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Big Telecom and Utilities Schmoozing New Republican Lawmakers and Governor in Ohio

Phillip Dampier February 7, 2019 AT&T, Charter Spectrum, Public Policy & Gov't 1 Comment

Gov. Mike DeWine and his wife, Francis.

Ohio’s incoming Republican state officeholders are being showered in gifts, cash, food and drink to celebrate their 2018 election victories and get their start of the 2019 legislative term off ‘in the right direction’, all courtesy of Ohio’s biggest telecommunications and for-profit utility companies.

It’s the perfect opportunity for powerful state lobbyists to introduce themselves and get their feet in the doors of the incoming Republican officeholders that dominate the governor’s office and state legislature. At least $1.7 million in gifts and cash were directed to incoming Gov. Mike DeWine and his running mate, Lt. Gov. Jon Husted alone.

Some familiar companies donated the maximum $10,000 apiece to the DeWine-Husted Transition Fund, a special set-aside account to cover inauguration activities and allow incoming politicians to count stacks of $100 bills. AT&T and Charter Communications — the dominant phone and cable companies in Ohio — each maxed out their contributions just before DeWine announced a new industry-friendly appointment to the Public Utilities Commission of Ohio (PUCO) and prepares the 2019 budget for the Consumers’ Counsel, an underfunded state office that represents the interests of Ohio consumers dealing with problem utilities, phone, and cable companies.

DeWine did not disappoint his corporate benefactors, this week announcing the appointment of Samuel Randazzo, a retired lawyer with a 40 year history of representing the interests of utility companies, as the newest commissioner at PUCO.

“We are disappointed in this choice, as Mr. Randazzo has a lengthy career fighting against renewable energy and energy efficiency in Ohio,” Heather Taylor-Miesle, president of the Ohio Environmental Council Action Fund, said in a release. “This move is out-of-step with the rest of the Midwest, where governors are committing to the future of energy, instead of the past.”

Randazzo has a long record of opposing utility mandates or regulations that interfere with the industry’s ability to generate profits, and is expected to be one of the friendliest regulators for utility companies in recent Ohio memory. Where did DeWine get Randazzo’s name? Scott Elisar, an attorney in Randazzo’s former law firm, was also a member of the nominating council that presented the list of four candidates for DeWine to consider for the PUCO position.

Consumer groups are also concerned that DeWine will soon appoint another member of the Commission after current PUCO Chairman Asim Haque leaves on March 1 to pursue a new job opportunity.

Randazzo

“We recommend that [his] seat be filled with a bona fide representative of residential consumers, especially considering that the current PUCO commissioners include two former utility representatives,” a statement from the Office of the Ohio Consumers Counsel said this week.

Other newly elected officials are also getting a taste of the action, with donor contributions limited to $2,500 each. Considering the number of special interests writing checks this year, several members of DeWine’s administration are also enjoying considerable free cash, despite the contributions limit: Attorney General David Yost of Columbus, $33,500; state Auditor Keith Faber of Celina, $29,000; Secretary of State Frank LaRose of Hudson, $30,500; and state Treasurer Robert Sprague of Findlay, $15,000.

An early test of what corporate influence can buy from Ohio legislators suggests it does not cost very much to participate in “pay for play” politics. FirstEnergy Solutions, Ohio’s bankrupt utility that reported “massive financial problems” last spring, still managed to scrape together $172,000 in campaign contributions for Ohio House candidates — mostly Republican, and another $565,000 for the Republican Governors Association during the 2018 election.

FirstEnergy spent much of last year lobbying the legislature to stick ratepayers with a $30 annual rate increase to bail out some of its unprofitable power generation facilities. It failed, along with a more comprehensive proposed corporate bailout package worth $2.5 billion. FirstEnergy became one of DeWine’s biggest supporters in his race for governor. DeWine, in turn, has signaled his support for the FirstEnergy bailout rejected last year. That could explain why DeWine received five times more money in contributions from the utility than his Democratic opponent.

On the first day of Ohio’s new 2019 legislative session, by sheer coincidence, the General Assembly announced a new standing committee on power generation, which will have the authority to approve a new bailout package for the troubled utility. FirstEnergy also announced it was abandoning some of its more costly energy producing facilities. Decommissioning costs will likely be financed by new surcharges on Ohio residential and business customer utility bills.

