John Paczkowski

Recent Posts by John Paczkowski

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

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.


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]

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The problem with the Billionaire Savior phase of the newspaper collapse has always been that billionaires don’t tend to like the kind of authority-questioning journalism that upsets the status quo.

— Ryan Chittum, writing in the Columbia Journalism Review about the promise of Pierre Omidyar’s new media venture with Glenn Greenwald