WSJ Interview with John Donovan: Inside AT&T’s Plan for 5G Technology

Wireless telcos are counting on 5G’s capabilities to broaden their customer base beyond phones to new machines like driverless cars and factory robots. AT&T executives are so enticed by the promise of mixed-reality goggles, which superimpose images in users’ field of vision, that they invested in visor maker Magic Leap to help develop a market for the devices (see below for details).

AT&T is in a race to launch 5G services faster than its rivals, though each is taking a different path to get there. Verizon Communications tried to get the jump on its competition with its own pre-5G (fixed wireless broadband) standard.  AT&T directed its research toward internationally recognized specifications (i.e. 3GPP which is not a standards organization)—hoping that doing so will make its service more adaptable as the technology matures.

The chief executive of AT&T’s communications division, John Donovan, spoke with The Wall Street Journal about AT&T’s plans for 5G, among other things. Here are edited excerpts of the conversation.

WSJ: There’s been a lot of talk about 5G technology. When it comes, what will it look like?

MR. DONOVAN: You’ll start to see handsets rolling out as early as the first quarter of 2019, but much more probably and in more volume when you start to look at the back half of ’19. Things will be compatible with not only 5G but also all of the prior generations. With nonstandards technology, [that kind of backward compatibility] is not typically the case. That’s why we didn’t waste too much time on the nonstandard version like some of our competitors.

WSJ: It sounds like there’s a bit of a chicken-and-egg problem. If you don’t know what consumers are going to want 5G service for, how do you know where to build the network first?

MR. DONOVAN: We think that the 5G network is going to be most impactful for most consumers and businesses based on specific use cases. One would be retail. With this 5G network, you’re going to be able to get centimeter-level accuracy on location. These potential use cases include recognizing consumers entering the store, alerting the concierge or manager to provide a personalized experience [and showing] product features on adjacent digital signage or scanning and displaying product features within the store app on the consumer’s mobile device. Those are the kinds of things we think are going to drive this, as opposed to saying, “Hey, I’ve got a phone and it’s faster, look at mine, it’s got this 5G tag up in the corner.”

An AT&T worker wires a development in Frisco, Texas, for future 5G service.

An AT&T worker wires a development in Frisco, Texas, for future 5G service. PHOTO: DEBRA HALE
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Research and Deployment:

Milestones in the evolution and rollout of 5G technology

Source: WSJ reporting

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We’ve made two announcements so far. One is in robotic manufacturing in Austin, Texas, with Samsung. And we have an exclusive for the Magic Leap mixed-reality goggles.

The speed of 5G means the next generation of goggles will be smaller, lighter and cheaper. When we did the announcement with Magic Leap, one of the things we announced is that DirecTV Now will be one of the apps available on the goggles. So, you put the goggles on and you can project four televisions onto the wall.

It’s mind-blowing to think about creating an 80-inch television from a set of goggles.

WSJ: When 5G comes to my cellphone, am I going to pay more for a plan?

MR. DONOVAN: That’s to be determined. I think that’s something that collectively the industry’s going to try to innovate around. When we went from megabits and text-message plans to unlimited in the 4G network, there wasn’t a lot of incremental revenue. But 4G dropped our costs dramatically, so it improved our margins.

With 5G, you can never call these things until you get into the marketplace. Most would say now that it’s going to carry a premium because it’s so superior in some of the things it can do. But that premium may be that you have three new devices in your home that have small connection fees, and not necessarily that you have an iPhone in your hand and the plan it’s on costs more.

WSJ: Looking back on past generations of wireless, as networks mature, it gets harder to tell the networks apart, at least in the consumer’s mind. How do you try to distinguish yourself from the other guys?

MR. DONOVAN: Generally, we’ve hit a point with networks that there’s “good enough.” The analogy I use is oxygen. You’ll notice if it’s not there. But if it is there, in its highest state it’s invisible. How do you make it visible? Your people. I love the idea when it’s about the people in the stores, the call centers, your sales rep. We’re more likely to win in a world differentiated around people than marginally differentiated by machines.

WSJ: Should the number of stores be growing? Do you think we need more places to buy phones?

MR. DONOVAN: Yes, but I don’t want to build a store that you have to go to. I want to go to where you already are. So, if you look at our retail growth this year, it’ll be in kiosks, pop-up stores and trucks. If you’re in a brand new [apartment] and you want to deal with fiber and a family plan and television, wouldn’t it be great if you had a pop-up store that’s in the lobby right near the leasing office, you can get all of that stuff done, and a year later the store is gone because the building’s leased up?

The future of retail is that you need to be where the people already are. The idea that you’re going to run a television commercial, have them get off the couch and go call an 800 number, or get off the couch and go to a store, is no longer the case.

If you take the wireless business, even up to three to five years ago, you could run a promotion on television and generate volume by people going to your store. Today, the customer’s perception is that’s an industry offer. They would never say, “That’s a T-Mobile offer, I’m going to go to the store and get it done.” They go from there to Google and they start searching. Or the other thing is they go entirely in social. So their friends say, “You know what, you need to switch to AT&T and here’s why.”

Those two things didn’t even exist five years ago from a standpoint of how we marketed.

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Mr. FitzGerald is a Wall Street Journal reporter in Washington. Emaildrew.fitzgerald@wsj.com.

Appeared in the October 30, 2018, WSJ print edition as ‘What’s Behind AT&T’s Plan for 5G Technology.’