After Trump Administration Tax Breaks, AT&T Launches a Wave of Layoffs Affecting Thousands

Phillip Dampier January 31, 2019 AT&T, Public Policy & Gov't No Comments

AT&T began laying off thousands of workers Monday, mostly targeting highly skilled and highly paid long-time AT&T employees nearing retirement age.

Many of those laid off this week worked in the company’s wireline division, which supplies landline phone service, fiber and copper-based internet service for residential and commercial customers, and AT&T’s Foundry “innovation” centers. Other affected units include AT&T Technology & Operations, Mobility, Construction and Financing, Entertainment Group, Global Supply, Finance, and DTV (DirecTV).

Many of those targeted for layoffs were approaching 30 years with AT&T, part of an important benchmark allowing employees to retire with maximum benefits. Those who did not quite make it will be offered two weeks pay for every year of service in severance instead, capped at a maximum of six months pay. Affected employees must leave AT&T by Feb. 18 or accept, when available, an alternate position at the company if one can be located within 50 miles of the current job location.

Last year, AT&T claimed that as a result of the passage of significant corporate tax cuts signed into law by President Trump, the company would hire at least 7,000 new workers and invest up to $1 billion in its business. AT&T claims it has already exceeded those commitments, hiring more than 20,000 new employees last year and more than 17,000 the year before, although the company would not confirm if those workers were directly hired by AT&T and in the United States. The Communications Workers of America reports that AT&T eliminated 10,700 union jobs from its payroll in 2018, with at least 16,000 employees replaced by offshore workers. The company had 273,210 employees as of August 2018.

In a leaked internal memo from AT&T’s vice president of technology and operations, Jeff McElfresh warned AT&T would be laying off a significant number of workers this year. The company is seeking a “geographic rationalization” of its current employees to cut a “surplus” of workers.

“To win in this new world, we must continue to lower costs and keep getting faster, leaner, and more agile,” McElfresh told employees. “This includes reductions in our organization, and others across the company, which will begin later this month and take place over several months.”

The wife of one “surplus” worker described how an AT&T manager ended her husband’s 29-year career at AT&T in a scripted, four-minute phone call.

“My husband had 29 years with the company. [He] has been a fiber and copper splicer, engineer, ran a construction crew, and has been an instructor as the subject matter expert in over 50 courses for the last 18 years,” she shared. “His boss called him this morning […] and in less than four minutes told him he was out. Twenty-nine years and you get a call that takes less than 4 minutes?”

Some workers unaffected by the current round of layoffs fear that AT&T gutted some of its most experienced and qualified talent, and worries about the future competence of AT&T to manage its business.

“We lost so many people throughout our work groups that there is no way I can see us being able to support the systems going forward. Can’t happen,” one employee shared. “We even lost people that were in one deep slots without any thought about the impact. Some positions that flat out require multiple people just to support the existing volume of support work and new projects have been reduced to one or less headcount.”

North Carolina’s Goal to be the First Giga State is Improbable With Current State Legislature

Solving America’s rural broadband crisis will take a lot more than demonstration projects, token grants, and press releases.

Since 2008, Stop the Cap! has witnessed media coverage that breathlessly promises rural broadband is right around the corner, evidenced by a new state or federal grant to build what later turns out to be a middle mile or institutional fiber optic network that is strictly off-limits to homes and businesses. Politicians who participate in these press events tend to favor publicity over performance, often misleading reporters and constituents about just how significant a particular project will be towards resolving a community’s broadband challenges. Much of the time, these projects turn out to serve a very limited number of people or only fund part of a broadband initiative.

Officials last week said they are hoping to make North Carolina “the first ‘giga-state,’ with broadband access for all its residents.” But to realistically achieve that goal, nothing short of an expenditure of hundreds of millions of dollars will be required to realistically achieve that goal statewide.

