AT&T: The early pace setter
Offering wholesale, enterprise, network infrastructure and consumer services, Kavit Majithia examines AT&T’s business strategy as the company attempts to setthe benchmark for innovation.
GNOC aims to identify a network problem an hour
The US’s largest operator and the world’s largest telecoms holding company by revenue, totalling $124 billion in 2010 and representing four year-on-year increases in consolidated revenue, AT&T has a constant commitment to provide innovative, reliable and advanced solutions to its vast customer base across 220 countries. AT&T has established itself as the largest wireless services provider domestically, with 95.5 million subscribers in Q4 2010; internationally, it offers 3G services in over 125 countries. Its global backbone network includes more than 886,000 fibre route miles, and with 38 internet data centres (IDC) across the globe, it boasts strong wholesale and enterprise segments.
A changing ecosystem
As is a common case with early pace setters in a developing market, one player will not be allowed to dominate for too long, and it appears AT&T is to suffer from setting a benchmark in the wireless mobility sector. Following the end of Apple’s exclusivity deal with AT&T to offer the iPhone in the US, and Verizon’s subsequent launch of the device on its network in February 2011, many market watchers are predicting a volatile US mobile market in the coming year. AT&T added 400,000 mobile subscribers in Q4 2010, down from 841,000 in Q4 2009; meanwhile Verizon almost doubled its new subscribers over the same period, a figure only set to rise with its launch of the iPhone. AT&T consequently suffered a near 3% share price drop in February 2011 according to Reuters. Wireless operating margins were 23%, some 3% down on last year.
“AT&T, like most network owners, is under extreme pressure from new market entrants and a changing ecosystem,” says Sandra Palumbo, research fellow at Yankee Group. “With an increasing number of devices, a huge increase in applications and high bandwidth content, there is real pressure on AT&T’s network.”
A vast network that sets a US industry standard should not be detrimental to future development, believes Ed Stulga, assistant VP, wholesale marketing at AT&T, considering the resources the company has at its disposal. AT&T’s impressive Global Network Operations Centre (GNOC) in New Jersey aims to provide low-latency, high-speed and ultimate network reliability across its global operations for every minute the network is in use. The centre manages data and voice traffic across AT&T’s network and is monitored by technically advanced staff across 141 giant screens that identify a network problem at least an hour before it becomes an issue for the end user. For each multiple platform, the total available minutes the network is in use is divided into the total number of outages, calculating a network performance rating close to 100% reliability as of March 2010.
“I have been in wholesale for a while, and from a network perspective there is no facility like GNOC in the world,” Stulga says. “For tracking data, the amount of expense and effort we take to ensure a reliable network is amazing.”
Advent of 4G
Stulga concedes that AT&T faces competition in network growth, as “the demand for mobile broadband continues unabated.” AT&T continues to focus on globalisation, virtualisation and mobilisation – a strategy that really differs from a wholesale and retail perspective. “There has been a clear contraction in the economy but, both for AT&T and US telecoms, mobility remains the largest growth opportunity. With the talk of 4G, LTE and HSPA, AT&T is not alone in attempting to build out its network.”
Verizon, Sprint and MetroPCS are already marketing the advent of 4G on their networks, with the latter being the first to claim the launch of an LTE network in Las Vegas in Q4 2010. AT&T has taken a different tack, developing its network slowly through implementing HSPA+ technology, before committing to a nationwide roll-out of LTE by 2013. “By combining LTE and HSPA+, we are attempting to ensure this network covers our entire footprint, not just having coverage in five cities and claiming a 4G network,” says Chuck Kalmanek, VP of network and services research at AT&T. “Other providers are hyping the advent of 4G, but we are all striving for ubiquitous coverage. By 2013, we aim to provide cellular signals to all our US serving areas.”