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AT&T Communications CEO John Donovan on 3Q2018 Earnings Call

Broadband:  Fiber deployment will drive broadband growth:

AT&T Communications is driving broadband growth in our fiber footprint. We now cover more than 10 million customer locations today and plan to add 4 million more locations in the next year. We already have substantially more than 3 million broadband customers in our fiber footprint. And the longer we have fiber in the market, the higher our penetration.

In fact, we expect our fiber broadband base to increase by more than 1 million subscribers this year. This shift to fiber is beginning to drive IP broadband ARPU growth. The strategic pivot we’re making with video, combined with our execution with fiber gives us the confidence that we will stabilize Entertainment Group EBITDA next year.

[Implication is that increased fiber to the building will stabilize AT&Ts linear video business (U-Verse and DirecTV) which has been losing subscribers to cord cutters.  However, FTTB is only applicable to U-Verse- not satellite TV (DirecTV)].

Finally, we’re keeping a laser focus on costs in all of our businesses and maintaining our margins in Business Wireline.

FirstNet:

Our FirstNet team continues to execute extremely well. So far, we launched a nationwide FirstNet dedicated and physically separate network core with FirstNet traffic moving on it. We have priority and pre-emption in place, allowing continuous service during times of heavy traffic.

FirstNet devices are ready and available. These devices support all AT&T commercial LTE bands as well as the FirstNet Band 14 and meet the band priority selection technical requirements. And we’re six months ahead of schedule with our network deployment already covering about one-third of the expected FirstNet area.

We’re seeing in real time how we are performing in times of emergency with Hurricane Michael being the latest example. We began preparing for this storm before it arrived and our work continues even to today.

Because of these efforts, we were able to keep our customers, including first responders, connected during and after the storm in many areas. In fact, our network operated at 90%, and usually better, of normal performance in the areas affected by Hurricane Michael. And through our tight coordination with public safety, we rolled out network assets to impacted areas to keep first responders connected.

We also worked with local authorities to identify public safety agencies that were without service from their wireless provider and delivered hundreds of FirstNet-enabled devices to help these first responders carry out their important mission of keeping the public safe.

One first responder went as far to say, when everything else was down, FirstNet was working. That’s high praise, and we’re humbled that we can play a part in helping a community recover from such a devastating storm. That’s what FirstNet is all about.

We continue to push our deployment. We’re climbing towers and adding 700 megahertz, AWS, and WCS spectrum all at once. We’re also adding new radio capability, which will enable us to upgrade the tower to 5G, without another tower climb.

The first responder community is a great sales opportunity for us. It’s an area where we’ve been under-penetrated in the past. But with our dedicated network core and outstanding performance when it matters most to the first responders, we’re making headway.

We now have more than 250,000 subscribers on FirstNet with more than 3,600 agencies represented. With a sales team dedicated to building this base, we believe there’s a lot of opportunity waiting for us.

5G and LTE-LAA:

AT&T is on track to be the first wireless carrier to introduce mobile 5G services in the United States in the next few weeks. This will be standards-based 5G  (what standard is that John???????????????????). We plan to introduce 5G in parts of 12 cities by the end of the year. And we’ve announced additional 5G cities for next year, as we drive toward nationwide coverage of our 5G network.

Editor’s Note/Sanity Check:

The first wave of AT&T “5G” markets will include Dallas, Atlanta, Waco, Charlotte, Raleigh and Oklahoma City.  Mr. Donovan noted that this rollout is part of a ‘drive toward nationwide coverage of our 5G network’; a nationwide 5G coverage target date has not been disclosed. He also noted that the 5G service will leverage the telco’s substantial fiber-optic network (see Comment box below), saying ‘fiber (backhaul) is the backbone of 5G’ [Of course, we agree]. AT&T will pass 18 million customer locations with its fiber network this year, with 22 million locations targeted in 2019.  However, neither AT&T’s or any “5G” network announced for this year or next will NOT be “standards based,” as there is only ONE!!!!! standard for 5G – IMT 2020 which won’t be completed till year end 2020.

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Second, our 5G foundation is in place (see below). We’ve completed 5G trials in several cities in the last three years. Fiber is the backbone of 5G, and we have one of the nation’s largest fiber networks. Including businesses, we pass about 18 million customer locations today and are expanding that to more than 22 million locations by next year.

5G Foundation:

Fiber passing ~22M units
• 14M Consumer by mid ‘19
• 8M Business
400+ 5G Evolution Cities in 2018
LTE-LAA in 24 Cities by End of Year

5G Introduction:

Completed 5G trials in multiple cities since 2016
Introducing mobile 5G in parts of 12 cities in 2018
-> 7 additional cities by early 2019
Starting on path to nationwide mobile 5G

Reliability:

The Best Network according to the nation’s largest test2
Nearly 50% increase in spectrum deployed by end of 2019 vs 2016
Strong performance during recent storms

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We plan for our 5G Evolution to be in more than 400 markets by the end of this year with nationwide coverage by mid-2019. Customers are seeing a dramatic lift in speeds with theoretical peak speeds reaching 400 megabits per second.

We also plan to launch LTE Licensed Assisted Access, or LTE-LAA, in parts of 24 cities by the end of the year. These are the building blocks towards the transition to 5G and can deliver speeds substantially faster than traditional LTE.

SDN, Virtualization, Spectrum, etc:

We’re also the leader in software defined networking (SDN) and are on track with our virtualization goals. This virtualization is bringing baseband units to the edge of the cloud or core and is going to be key for ultra-low latency that’s in 5G.

Thanks in part to our FirstNet build, our wireless spectrum is being put into service at a rapid rate. We’re on track to increase the amount of spectrum deployed by nearly 50%.