A decade ago, rural broadband progressed in North Carolina, as communities transitioned away from traditional tobacco and textile businesses to the information and technology economy. To assure a foundation for that economic shift, several communities identified their local substandard (or lacking) broadband as a major problem. The state’s phone and cable companies at the time — notably Time Warner Cable, AT&T, and CenturyLink, often proved to be obstacles by refusing to upgrade networks in the state’s smaller communities. Some cities decided to stop relying on what the broadband companies were willing to offer and chose to construct their own modern, publicly owned broadband network alternatives, open to residents and businesses. A handful of cities in North Carolina went a different direction and acquired a dilapidated and bankrupt cable system and invested in upgrades, hoping cable broadband improvements would help protect their communities’ competitiveness to attract digital economy jobs.

That progress largely stalled after Republicans took control of the state legislature in 2011 and passed a draconian municipal broadband law that effectively banned public broadband expansion. Most of those backing the measure took lucrative campaign contributions from the state’s dominant phone and cable companies. One, Sen. Marilyn Avila, worked so closely with Time Warner Cable’s lobbyists, the resulting bill was effectively drafted by the state’s largest cable company. For that effort, she was later wined and dined by cable lobbyists at a celebration dinner in Asheville.

To be fair, some North Carolina cities are experiencing a broadband renaissance. Charlotte, Raleigh, Greensboro, Cary, Durham, Winston-Salem, and Chapel Hill will have a choice of providers for gigabit service. Google has installed fiber in some of these cities while AT&T and Charter lay down more fiber optics and introduce upgrades to support gigabit speeds.

Things are considerably worse outside of large cities.

In North Carolina, 585,000 people live in areas where their wired connections cannot reach the FCC’s speed definition of broadband — 25 Mbps, and another 145,000 live without any notion of broadband at all.

Bringing all of North Carolina up to at least the nation’s minimum standard for broadband will not be cheap, and politicians and public policy groups must be realistic about the real cost to once and for all resolve North Carolina’s rural broadband challenges. Where the money comes from is a question that will be left to state and local officials and their constituents. Some advocate only tax credit-inspired private funding, others support a public-private partnership to share costs, while still others believe public money should be only spent on publicly owned, locally developed broadband networks. Regardless of which model is proposed, without a specific and realistic budget proposal to move forward, the public will likely be disappointed with the results.

The Facts of Broadband Life

There is a reason rural areas are underserved or unserved. America’s broadband providers are primarily for-profit, investor-owned companies. They are not public servants and they respond first to the interests of their shareholders. Customers might come in second. When a publicly owned utility or co-op is created, in most cases it is the result of years of frustration trying to get a commercial provider to serve a rural or high cost area. Public projects are usually designed to serve almost everyone, even though it will likely take years for construction costs to be recovered. Investor-owned companies are not nearly as patient, and usually demand a Return On Investment formula that offers a much shorter window to recover costs. For broadband, adequately populated areas that can be reached affordably and attract enough new customers to recover the initial investment will get service, while those areas that cannot are left behind. The two populations most likely to fail the ROI test are the urban poor that may not be able to afford to subscribe and rural residents a company claims it cannot afford to serve. Many early cable TV franchise agreements insisted on ROI formulas that allowed companies only to skip areas with inadequate population density, not inadequate income, which explains why cable service is available in even the poorest city neighborhoods, while a wealthy resident in a rural area goes unserved.

Today, most cable and phone companies install fiber optic infrastructure most commonly in new housing developments or previously unwired business parks, while allowing existing copper wire infrastructure already in place elsewhere to remain in service. Some companies, including AT&T and Verizon, have made an effort in some areas to replace copper infrastructure with fiber optics, but in most cases, their rural service areas remain served by copper wiring installed decades ago. As a result, most rural residents end up with DSL internet from the phone company, often at speeds of 5 Mbps or less, or no internet service at all. Neither of these phone companies, much less independent telcos like CenturyLink and Frontier, have shown much interest in scrapping copper wiring for fiber optics in rural service areas. There is simply no economic case that shareholders will accept for costly upgrades that will deliver little, if any, short-term benefits to a company’s bottom line. That reality has led some communities to try incentivizing commercial providers to make an investment anyway, usually with a package of tax breaks and cost sharing. But many communities have achieved better results even faster by launching their own fiber broadband services that the public can access.

