Stephen Lawson of IDG News Service recently mentioned in his article why AT&T needs to spend $5 Billion on its wireless network. I agree with him on this as AT&T has to catch up with the coverage offered by Verizon Wireless.
Though AT&T boasts of the fastest 3G Network and it might be too, but customer satisfaction and connection reliability index especially in urban areas are the two main reasons which might blur AT&T's image. And with inclusion of bandwidth hungry smartphone (iPhone primarily) users in its portfolio, loading their networks and juicing out the backhaul, situation might get out of control for AT&T unless they start acting on it. Apart from the loading the other important factor which I mentioned earlier is coverage which affects the reliability.
Issue 1: 3G Speed & Reliability Tests
AT&T's 3G network is based on HSPA (High-Speed Packet Access) and an upgrade to HSPA+, a system designed to deliver as much as 7.2M bps (bits per second). Verizon uses EV-DO (Evolution-Data Optimized), which that carrier said offers as much as 1.4M bps in real-world performance. The speed of the network for individual subscribers depends on a variety of factors. But what matter here is the reliability along with the speed. The PC World test, conducted by Novarum last year, found mixed results for network speeds among AT&T, Verizon and Sprint but showed AT&T in last place for reliability in all 13 cities tested.
The above analysis puts light on The "reliability" score depicts the percentage of the tests in which the service maintained an uninterrupted connection at a reasonable speed (faster than dial-up) for Verizon, Sprint and AT&T in 13 different cities.
Issue 2: CAPEX on wireless infrastructure
Recent reports from TownHall Investment Research depicts that AT&T is short on CAPEX behind key competitor Verizon and Sprint on its Wireless infrastructure. AT&T's capital expenditures on its wireless network from 2006 through September 2009 totaled about $21.6 billion, compared with $25.4 billion for Verizon and $16 billion for Sprint (including Sprint's investments in WiMax operator Clearwire). Over that time, Verizon has spent far more per subscriber: $353, compared with $308 for AT&T. Even Sprint has outspent AT&T per subscriber, laying out $310 for network capital expenditure. That investment shortfall has been the major cause of AT&T's poor network performance, which has been reflected in tests by Consumer Reports and PC World The other issue is AT&T invests more in its wired infrastructure than in its wireless network, even though the wireless business contributes a majority of the carrier's profit. AT&T gets 57 percent of its operating income from wireless and only 35 percent from wired services, but wireless only gets 34 percent of the capital expenditures, with the wired network taking up 65 percent of that spending.
Issue 3: Backhaul Capacity
Along with invest in upgrades to HSPA 7.2 in the base stations, AT&T needs to remove the backhaul bottlenecks to accommodate high speed data in the core. The backhaul limiting the speeds is the primary concern as I mentioned in my previous post for operators choosing the right backhaul solution considering the capex/opex. The $5 billion investment gap could expand to $7 billion because of the need for new backhaul capacity to link AT&T's wireless network into the wired Internet.
Issue 4: Old Infrastructure
Another looming problem for AT&T is that its E911 emergency calling system, which works on its older GSM (Global System for Mobile communications) network, hasn't been adapted to use 3G and is unlikely to make the migration soon. That means AT&T will have to maintain that old network for the foreseeable future, including possibly more capital investment for more power-efficient GSM equipment.
Solutions:
Hot on the heels of T-Mobile USA's announcement that it upgraded its 3G footprint to HSPA 7.2, AT&T Mobility said it upgraded its own 3G cell sites across the country with HSPA 7.2 software. However, AT&T clarified that it is still working to deploy increased backhaul capacity to the sites, a job that it will continue into 2011. With this the customer experience will definitely get a boost with improvement in consistency in the data sessions access. So apart from base station upgrades and increasing backhaul capacity AT&T needs to add more number of base stations especially in the urban areas where the user confidence level is shaky and expand their coverage. AT&T has already started taking some smart steps by moving the 3G service to its longer range 850MHz radio band in the San Francisco area which seems to have helped coverage there, and the company will probably take that strategy nationwide while testing coverage in specific areas and "surgically" increasing capacity. So the ball is in AT&T's court and they have to act, spend and expand !!
- Neil Shah
References: Analyst: AT&T Needs to Spend US$5B to Catch up by Stephen Lawson, IDG News Service A Day in the life of 3G: Mark Suvillan, PC World AT&T plans to double 3G speeds Ian Paul, PC World AT&T upgrades cell sites to HSPA7.2 software: by Phil Goldstein, Fiercewireless.com
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