This is having a dramatic positive impact on our network, and others are noticing. We’ve been named the nation’s best network by a September GWS OneScore study, which is the largest and most comprehensive network study of its kind. Our network already is a recognized leader, and we’re taking steps to make it even better.

Video Business:

Moving to the video business. We continue to navigate industry pressure. We have plans to bring EBITDA stability back to our Entertainment Group. Allow me to elaborate on that.

First, we’re refining our four video products, tailoring them to customer needs. Our mobility-focused WatchTV is gaining traction. DIRECTV NOW is being updated to increase its simplicity and further differentiate the service. And our premium DIRECTV and U-verse services focus on the traditional linear TV viewers.

We’ve also begun beta testing our proprietary thin client streaming service (unnamed but said to be built around HBO) and plan to roll out trials in the first half of next year. This will be a more measured roll out. And like our introduction of WatchTV, we expect this service to be EBITDA positive. And over time, it should lower our acquisition cost of our premium video service. And both of these use the common platform we introduced with DIRECTV NOW.

If you look at linear TV, it’s really going to be about broadband and how do we use broadband to lead ourselves into premium TV. And then get an OTT package that’s well-suited to the people that are going to be the heavily engaged users.

If you look at the industry’s rate of decline on linear video, you find that we’re doing dramatically better than the industry where we have fiber footprint. We’re doing dramatically better than the industry in churn and acquisition where we have 25 meg and greater.  Where our stress is is in the linear, in areas where we’re priced with just the linear video. And we’re going to have to take actions to continue to improve how we’re doing there.

Our fiber footprint build has given us a lot of inventory to sell into.  With the fiber inventory that we’ve got coming online back half of this year, first part of next year, we have a lot of footprint to sell into. And within the quarter, not only do we have broadband ARPU growth, each month of the quarter got stronger. So we feel very good about where the broadband footprint is, in particular the fiber area. And that will help us with the video business, especially the linear video business.

But with the fiber inventory that we’ve got coming online back half of this year, first part of next year, we have a lot of footprint to sell into. And within the quarter, not only do we have broadband ARPU growth, each month of the quarter got stronger. So we feel very good about where the broadband footprint is, in particular the fiber area. And that will help us with the video business, the linear video business.

AT&T CEO Randall Stephenson aded: “And as we’re nearing completion of our fiber build and making pricing moves on video, we’re laying the foundation for stabilizing our Entertainment Group profitability in 2019. Across the business, I like our momentum and feel confident that we’re on track to deliver on our plans.”

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CFO John Stephens on CAPEX and Free Cash Flow:

We continue to expect our capital spending in the $22 billion range this year but we don’t expect as much vendor financing in the fourth quarter as before. So now we expect to be in the $24 billion range in gross capital investment for the year. We’re feeling really good about our free cash flow position heading into the fourth quarter. We expect $1.3 billion of FirstNet reimbursements in the fourth quarter since we received the FirstNet authorities’ approval for the latest contract milestone achievement.

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Earnings Call Transcript:

https://seekingalpha.com/article/4213893-t-t-q3-2018-results-earnings-call-transcript?part=single

Slide Presentation:

https://investors.att.com/~/media/Files/A/ATT-IR/financial-reports/quarterly-earnings/2018/3q-2018/ATT%203Q18%20Earnings.pdf

2Q-2018 AT&T Communications report by John Donovan:

2Q-2018 Status & Direction of AT&T Communications, by CEO John Donovan

 

AT&T Fiber Now Reaches 2 Million Business Customer Locations

https://about.att.com/story/2018/fiber_for_business.html

 

AT&T’s Gordon Mansfield on 5G Spectrum, millimeter wave, and Project AirGig

AT&T will use 700MHz low-band and 2.3GHz WCS spectrum along with millimeter wave spectrum for its 5G rollout, said Gordon Mansfield of AT&T.  Separately, the company plans to use its millimeter wave Project AirGig to reach rural areas.

Mansfield  told a Light Reading event audience that AT&T won’t be solely reliant on 28GHz mmWave as it moves toward 3rd Generation Partnership Project (3GPP) 5G New Radio-based service,

He also appeared to indirectly criticize the 5G-based fixed wireless access service from wireless telco rival Verizon Communications Inc. “They have to go ahead and rip out the equipment at the customer homes when they want to update,” Mansfield said, not naming Verizon’s 5G Home Service, a fixed wireless offering based on the operator’s proprietary 5GTF specification, which launched on October 1, 2018.

AT&T's Gordon Mansfield at the Light Reading event

                                AT&T’s Gordon Mansfield at the Light Reading event in New York City.

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Speeding up the deployment of mmWave for the mobile rather than fixed 5G will require more infrastructure integration, as Verizon seemed to acknowledge at the event.

AT&T is hopeful that its millimeter wave “Project AirGig” will be able to provide gigabit-speed backhaul in the future, especially in rural areas. The AirGig technology wirelessly rides alongside medium-voltage power lines and uses newly designed “low-cost” plastic antennas for connectivity. (See Project AirGig Goes Down to Georgia ).  At the moment, “it’s a research project,” Mansfield added.

Mansfield pointed out that AT&T has already been “serving users at Magnolia Silos with [fixed] broadband 5G” since December 2017. AT&T announced that it would hold a wireless trial at the Magnolia Market at The Silos shopping complex in Waco, Texas, on December 17, 2017. The operator is using millimeter wave spectrum to deliver connectivity to shoppers, distributed via WiFi.