Some states with large rural areas have recognized that solving the rural broadband problem will be costly — almost always more costly than first thought. Such projects often take longer than one hoped, and will require some form of taxpayer matching funds, municipal bonds, public buy-in, or a miraculous sudden investment from a generous cable or phone company. In states with municipal broadband bans, like North Carolina, politicians who support such restrictions believe the cable and phone companies will spontaneously solve the rural internet problem on their own. Such beliefs have stalled rural broadband improvements in many of the states ensnared by such laws, usually tailored to protect a duopoly of the same phone and cable companies that have historically refused to offer adequate broadband service to their rural customers.

Challenges for North Carolina

(Courtesy: North Carolina League of Municipalities – Click image for more information)

North Carolina is a growing state, so a small part of the rural broadband problem may work itself out as population densities increase to a level that crosses that critical ROI threshold. But most rural communities will be waiting years for that to happen. Intransigent phone and cable companies are unlikely to respond positively to local officials seeking better service if it requires a substantial investment. As industry lobbyists will tell you, it is not the job of government to dictate the services of privately owned companies. The Republican majority in North Carolina’s legislature underlines that principle regularly in the form of legislation that reduces regulation and oversight. Many, but not all of those Republicans have also taken a strong strand against the idea of municipalities stepping up to resolve their local broadband challenges by working around problematic cable and phone companies. The ideology that government should never be in the business of competing against private businesses usually takes precedence.

Almost a decade ago, the cable and phone companies of North Carolina made three failed attempts to enshrine this principle in a new statewide law that would limit municipal broadband encroachment to such an extent it made future projects unviable. They succeeded in passing a law on their fourth attempt in 2011, the same year Republicans took control in the state legislature.

Today, Republicans still control the legislature with a Democratic governor providing some checks and balances. Why is this important? Because for North Carolina to achieve its goal, it will realistically need a combination of bipartisan support for rural broadband funding and an end to the municipal broadband ban.

Where is the money?

Although North Carolina wants to be America’s first “gigabit” state, New York is the first to at least claim full broadband coverage across the entire state. That did not and could not happen without a multi-year spending program. Recently, North Carolina’s Department of Information Technology launched a $10 million GREAT Grant program to provide last-mile connectivity to the most economically distressed counties in the state. While a noble effort, and one no doubt limited by the availability of funds to spend on broadband expansion, it is a drop in a bucket of water thrown into a barely filled pool.

To put this problem in better context, New York’s goal of full broadband coverage (which in our view remains incomplete) required not only $500 million acquired from settlement proceeds won by the state after suing Wall Street banks for causing the Great Recession, but another $170 million in federal broadband expansion funds that were expected to be forfeited because Verizon — the state’s largest phone company — was not interested in the money or upgrading their DSL service upstate.

Big Money: New York’s rural broadband funding initiative spent hundreds of millions to attack the rural broadband problem. Gov. Andrew Cuomo outlines funding for just one of several rounds of broadband funding.

Last year, Gov. Andrew Cuomo detailed success for his Broadband for All program by pointing out the state spent $670 million to upgrade or introduce broadband service to 2.42 million locations in rural New York, giving the state 99.9% coverage. That amounts to an average grant of $277 per household or business. In turn, award recipients — largely incumbent phone and cable companies, had to commit to matching private investments. For that state money, the provider had to typically offer at least 100 Mbps service, except in the most rural parts of the state, where a lower speed was acceptable.

North Carolina has 585,000 underserved or unserved locations. Just by using New York’s average $277 grant, North Carolina will have to spend approximately $202 million with similar matching funds from private companies to reach those locations. In fact, it is assuredly more than that because North Carolina’s goal is gigabit speed, not 100 Mbps. Also, New York declared ‘mission accomplished’ while stranding tens of thousands of expensive or difficult to reach residents with subsidized satellite internet access. That offers nothing close to gigabit speed. A more realistic figure for North Carolina in 2019 could be as high as $250-300 million in taxpayer dollars — combined with similar private matching funds to convince AT&T, Charter, CenturyLink and others that the time is right to expand into more rural areas. But as New York discovered, there will be areas in the state no company will bid to serve because the money provided is inadequate.

If the thought of handing over tax dollars to big phone and cable companies bothers you, the alternative is helping communities start and run their own networks in the public interest. Except private providers routinely retaliate with well-funded campaigns of fear, uncertainty and doubt over those projects, and they become political footballs to everyone except their customers, who generally appreciate the service and local accountability.

