Analyst says AT&T should spend to upgrade

TownHall analyst Gerard Hallaren late Tuesday chastised AT&T for what he sees as underfunding its network. In his research, he notes that AT&T has spent the least per subscriber of the three carriers to upgrade its network. AT&T has committed just $308 per person to capacity and speed updates where Verizon has spent $353; even Sprint, which has less than half the subscribers, has spent slightly more at $310 each.

Overall, AT&T's investments between 2006 and 2009 were about $21.6 billion where Verizon put in $25.4 billion despite trailing AT&T in subscribers for much of that period.

Hallaren adds that AT&T paradoxically invests more into its landline services, such as U-Verse, rather than the cellular business that forms the backbone of its current operations. Although it makes 57 percent of the company's operating income, the cellphone network only gets about 34 percent of AT&T's funding. In comparison, the wired business only accounts for 35 percent of income but gets 65 percent of the funding.

The analyst estimates that, to catch up, AT&T would need to invest another $5 billion to match where Verizon is today. That number could creep up to $7 billion for the back infrastructure needed to tie the wired and wireless networks together.

AT&T has already responded to the criticisms and claims its network, which tops out at a peak 7.2Mbps in a small number of cities, is the fastest in the US and covers 97 percent of the population.

Most criticisms, however, have centered not on coverage area or absolute speed but on the reliability of the network, which has been a staple of Verizon's marketing of its own service. A lack of 850MHz 3G and insufficient underlying capacity led to AT&T's network suffering from severe congestion in key areas like New York City and San Francisco. Often, this has resulted in high numbers of dropped calls and frequent drops from 3G to EDGE or even GPRS.

AT&T has been adding 850MHz service in these areas as well as doubling the number of accessible cell sites and girding the capacity these areas need. At the same time, it has claimed that upgrades in San Francisco and a few other areas are slow as local laws have prevented the provider from upgrading as quickly as it would like.

Regardless of the investments, Hallaren thinks AT&T could face trouble in late spring if Apple ends its exclusivity with the carrier for the iPhone, as many customers may leave precisely to avoid network congestion issues. [via PCWorld]

By Electronista Staff