AT&T is expected to launch 3GPP mobile 5G in parts of 12 US markets in “late” in 2018.

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From Twitter: Gordon Mansfield discusses ‘s 5G Evolution technology on October 9th , chatting about the company’s vision, the technology’s impact, and its possibilities across different industries.

References (videos):

https://www.lightreading.com/mobile/5g/atandts-gordon-mansfield-focusing-on-mobile-5g/v/d-id/746774?_mc=RSS_LR_EDT

https://twitter.com/search?q=%40Cheddar%20%20Gordon%20Mansfield&src=typd&lang=en

 

AT&T Fiber Now Reaches 2 Million Business Customer Locations; $120M invested in Iowa networks

AT&T Increases Lead as the Largest U.S.-Based Provider of Fiber for Business Services:

AT&T continues to invest in aggressively expanding our national fiber footprint. There are more than 450,000 U.S. business buildings lit with AT&T fiber, and we’re adding thousands more each month.

Within those buildings, AT&T now enables high-speed fiber connections to more than 2 million U.S. business customer locations. And if you count businesses near our fiber network, that number quadruples. Nationwide, more than 8 million business customer locations are on or within 1,000 feet of our fiber.1

“As the largest provider of fiber for business services in the U.S., we have unparalleled ability to help businesses transform. Our growing fiber network is the foundation for the future,” said Roman Pacewicz, chief product officer, AT&T Business. “With companies using more data, applications and services in the cloud than ever before, high-speed, ever-present connectivity has never been more paramount.”

AT&T  offers business customers of all sizes – from small businesses to the largest enterprises –high-speed connectivity solutions on our fiber network:

  • AT&T Business Fiber provides businesses speeds of up to 1 gigabit per second (Gbps). It has the bandwidth needed to support data-intensive services like video conferencing, collaboration, cloud services and more.
  • AT&T Dedicated Internet customers have an internet connection that provides dedicated throughput and consistent performance. It allows for symmetrical speeds of up to 1 terabit per second (Tbps).
  • AT&T Switched Ethernet Service provides multi-site companies a simple, scalable and affordable Ethernet Virtual Private Network (VPN) solution. AT&T Switched Ethernet Services with Network on Demand is software-defined and allows enterprises to scale bandwidth up and down in near real time through a portal.
  • AT&T Dedicated Ethernet provides customers with a low latency, dedicated connection to move critical information at speeds up to 100Gbps. Ideal for quickly moving data to backup facilities or data centers.

These services and more are all possible with fiber – the key differentiator in a high-speed world and a necessary building block for 5G.

What Customers Are Saying

“Fiber has been a godsend. Before AT&T fiber, the office and retail center I own lacked reliable and fast internet connectivity. It was impacting my ability to attract new tenants and keep quality existing tenants,” said Shane Glass, property owner and manager, Three Flags Center. “AT&T was able to get fiber into all 6 of our buildings. In the 8 months since, we have been 100% leased. More importantly, my tenants are very satisfied with both the reliability and blazing speeds AT&T fiber provides.”

“Blooming Potential works with children with Autism and other developmental and behavioral concerns. Due to the nature of our applied behavior analysis and speech therapy services, each therapist documents their sessions using an app on a tablet,” said Tiffany Rigal, owner, Blooming Potential. “With so much of our record-keeping being digital, we need fast and dependable technology. And that’s what we get with AT&T Dedicated Internet on AT&T fiber. We can worry less about our technology and remain focused on helping each child succeed.”

AT&T Partner Solutions

We make it easy for business customers to sign up for fiber on their terms. In addition to our direct sales channels, customers can purchase through solution providers in the AT&T Alliance Channel™, AT&T Partner Exchange® and ACC Business.

We strive to make it virtually seamless for solution providers to sell fiber services to businesses. We now share data with online resources like FiberLocator, a network planning and connectivity tool. These resources show which buildings are fiber lit through a quick address search, and they offer an API solution that providers can integrate into their platforms.

For more information on AT&T Business Fiber, please go to att.com/businessfiber.

1The 2 million U.S. business customer locations, which AT&T provides high-speed fiber connections, is included within the 8 million U.S. business customer locations on or within 1,000 feet of our fiber.

About AT&T Communications
We help family, friends and neighbors connect in meaningful ways every day. From the first phone call 140+ years ago to mobile video streaming, we innovate to improve lives. We have the nation’s largest and most reliable network and the nation’s best network for video streaming.** We’re building FirstNetjust for first responders and creating next-generation mobile 5G. With DIRECTV and DIRECTV NOW, we deliver entertainment people love to talk about. Our smart, highly secure solutions serve over 3 million global businesses – nearly all of the Fortune 1000. And worldwide, our spirit of service drives employees to give back to their communities.

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AT&T Invests Nearly $120 Million Over 3-Year Period to Boost Local Networks in Iowa:

Separately,  AT&T has invested nearly $120 million in our Iowa wireless and wired networks during 2015-2017. These investments boost reliability, coverage, speed and overall performance for residents and businesses. They also improve critical services that support public safety and first responders.

In 2017 we made more than 365 network enhancements across Iowa, including new cell sites, the addition of network capacity and network upgrades.

“Whether it’s streamlined rules to simplify and speed the deployment of wireless facilities or being one of the first states in the nation to opt-in to the FirstNet broadband network for first responders, Iowahas aggressively embraced policy to encourage continuous investment in mobile broadband infrastructure across the state,” said Gov. Kim Reynolds. “Today’s policies will pave the way for 5G mobile services in the years ahead and position Iowa for a prosperous economic future.”