If North Carolina’s state government relies on a series of $10 million appropriations for grants, it will likely take at least 20 years to wire the state. Stop the Cap! agrees with the goals North Carolina has set to deliver ubiquitous, gigabit-fast broadband. But those goals will be difficult to reach in the present political climate. Republicans in the state legislature approved reductions in the corporate income tax rate to 2.5 percent, down from 3 percent last year, and the personal income tax rate drops to 5.25 percent from 5.499 percent. North Carolina’s latest budget sets aside $13.8 billion for education, $3.8 billion for Medicaid, $3 billion in new debt for road maintenance, and $31 million in grants to attract the film industry to shoot their projects in the state.

It is likely any appropriation significant enough to actually deliver on the commitment to provide total broadband coverage will have to be spread out over several years, unless another funding mechanism can be identified. That assumes the Republicans in the state legislature will be receptive to the idea, which remains an open question.

AT&T: “2019 is the Money Year” – Company Plans Big Rate Hikes, Makes It Tough to Disconnect

Phillip Dampier January 29, 2019 AT&T, Competition, Consumer News, DirecTV, Online Video 5 Comments

AT&T shareholders are frustrated. They are not getting the dividend payouts and shareholder value they expected after AT&T put itself $170 billion in debt last year — the highest debt load of any non-financial American corporation.

As AT&T has bet big in recent years on video-related acquisitions, including DirecTV and Time Warner (Entertainment), investors are skeptical AT&T can properly monetize its video business. Many have sold shares after criticizing company executives over the company’s strategy and high debt, driving AT&T’s market capitalization down to around $225 billion, comparable with considerably smaller Verizon Communications.

But no worries, AT&T CEO Randall Stephenson, has reassured. AT&T expects those investments to yield results this year, helped by forthcoming broad price hikes for AT&T’s consumer services.

“2019 candidly is the money year,” Stephenson said in an interview with the Wall Street Journal. “This is a year when we get everything rationalized.”

According to AT&T, customers are irrationally paying too little for AT&T’s video-related services, which include DirecTV (~19 million customers) and DirecTV Now — the two-year old streaming service that has attracted nearly two million subscribers.

Stephenson

Although DirecTV has recently been extremely aggressive about offering deep discounts to convince satellite customers to stay, AT&T plans to pull back on those discounts as two million DirecTV customers see their two-year contracts end this year. Instead of granting renewed discounts for signing another contract, AT&T plans to deliver significant rate increases.

“As those customers come due, we’ll get closer to market pricing,” AT&T’s John Donovan told investors at a November investor conference. “We’ll be respectful of our customers, but [prices] will move up.”

That may prove a difficult sell for DirecTV satellite customers, who have recently been abandoning the satellite platform in favor of cheaper streaming TV alternatives. Even with package discounts, DirecTV is the pay television industry’s most expensive provider, collecting an average of $120.36 a month for its TV packages. In contrast, Dish Networks gets an average of $103.99, Charter Spectrum earns $91.14 and Comcast, $84.50.

DirecTV defections, largely over price, have been growing at an accelerated rate, with 1.4 million customers turning their back on the satellite provider over the last two years. Analysts expect AT&T will report 300,000 more lost subscribers in the last three months alone. At that rate, AT&T will lose at least $1 billion in operating profits in 2019 from its declining satellite TV unit alone.

(Image courtesy: WSJ)

DirecTV Now customers, who already absorbed a $5 rate hike last summer, and will face even more rate increases and channel reductions in 2019. Stephenson expects DirecTV Now’s price point to be in the $50-60 range, which means many customers will likely face an average of $10 in rate hikes this year. For AT&T, that would deliver “the right price” and gets the service “to where it is profitable,” according to Stephenson.

But customers are likely to balk if AT&T reduces channel lineups at the same time it raises prices. AT&T has already faced substantial DirecTV Now customer defections after last summer’s rate increase, and the company has also reduced new customer sign-ups by cutting back on new subscriber promotions, which often included a free set-top streaming device. Waiting to pick up exiled streaming and satellite customers are AT&T’s competitors, especially Google. YouTube TV has proved to be a DirecTV Now killer, now charging $40 a month for 60+ channels. It also comes with an unlimited cloud DVR feature and a complete lineup of local channels across most of the country. YouTube TV is reportedly still growing, attracting more than one million customers so far. AT&T executives claim the service is popular only because Google is suspected of subsidizing what they believe to be an unprofitable venture by around $9 a month.