TeleGeography analyst Peter Bell believes AT&T will push its HSPA+ network as 4G on the iPhone 5, although it is unlikely there will be an LTE compatible iPhone until at least 2012. “With the ‘4G’ iPhone 5 set to launch in mid-2011, AT&T is expected to introduce 20 4G devices this year to compete with Verizon. Such advancements are necessary because LTE has been hampered by the lack of compatible handsets.”
Analysts are predicting a flurry of activity in outsourcing and enterprise service investment, with operators looking into cloud hosting companies as acquisition targets, fuelled by Verizon’s $1.4 billion acquisition of Terremark Worldwide in January. AT&T opened a third data centre in the UK and expanded its hosting capability to over 2.6 million ft2 across 38 IDCs; Steve Caniano, VP of hosting and cloud solutions at AT&T confirmed plans to increase data centre capacity throughout 2011. “Our investments in data centres generally follow our network. A lot of multinational customers are globalising business operations through us. The ability to host in Hong Kong allows a company without a physical presence to participate in that market.”
AT&T brands itself with the slogan ‘Rethink Possible’, and develops much of its new technology at the Shannon Research Laboratory in New Jersey. The company aims to advance the science of communication and its specialist team has achieved a range of industry milestones. In 2009, researchers from AT&T and NEC transmitted 114Gbps on 320 separate optical channels over a 580km link, with bandwidth capacity achieving speeds of 32Tbps, beating a previous record by 25%. Part of the development of 100G, industry experts considered the research to be crucial for handling the large influx of future internet demands. Current research is focussed on progressing WATSON, AT&T’s pioneering speech services platform to develop application services around speech, language and network-based solutions. Over a million hours have been spent in research, and through speech compliant applications like YPMobile, Speech Analytics and Vling, it aims to enable customers to use speech technology through a smartphone to translate language, drive local search and develop speech security initiatives to reduce fraud.
Jay Wilpon, executive director of speech services research at AT&T, believes it is vital for service innovators to access the technology. “By making this available in the cloud, companies can build applications using the principles of speech technology,” he says. “Instead of using a mother’s maiden name or postcode for security verification, a unique authentication through a speech password, coupled with biometric capability, can save billions in fraud prevention.”
With a global network covering virtually every market and setting a benchmark for reliability, AT&T faces the challenge of meeting its own high innovative standards. Berge Ayvazian, senior consultant at Heavy Reading, believes AT&T’s recent $1.9 billion 700MHz spectrum acquisition from Qualcomm indicates its intentions of establishing a unique next-generation network. “AT&T plans to cover 70 to 75 million PoPs by Q4 2013, and to be the only carrier offering two layers of mobile broadband technology delivering 4G, HSPA+ and LTE.” Its network, Palumbo believes, is critical to all content, application and device success. “The network continues to be commoditised by all the players owning the customer relationship. AT&T must establish strategic relationships to increase customer ARPU and stickiness.”
History: With a history going back over 100 years, the Bell System divestiture in 1984 led to AT&T’s operations being split into independent Regional Holding Companies. AT&T retained its long-distance, R&D and manufacturing arms, creating SBC Communications. SBC Communications acquired AT&T Corp in 2005, creating the new AT&T.
Ownership: Listed on the New York Stock Exchange and a Fortune 500 company, AT&T is one of the 30 stocks that make up the Dow Jones Industrial Average.
CEO: Randall Stephenson is the chairman and CEO.
Financials: In 2009, AT&T reported $123 billion in consolidated revenue.
Network: AT&T has wireless and wired access capabilities, and one of the world’s most powerful IP backbones which provides MPLS-based services in 182 countries and covers 877,000 fibre route miles. Their wireless network provides a digital voice and data network covering three billion people in over 300 countries.
Customers: AT&T is the largest provider of wireless, voice and data services in the US with 92.8 million wireless subscribers. Globally, AT&T serves millions of businesses over six continents.
Services: AT&T provides IP and network services and products for consumers, businesses, carriers, wireless service providers, cable providers, systems integrators, ISPs and content providers.