Since the formation of the FirstNet public-private partnership a little over a year ago, governors from all 50 states, 5 territories and D.C. recognized the value of FirstNet, joining in its mission to strengthen and modernize public safety’s communications capabilities.

FirstNet is a new nationwide communications platform dedicated to America’s public safety community. As we build, deploy and evolve FirstNet, we will build upon our current and planned investments in Iowa to help ensure public safety’s network delivers the coverage and cutting-edge capabilities first responders expect – today and for decades to come.

For the 4th year in a row, AT&T earned the top spot in the telecommunications industry on FORTUNE’s Most Admired Companies list in 2018. We also placed No. 49 among the 50 most admired companies across all industries.

We were ranked first or second in all 9 attributes used to compile the list, including innovation, people management, quality of management, long-term investment value, quality of products/services and global competitiveness.

To learn more about AT&T coverage in Iowa, or anywhere in the U.S., visit the AT&T Coverage Viewer. For updates on the AT&T wireless network, please visit the AT&T network news page.

1 AT&T products and services are provided or offered by subsidiaries and affiliates of AT&T Inc. under the AT&T brand and not by AT&T Inc.

AT&T to build “5G Evolution” connected community in Frisco Station, Texas

Frisco Station is a 242-acre, mixed-use urban development in Frisco, Texas. Located along Frisco’s North Platinum Corridor, Frisco Station includes office, residential and medical space, along with a retail and restaurant district.

On Friday, the entity  announced plans to deploy integrated network connectivity from AT&T.  Frisco Station said that the development will be one of the first connected communities in the nation built from the ground up with “5G Evolution” wireless technology from AT&T.  The future deployments will include “wireless stealth micro cells,” fiber-based internet service and Wi-Fi throughout all common areas according to Frisco Station and AT&T.

“Frisco Station understands the future belongs to the individual,” said Ed Balcerzak, SVP of AT&T Connected Communities in a statement. “With this development, we’re working together to give you more of your thing and connect you to the people, information and entertainment you care about.”

“Stations are places where people go to make connections. That’s why the Frisco Station Partnership chose AT&T as its partner to implement a platform that can support a connected community at every stage,” said Mike Berry, president of Hillwood, Frisco Station’s master developer. “We believe we are creating a high-tech environment, unlike anywhere else in the country, that has the potential to change the way people think about what’s possible in their day-to-day interactions with people and information.”

AT&T highlighted that this investment in innovative technologies will allow Frisco Station to be ready for new innovations to be launched, like Uber Air’s first Skyport and the recently announced drive.ai autonomous vehicle pilot program.

“By proactively addressing current and future connectivity needs, Frisco Station will be prepared for greater reliance on smart devices and automated platforms for transportation, healthcare, entertainment and lifestyle advancements – connecting an anticipated 15,000-person daytime population, five million square feet of office and 2,400 urban living residents,” AT&T’s statement says.

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Frisco Station’s enhanced wireless technology is providing a platform to encourage connectivity between Frisco’s emerging corporate and entertainment destinations. Building a connected community from the ground up ensures that Frisco Station’s vision can be put into practice today and maximized well into the future.

About Frisco Station

Frisco Station is an unprecedented 242-acre, mixed-use development in Frisco, Texas that is created with a new approach to urban design based on the foundational principles of smart, creative and healthy experiences. It is among the first connected communities in the nation to be constructed from the ground up, which enables the development to offer innovative amenities that increase convenience and productivity. Frisco Station is served by one of the world’s first Skyports to support Uber Air’s unique flying taxis and is one of the first projects in the nation to be served by a network of autonomous vehicles. Located along Frisco’s highly desired North Platinum Corridor, Frisco Station features fully amenitized office, residential and medical uses, along with a robust retail and restaurant district that will be anchored by Alamo Drafthouse. The project is being developed by the Frisco Station Partnership, which is composed of The Rudman Partnership, Hillwood Properties and VanTrust Real Estate.

About AT&T Communications

We help family, friends and neighbors connect in meaningful ways every day. From the first phone call 140+ years ago to mobile video streaming, we innovate to improve lives. We have the nation’s largest and most reliable network and the nation’s best network for video streaming.** We’re building FirstNet just for first responders and creating next-generation mobile 5G. With DIRECTV and DIRECTV NOW, we deliver entertainment people love to talk about. Our smart, highly secure solutions serve over 3 million global businesses – nearly all of the Fortune 1000. And worldwide, our spirit of service drives employees to give back to their communities.  AT&T Communications is part of AT&T Inc.

References:

AT&T to deploy 5G-ready connectivity services for Frisco Station urban development

https://www.businesswire.com/news/home/20180809005098/en/Frisco-Station-ATT-Create-5G-Evolution-Connected

 

AT&T acquires AlienVault; says its customers demanded NB-IoT

1. AT&T buys AlienVault:

AT&T has announced plans to acquire cybersecurity company AlienVault. Terms of the deal were not disclosed.

Founded in 2007, AlienVault offers a number of tools for detecting and responding to security threats through its Unified Security Management (USM) platform, while its Open Threat Exchange (OTX) platform serves as an online community where security professionals and researchers can share their latest findings and threat data.

2.  AT&T to offer NB-IoT:

AT& already offers cellular LPWAN services (LTE Category 1 and LTE Category M1) for its IoT customers who want to connect devices, assets and equipment to the cloud.  Now, AT&T says NB-IoT opens up new use cases for IoT.  However, the company did not reveal pricing for its NB-IoT data plan(s).