Investors are also unhappy about customers slimming down their TV packages, because average revenue per customer is cut in the process, sometimes dramatically. Wall Street was accustomed to video packages bringing in at least $100 a month. In many cases, that revenue is cut in half after a customer switches to a streaming provider. AT&T hopes investor pressure on those new ventures and ongoing wholesale programming rate increases will both conspire to bring back familiar annual rate hikes for streaming services as well. Programming cost inflation almost feeds itself. As programmers set new wholesale rate records for their networks, other programmers believe there is now room to raise their wholesale rates as well.

Programming costs are not just important for consumers, either. Wholesale programming rate inflation was one of the reasons AT&T spent $49 billion to acquire DirecTV. Volume discounts for DirecTV meant the satellite provider was paying an estimated $20 a month less on programming than AT&T’s own U-verse unit, which had a much smaller customer base. AT&T’s purchase of Time Warner, which owns several popular cable networks, was also a hedge against programming rate increases because AT&T would effectively pay any increases to itself.

(Image courtesy: WSJ)

The Journal reports AT&T executives were unprepared for the speed cord-cutting has taken hold. Most most under-30 have abandoned the concept of paying for live, linear cable television at any price, preferring a combination of on-demand streaming from Netflix, Hulu, and other video streaming services with an over the air antenna to watch local stations for free. Older Americans are gradually following suit.

According to the Journal, AT&T’s latest tactic to slow down customer departures is to make cancellation as difficult as possible:

“There’s no way that we could make the numbers we were told to make,” said Altrina Grant, former manager of a Chicago-area AT&T call center. She said some agents would promise to call back a customer about a request to drop service rather than immediately disconnecting, which would count against their compensation. Irate customers would later call another employee to ask why their request wasn’t honored, she said.

“These reps were getting thousands of dollars because they knew how to manipulate the system,” Ms. Grant said.

Cyrus Evans, a former call-center manager in Waco, Texas, said employees’ pay could swing between $50,000 and $80,000 a year depending on their performance, which was often influenced by how many disconnection requests they could deflect. Mr. Evans said employees often got angry calls from customers who had been promised their service would end, only to receive a bill the next month. He said the incentive structure rewarded bad behavior.

Former AT&T workers said the company launched a new audit team in 2017 to crack down on support staffers making promises they couldn’t keep. Ms. Grant said this initiative led the company to fire some workers but several customer-care executives are still in their jobs.

AT&T disputes these allegations, claiming false promises to customers violate AT&T’s Code of Business Conduct and are “extremely rare.”

AT&T Introduces Phony 5GE to Highlight Newly Lit Spectrum (It’s Really Still 4G LTE)

AT&T customers with Samsung Galaxy 8 Active or LG’s V30 or V40 smartphones began noticing a new icon on their phones starting last weekend: an italicized 5GE, leading some to believe 5G wireless service has now reached AT&T’s network.

Not so fast, AT&T.

AT&T’s use of 5GE, which stands for “5G Evolution” in AT&T’s techie parlance, is another example of how wireless carriers exploit up and coming technology upgrades that are unprotected from overzealous marketing misuse. The actual 5G standard is different from 5GE, and customers using 5G on millimeter wave frequencies can expect very different performance in comparison to today’s 4G LTE experience. But with 5G being hyped in the media, AT&T is attempting to capture some of that excitement for itself.

The company’s marketing division managed to accomplish a speed and technology upgrade without spending millions of dollars on actual 5G network upgrades — just by changing an icon on customers’ phones and making them believe they are getting a 5G experience. In fact, 5GE is actually just the latest evolution of 4G LTE already known to Verizon customers as LTE-Advanced or LTE Plus on Sprint’s network — technology including carrier aggregation, 256 QAM, and 4×4 MIMO that has been in use on competing cellular networks in the U.S. since at least 2016. But just as Verizon customers saw significant speed improvements from Verizon’s updates to the 4G LTE standard, as AT&T deploys similar upgrades in each of its markets, customers should notice similar performance improvements.

