhance its wireless and wireline IP broadband networks to support growing customer demand for high-speed Internet access and new mobile, app and cloud services. The investment plan – Project Velocity IP (VIP) – expands AT&T’s high-potential growth platforms.

The gist of AT&T’s planned network expansion announcement comes from these press release bullets:

  • 4G LTE network expansion expected to cover 300 million people by year-end 2014
  • Wired IP broadband network expected to expand to 75 percent of customer locations in AT&T’s 22-state wireline service area by year-end 2015
  • Fiber deployment expected to reach 1 million additional business customer locations, covering 50 percent of multi-tenant office buildings in AT&T’s wireline service area by year-end 2015
  • 99 percent of customer locations in wireline service area expected to have high-speed
    IP Internet access via IP wireline and/or 4G LTE.

Like Verizon with Fios, AT&T is now embarked on running fiber to the curb across its 22-state service area. Fiber provides very high bandwidth with concomitant high capital costs to run the fiber down the street. Fiber is at its economic best in dense urban and suburban neighborhoods. However, there are tens of millions of residences in low-density neighborhoods where the economics are sketchy at best. For these ex-urban customers, AT&T will deliver broadband via wireless 4G LTE. No fiber for you.

I am an AT&T wireless customer. [Full disclosure: I’m also a stockholder.] I have five years experience with four generations of iPhones, two generations of iPads, and an odd cell phone or two. I often travel with these devices. On a good day, AT&T wireless is adequate for mobile communications. That is, e-mail, messaging, and Internet browsing. The caveat is that performance is always superior outside.

Inside, where the bulk of Internet connectivity is needed, AT&T’s wireless is poor to fair, and an inadequate substitute for broadband. That’s partly physics, where walls impede the signal of all wireless carriers. Without a boost, inside-the-home 4G LTE wireless is no panacea for broadband Internet connectivity.

AT&T 3G MicroCell

Responding to customer complaints about poor inside wireless reception, AT&T three years ago started offering the 3G MicroCell, a $300 femtocell built by Cisco. The 3G MicroCell creates a house-sized wireless zone that works with AT&T’s GSM-based wireless cell phones, iPhones, and iPads. Think of the 3G MicroCell as an 8-inch tall cell phone tower. I have two. They work fine with three exceptions:

  1. The wireless traffic is backhauled via a wired home Ethernet network through a cable modem to the Internet backbone. If you don’t already have wired broadband Internet, the 3G MicroCell can’t improve interior home reception and wireless speeds;
  2. The AT&T online activation process is complex, subject to network outages and error messages, and headed towards more than one tech support call. [See trouble ticket CM20121002_50231474 and annexes].
  3. The 3G MicroCell does not work with many routers. If you have a home network that’s more complex than a cable modem, the 3G MicroCell might not might not work for you. (15% re-stocking fee applies).

Adding insult to injury, AT&T has embarked on a major marketing program to replace traditional landline telephones with the AT&T Wireless Home Phone, which will suffer all the problems that cell phone customers have indoors.

AT&T Wireless Home Phone

The gaping hole in AT&T’s $14 billion strategy is wireless. We all know wireless demand is near infinite. Inside-the-home coverage is spotty for calls and not ideal for high-speed Internet connectivity.

Hooray for those who get a triple-play of Internet, TV, and phone service. Boo-hoo for the 25% of AT&T’s customers who won’t get wired Internet.

In three years, AT&T will be back with another wireless program to try to keep up with, let alone get ahead of, wireless customer dissatisfaction.

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2 thoughts on “The Holes in AT&T’s $14 Billion Network Expansion

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