“We already are using LTE-M, and based on a lot of customer feedback we felt that we needed complementary services for other use cases, such as in a fixed asset tracking environment with very low bandwidth uses,” said Shiraz Hasan, VP, IoT solutions at AT&T. “The motivation is cost savings primarily, and the other thing is the ability to utilize the tech a little better because it penetrates even better than LTE-M.”

Shiraz said AT&T has a lot of customers in the security and alarm industries, and that many of these companies are evaluating IoT technology and learning that NB-IoT may serve their needs best. Alarms and locks are often located deep within buildings, so using cellular connectivity to monitor equipment health requires radio transmissions that can penetrate thick walls.

https://www.fiercewireless.com/wireless/at-t-says-customer-demand-prompted-nb-iot-launch

 

Busting a Myth: 3GPP Roadmap to true 5G (IMT 2020) vs AT&T “standards-based 5G” in Austin, TX

TRUTH about 3rd Generation Partnership Project (3GPP) and the path to 5G Standards:

3GPP is a very honest, focused and effective engineering organization that develops technical specifications – not standards.  Not once has 3GPP contributed to the hype and spin embedded in  “5G” propaganda and fake news.  It is the 3GPP  member companies, service providers, and the press that’s guilty of that disinformation campaign.

From the 3GPP website under the heading Official Publications:

The 3GPP Technical Specifications and Technical Reports have, in themselves, no legal standing. They only become “official” when transposed into corresponding publications of the Partner Organizations (or the national / regional standards body acting as publisher for the Partner). At this point, the specifications are referred to as UMTS within ETSI and FOMA within ARIB/TTC.

Some TRs (mainly those with numbers of the form xx.8xx) are not intended for publication, but are retained as internal working documents of 3GPP. Once a Release is frozen (see definition in 3GPP TR 21.900), its specifications are published by the Partners.

All of the above and more were explained in this blog post, but apparently no one paid any attention as the claims of being compliant with “3GPP standards” abound.  Here are two from AT&T:

1.  After the 3GPP New Radio (NR) description/specification was completed in 3GPP Release 15:

“We’re proud to see the completion of this set of standards. Reaching this milestone enables the next phase of equipment availability and movement to interoperability testing and early 5G availability,” said Hank Kafka, VP Access Architecture and Analytics at AT&T. “It showcases the dedication and leadership of the industry participants in 3GPP to follow through on accelerating standards to allow for faster technology deployments,” he added.

2. In AT&Ts recent FCC application for an experimental radio license in Austin, TX, which is in this FCC filing:

3GPP has developed 5G standards that became available in 2018.”

That statement was echoed in a Light Reading blog post titled: AT&T to Show Off Standards-Based 5G in Austin.

My rebuttal in an email to AT&T executives included this paragraph:

As you should be very well aware, 3GPP specifications have no official status and are not standards (as per their website).  More importantly, 3GPPs “final 5G” spec will be in release 16 which won’t be completed till July 2019.  Release 16 and parts of Release 15 will then be submitted for consideration as an IMT 2020 Radio Interface Technology (RIT) at the July 2019 ITU-R WP5D meeting- the first meeting which will evaluate IMT 2020 RIT/SRITs.  All this info and much more is available at the 3GPP website with no log in required for access!
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Here’s the actual status of 3GPP specs directed at 5G standards (IMT 2020) from 3GPP’s Submission of initial 5G description for IMT-2020:

IMT submissions

This document December 2017 version of 3GPP Release 15) is the first of three planned steps spanning two releases from 3GPP, following the decision to submit preliminary descriptions of the solution only when milestones of high relevance are achieved:

  • Release 15 December 2017 version;
  • Release 15 June 2018 version and
  • Release 16  (scheduled for July 2019)

The final and fully comprehensive 3GPP IMT-2020 submission (encompassing both Release 15 and Release 16) for IMT 2020 is planned for July 2019.

To help the ITU-R Evaluation Groups in their work, 3GPP is currently planning a workshop to present the 5G solutions to interested external bodies – specifically the Evaluation Groups – to allow a better understanding of the 3GPP technologies for 5G.

3GPP has agreed to organize a Workshop on 3GPP submission towards IMT-2020in October 2018. Some details are provided below:
•           Dates/Location:
–     October 24-25th, 2018;
–     Location: Brussels (European Commission facilities).
•           Target audience:
–     Independent Evaluation Groups, Regulators, Administrations, Industry Sectors interested in using 3GPP technologies.
•           Scope:
–     Present/describe the 3GPP IMT-2020 submission proposal
•           High level agenda/topics:
–     Specific technical features of the “5G” proposal
–     Submission templates
–     Self-Evaluation assumptions/results
–     Anticipations on the final submission with Rel. 15 and Rel. 16 contents
–     Overview of System Aspects

Here’s a free 3GPP webinar where you can get more information:

http://www.3gpp.org/news-events/3gpp-news/1966-webinar2_ran

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Debunking the 5G carrier and vendor claims:

As we’ve repeatedly stated, ITU-R WP 5D is the official standards organization for IMT 2020 (5G mobile).  They will evaluate RIT/SRIT submissions at their July 2019 meeting.  To date, 3GPP, South Korea, China, ETSI/DECT Forum, and TDSI have all indicated their intent to submit detailed RIT/SRIT proposals at the July 2019 ITU-R WP 5D meeting.  There are significant differences amongst these proposed RITs which WP 5D must sort out and approve before the IMT 2020 standard is completed at the end of 2020.