AT&T claims 5GE is already live in 400+ markets with more to come. In the short term, the “upgrade” that was pushed to AT&T network devices last weekend only switched on the 5Gicon, which will mean little to AT&T customers already reached by 5Gand never knew it until this past weekend, and nothing to those still waiting for the upgrade to arrive.

Walter Piecyk, an analyst at BTIG Research, says AT&T’s latest spectrum deployments will matter more than whatever the company brands its latest upgrade, and could eventually allow AT&T to surpass Verizon Wireless in network performance.

AT&T’s recent effort to improve its network by deploying more wireless spectrum — up to 60 MHz in many areas, is not the 5G upgrade customers might expect, but it will deliver faster speeds and more performance on today’s smartphones.

AT&T calls its forthcoming actual 5G network 5G+, and the company is launching a modest but authentic 5G experience in limited “innovation zones” in Jacksonville, Fla., Atlanta, Ga., Indianapolis, Ind., Louisville, Ky., New Orleans, La., Charlotte and Raleigh, N.C., Oklahoma City, Okla., as well as Dallas, Houston, San Antonio, and Waco, Tex.

In a money-saving maneuver, AT&T’s combined spectrum upgrades include 20 MHz of FirstNet first responder spectrum (prime 700 MHz spectrum shared with AT&T customers except during emergencies) it received in 2017, 20 MHz of AWS-3 spectrum (1755-1780 MHz for uplink operations and 2155-2180 MHz for downlink) it acquired for $18 billion in 2015, and 20 MHz of WCS spectrum (2300 MHz) it acquired from NextWave for $650 million back in 2012. All of this spectrum is expected to be activated at the same time as technicians work to upgrade each AT&T cell tower. This dramatically cuts AT&T’s costs and truck rolls for incremental upgrades.

AT&T calls its improved 4G LTE network “5G Evolution”

“We’re turning up not only the FirstNet spectrum that we got, but all of this other spectrum that we’ve acquired over the last few years,” AT&T CEO Randall Stephenson told investors at a December conference. “So as we climb these cell towers, we turn up the spectrum. By the time we get to end of 2019, we will have increased the capacity on AT&T’s network by 50%. I mean, you just have to pause and think about this. The entire AT&T wireless network capacity is going to increase over the next 14 months by 50%. I mean, that’s huge.”

Some areas have already received partial upgrades, others may find newly improved rural coverage as AT&T meets its commitments to the government’s FirstNet platform, which calls for more robust rural coverage. Some areas that never had AT&T coverage before may get it for the first time.

AT&T’s biggest competitor, Verizon, has commanded a lead in 4G LTE coverage from 2010 forward after utilizing a considerable amount of its available spectrum for the faster standard. But Verizon has not been a robust bidder for new spectrum recently, except for the millimeter wave frequencies it bought for its emerging 5G network. It has some additional unused AWS-3 spectrum it can use for expansion, but Piecyk believes Verizon may already be using those frequencies in many markets where it is likely facing a spectrum crunch.

While AT&T lights up 60 MHz of additional spectrum, Verizon is primarily depending on the ongoing conversion of 10-15 MHz of existing spectrum it now uses for 3G service to LTE each year. But the company is reportedly running out of frequencies in areas where data demand requires that extra spectrum the most.

The only short term solution for Verizon, which is not participating in marketing hoopla like 5GE, is to make its current spectrum more efficient. That means more cell towers sharing the same frequencies to reduce the load on each tower, improved antenna technology, and using newly available spectrum in the CBRS and millimeter wave bands to manage network traffic. Verizon may even use unlicensed shared spectrum to handle some of the load. Unfortunately, smartphones equipped to take advantage of these new bands are not yet available and may not be until 2020.

For AT&T, improved network performance is seen as a key to resume robust growth in new subscribers.  After Verizon dramatically improved its LTE network in 2014, AT&T stopped growing its lucrative post-paid phone subscriber base, according to Piecyk. Now it may be AT&T’s chance to turn the tables on Verizon.

This AT&T produced video helps consumers understand what 5G, beam forming, small cells, and coverage differences between 4G and 5G are all about. Notice the 5G trial speed test showed download speeds topping out at around 137 Mbps. (4:26)

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