Ina Fried

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AT&T’s Ralph De La Vega on the T-Mobile Deal, Service Issues, Spectrum Shortage

Trying to buy T-Mobile USA for $39 billion. Looking to fend off new competition with Verizon over the iPhone. The looming spectrum crunch and the shift away from unlimited data pricing.

Too bad there is nothing to talk to AT&T executive Ralph de la Vega about. He’ll be the wrap-up speaker here at the D9 conference, and this is the spot for live coverage of his talk.

10:58 am: Talk begins with de la Vega outlining the benefits AT&T sees from the T-Mobile merger.

10:59 am: Kara notes that she just left AT&T for Verizon, and only partly to get the shiny new white iPhone. Also because her AT&T iPhone was dropping calls.

11:00 am: Walt: Why should we believe that AT&T is competent to manage the biggest carrier, when AT&T is consistently rated as providing the worst service?

De la Vega: We’re not happy or satisfied, but improving. “We’re improving and taking the levels of customer satisfaction higher and higher.” AT&T says what it is seeing in data growth is more than any other carrier in the world.

“We, today, have the most smartphones of any provider in the world,” he says.

De la Vega talks about how AT&T has devoted more spectrum to New York City than has been seen in any carrier in any city in the world.

Walt points out that AT&T customers there still aren’t satisfied.

De la Vega says it is improving. He also notes that the company set a record for iPhone shipments even in the first quarter it had competition from Verizon.

“I think that customers are seeing improvement,” he says. “We are not happy where we are.”

11:04 am: Kara: Going from four to three is a big deal, though. When you get to a big size, what kind of leverage does anyone have if they are unhappy?

De la Vega points to the fact many markets have five or more competitors.

Walt points out that those are small.

De la Vega points out that in L.A., where D9 is, Metro PCS is the number four carrier and T-Mobile is number five.

11:06 am: De la Vega notes that Metro PCS and Leap added more total customers in the first quarter than AT&T and Verizon.

“To me, that’s what makes the industry dynamic,” de la Vega says.

De la Vega says the U.S. is the least-concentrated market in the world today. “The combination, I don’t think, will keep that competition from happening.”

11:09 am: De la Vega on company’s 4G efforts:

He notes that the company felt it had pretty good tech with HSPA+ so didn’t need to move as fast as Verizon with LTE. That said, LTE is working well and AT&T expects to move quickly.

“I think you will see us be very competitive with LTE,” he says.

Walt: When will you catch up with Verizon?

De La Vega: Within two to three years, LTE coverage will be indistinguishable.

11:10 am: Walt: Dan Hesse says this merger will kill them.

De la Vega: “I can’t refute what he says, but I think Sprint has done well in this environment.”

Sprint, combined with Clearwire, he says, has more spectrum than any carrier in this industry.

“They have a huge amount of spectrum.”

11:12 am: Walt: Although Sprint owns 54 percent of Clearwire, they can’t seem to control them. Noting that the two compete.

De la Vega: That’s an internal problem.

Walt: But Verizon is really your only major competitor.

Verizon, of course, is a main competitor. But Sprint is a viable competitor, plus a lot of local competitors, plus LightSquared (a wholesale start-up).

As for pricing, de la Vega reiterates the argument that wireless costs have dropped by 50 percent in 10 years, despite a bunch of big mergers.

11:14 am: Walt: “So you must have been way overcharging four or five years ago.”

De la Vega: No. Each generation, data costs drop.

11:16 am: Walt: Why is it so hard in San Francisco?

De la Vega: In San Francisco, he says, it takes two to three times longer to build or upgrade a cell site than it does in a lot of other places.

“We’re pulling every lever humanly possible.”

Walt: And what’s the problem in New York. Is it Mayor Bloomberg?

De la Vega: Bloomberg loves his iPad. He’s our customer.

11:19 am: Kara shifts talk to relationships with Apple and Google and the changed landscape.

De la Vega reiterates point made by Nokia CEO Stephen Elop that it is now an ecosystem game.

“We want to give the customers the choice,” he says, noting AT&T carries just about every platform out there.

11:20 am: De la Vega does make choices. He notes that the company recently scrapped a planned product launch. By the time we got it, it was already late to market.

He didn’t specify the product–says it’s not the Nokia one.

11:21 am: Walt: What is the role of the carrier?

De la Vega: If you look at the AT&T infrastructure, we have all of the infrastructure that enables this to happen.

“We enable all of this innovation to come to market.”

Kara: Have you lost power in that dynamic?

De la Vega: “I think the future is going to require more collaboration.”

Walt, on iPhone collaboration with Apple, “The collaboration was ‘You can’t touch this.'”

De la Vega disputes this, saying AT&T gave Apple a lot of know-how.

Same with working with Microsoft on U-verse TV, he said.

“I hope that people view us as a good collaborator.”

11:25 am: Walt: Could you please tell us exactly what the new iPhone will look like?

De La Vega: Can’t comment. (Shocking.)

You have to learn how to work with different companies. In the case of Apple, they are very, very concerned about their information getting out. He says the company has put a lot of processes in place to keep that info secret.

11:27 am: Walt: The tablet market is essentially an iPad market today. One interesting thing is that the iPad is sold unsubsidized, with no contract.

De la Vega notes that it helped make that possible on the iPad. “That’s our software in collaboration with Apple.”

As for whether that’s the future of tablets, the jury is still out.

And, as people carry more and more devices, “you may want a shared plan,” he says. “We’re working on one.”

How soon?

“It will be soon. I can’t comment on a quarter (when it will launch) but it will be soon.”

11:30 am: Moving on the the Q&A now. JP picking up for Ina, who’s off to snag another interview.

11:31 am: Why won’t AT&T unlock iPhones for overseas use after contracts are up?

Unlocking is always a big issue when you give someone a hugely subsidized device, says de la Vega, adding that folks are welcome to pay the full retail price and take the device wherever they like.

11:33 am: Not sure anyone understood that last question, which I’m at a loss to transcribe here.

11:34 am: But here’s the answer to it anyway. “When people use our network, they pay for it, and when they don’t, they don’t.”

11:34 am: Question about femtocells.

De la Vega says AT&T doesn’t give them out or encourage people to buy them unless customers are obviously in very low-signal areas.

11:35 am: Inevitable cellphones cause brain cancer question.

World Health Organization didn’t do any new studies to support its latest report, says de la Vega. That data is a year old. Which is not to say that it’s not concerning, but perhaps that it’s being made out to be a bit more than it is. “We should continue to study the matter,” he says.

11:37 am: Jason Calacanis would like a discount on his lousy AT&T service.

11:40 am: De la Vega dodges the question, but is ultimately forced to provide this answer: “If a customer calls us and there’s a history of problems, our reps are authorized to provide a discount.”

11:42 am: What’s your plan if the merger doesn’t happen?

Great question, but peripheral discussion quickly drags it into the weeds.

11:44 am: Ah. Here’s the answer. “Our plan is this: We still have sufficient spectrum to have a big footprint and cover a major portion of the U.S. in LTE. We’re going to be fine whether the merger happens or not.”

11:45 am: Aren’t there other ways of addressing the spectrum crunch than buying T-Mobile? And is there really a spectrum crunch? Because the NAB says there isn’t.

De la Vega says that despite what the NAB says, there is going to be a crunch. “There’s no question in my mind that crunch is occurring. I don’t know why the NAB is taking the stance they’re taking.”

He adds that he’s pleased the FCC has taken an interest in this issue.

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