Note also that there is NO IMT 2020 USE CASE FOR 5G FIXED WIRELESS ACCESS (FWA), so all claims about standards compliant 5G FWA (based on 3GPP release 155G NR – Non Stand Alone” are bogus/fake.

Non Stand Alone” (NSA) 5G NR means that a 4G-LTE network anchors the 5G NR access (see comments below this post).  That LTE network is used for control plane signaling and for the Evolved Packet Core (EPC).  In 5G NR NSA access, the LTE base station (eNB) and the 5G NR base station are interconnected with dual connectivity. The IMT 2020 standard will include a 5G packet core without any LTE components.

In addition to the IMT 2020 specified  (by ITU-R) packet core there is the transport network for 5G, which is described in this ITU-T Technical Report (TR).  There are fronthaul, midhaul and backhaul components described in that TR.  It is a work in progress.

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AT&T to test “standards based 5G” at the Austin, TX Convention Center:

The FCC has just granted AT&T an experimental radio license to test what the mega carrier calls “standards-based 5G” in the convention center in Austin, Texas.  The test will begin at the end of July.   AT&T will run “up to 3” 28GHz fixed base stations in the convention center with connections to “up to 6” compatible user devices at up to 100 meters. AT&T promises demonstrations of 4K TV, volumetric video and eSports, as well mobile gaming, over the air, and more.

Indeed, Austin has been a hotbed for AT&T’s 5G developments. In February, the company announced plans to open a new 5G lab there. One of the first in-house projects built at the lab is the Advanced 5G NR Testbed System (ANTS), which AT&T describes as a first-of-its kind 5G testbed system that is proprietary to AT&T.

AT&T said in January 2018 that it plans to launch 3GPP release 15 based mobile 5G in up to 12 markets by the end of the year.  The mega carrier (and now via Time Warner acquisition an entertainment content company) has been using special events around the country to showcase its 5G technology.

In early June, AT&T staged its Shape conference at Time Warner’s Warner Bros. Studios in Burbank, California, where it showed presentations on edge technologies, artificial intelligence and immersive entertainment, as well as a 5G demonstration with Ericsson and Intel.

At the Electronic Entertainment Expo (E3) in Los Angeles, AT&T conducted a 28 GHz demo to give gamers an up-close look at how a 5G connection can give them a live gaming experience virtually anywhere there’s network coverage. That demo also involved Ericsson, Intel and ESL.

Also in June, there was the 2018 5G demo at the  U.S. Open, which took place at the Shinnecock Hills Golf Club in Tuckahoe, New York. Ericsson, Intel and Fox Sports were also participated in that demo.

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Here are a few recent IEEE techblog posts related to AT&T’s 5G initiatives:
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CAPEX at AT&T, Verizon to rise in 2018; AT&T investing in High Speed Networks

Capital expenditures (CAPEX) at AT&T and Verizon will rise slightly more than had been expected for 2018, according to Oppenheimer analysts. In a research note, analysts cited “5G” investments in upping their capex estimates for Verizon by 2%, and they raised their AT&T outlook by 3% because of FirstNet.

“For FY2018E we increase our total capex estimates [for Verizon] by 2% to $18.2B, due to wireless and our position that 5G deployments will accelerate,” the Oppenheimer analysts wrote in a report today. “We increase our FY2018E capex estimates [for AT&T] by ~3% to $25.0B due to FirstNet.”

According to Fierce Wireless, both Verizon and AT&T spent more on their networks in the first quarter of this year than some Wall Street analysts had expected.

“The biggest delta, or upside surprise vs. our estimates thus far has come from higher capex numbers at both Verizon and AT&T,” wrote the Wall Street analysts at Deutsche Bank Markets Research in a May report to investors, following the carriers’ first-quarter earnings reports. They pointed out that Verizon spent fully $4.6 billion on its network during the first quarter, which they said was 29% more than they had been expecting and almost 50% more than what Verizon spent on its network during the same quarter last year.

Overall, the nation’s top carriers are expected to significantly raise their capex spending this year in advance of 5G launches. Barclays in February said it expects capex among the “big four” (Verizon, AT&T, T-Mobile and Sprint) to rise by 10% this year, which it said would be the largest increase in the past five years.

Last week, AT&T executives told attendees at a Wells Fargo investor conference:

Many of the company’s capital-intensive projects are well under way or are near completion, which will support AT&T’s de-levering goals. The company now markets its 100% fiber network to 9 million locations, well on its way to the 12.5 million commitment it made as part of the DIRECTV acquisition. In fact, AT&T expects to reach 14 million customer locations by mid-2019. Also within the next year, the company expects to be in the 40% to 50% range of its FirstNet buildout commitment. And AT&T’s 4G LTE build in Mexico is nearly complete. AT&T also expects continuing benefits from its software defined network (SDN) investments.

High-speed networks. These networks must be able to deliver premium content to whatever screen the customer demands at the lowest cost per megabyte possible. This can include delivering content to homes, mobile devices and cars, and AT&T is investing in wireless build, fiber and new technologies like 5G to deliver a great viewing experience as demand continues to grow for 4K video and virtual and augmented reality.

AT&T Communications provides mobile, broadband, video and other communications services to U.S.-based consumers and nearly 3.5 million companies – from the smallest business to nearly all the Fortune 1000 – with highly secure, smart solutions. Revenues from these services totaled more than $150 billion in 2017.

AT&T expects:

  • Continued solid growth in its Mexico wireless operations in the second quarter of 2018 with as many as 700,000 net adds and improving churn. However, the strengthening U.S. dollar and volatility in foreign exchange rates are expected to pressure International segment results.
  • Wireless service revenue growth for full-year 2018, on a comparable basis. The company expects wireless service revenues will be essentially flat in the second quarter of 2018.
  • The transition of the video market to continue to negatively impact revenues and margins in the Entertainment Group. For the quarter, the company expects total video and broadband subscribers to increase, with DIRECTV NOW subscribers more than offsetting continued declines in traditional TV subscribers. Stephenson said that the mix will continue to shift to over-the-top video. Earlier today, the company announced new unlimited wireless plans — AT&T Unlimited &More Premium starting at $80 for the first line and AT&T Unlimited &More for $70 for one line or $40 per line for four lines— that include access to AT&T’s WatchTV service, the company’s newest video offering featuring 30+ live channels and more than 15,000 TV shows and movies on demand.Stephenson said the new product comes with attractive margins.

 

Analysis & Huge Implications of AT&T – Time Warner Merger

Disclaimer:  The author has been an AT&T customer for over 50 consecutive years (Ma Bell, Pac Bell with AT&T long distance, SBC, AT&T Broadband (now Comcast), and the current AT&T).  He currently subscribes to AT&T: U-verse “high speed” Internet , U-verse pay TV, POTS and wireless voice/data services.

Summary:

Judge Richard Leon of the the US District Court for the District of Columbia ruled today that AT&T and Time Warner can merge, without any concessions or strings attached.  This was a huge rebuke for the US Justice Department, which had argued that the deal would be anti-competitive (See Author’s Opinion below).  The judge’s 200-page opinion permits the $85.4 billion (or $108.7 billion including debt) deal to go forward with no conditions imposed. The transaction will close on or before June 20, AT&T’s lead lawyer, Daniel Petrocelli, told reporters after the ruling. AT&T will now own pay TV channels such as HBO, TNT, TBS, and CNN which it currently distributes on it’s U-verseDirecTV, and DirecTV Now pay TV platforms.  It will also own Warner Brothers which includes DC Entertainment.

The merger, including debt, would be the fourth largest deal ever attempted in the global telecom, media and entertainment space, according to Thomson Reuters data. AT&T will take on a large amount of additional debt to clinch the Time Warner pact, with its long-term debt rising from $134 billion to more than $175 billion.

The Department of Justice released a statement after the decision, saying, “We are disappointed with the Court’s decision today. We continue to believe that the pay-TV market will be less competitive and less innovative as a result of the proposed merger between AT&T and Time Warner. We will closely review the court’s opinion and consider the next steps in light of our commitment to preserving competition for the benefit of American consumers.”

On the other hand, AT&T General Counsel David McAtee said in a statement: “We are pleased that, after conducting a full and fair trial on the merits, the Court has categorically rejected the government’s lawsuit to block our merger with Time Warner.  We thank the Court for its thorough and timely examination of the evidence, and we compliment our colleagues at the Department of Justice on their dedicated representation of the government. We look forward to closing the merger on or before June 20 so we can begin to give consumers video entertainment that is more affordable, mobile, and innovative.”

In a scathing opinion, Judge Leon urged the U.S. Department of Justice not to seek a stay of his ruling, saying it would be “manifestly unjust” to do so and not likely to succeed.  If the Justice Department can’t win an emergency stay during appellate litigation, AT&T and Time Warner will be free to go ahead and close their deal.

“That’s a legal shocker.” said J.B. Heaton, an attorney and consultant on litigation and regulatory proceedings. “I think we’ll see now that companies will be much more confident about vertical mergers,” he added, referring to acquisitions which tie together different parts of a business, such as production and distribution.

Judge Leon previously approved Comcast’s acquisition of NBC Universal in 2011. In that case, he added a list of conditions the new entity was required to follow. Among those, Comcast agreed not to gouge competitors who wanted to carry NBC content and not to create a service entirely made up of Comcast or NBC content.  Not so for this deal.  The Justice Department had pressured Time Warner to sell Turner Broadcasting, which includes the cable news operation CNN, or other segments of the business, which both companies resisted. But Judge Leon rejected that argument.

In his opinion, Leon cited the “tectonic changes” brought about by the likes of Netflix, Hulu and Amazon and other OTT content providers which has enabled many video consumers to cut the cable cord. “AT&T and Time Warner concluded that each had a problem the other could solve,” he wrote. “Together, AT&T and Time Warner concluded that both companies could stop ‘chasing taillights’ and catch up with the competition.”

AT&T logo

Other Media Deals Brewing:

On Monday, CNBC reported that Comcast was preparing to bid for 21st Century Fox if the AT&T deal went through, playing off a more permissive judicial atmosphere for major content acquisitions. Disney has already bid for the studio, and it’s still unclear which company will actually end up owning it, but the overall point is hard to miss. The only question is how they’re planning to press their new advantage.

It will be interesting to see if there’s now a bidding war between Comcast and Disney which both want to acquire 21st Century Fox.  One can certainly expect the pace of mergers and acquisitions to accelerate due to this “green light” ruling.

Author’s Opinion:

At the root of almost all mergers is a quest for more market power, or simply put, the ability to knock out competitors and raise prices. Pricing power is something AT&T and the other distributors of media have been losing as consumers flock to cheaper online streaming services (like Netflix Inc, Hulu, You Tube, etx) where the profit margins are much tighter.  That’s after intense competition from T-Mobile US Inc. drove other wireless carriers to lower the cost of mobile-data plans. The struggle to find growth also isn’t something unique to the media giants, which is why once unthinkable mega- mergers are being considered.

The end of net neutrality, which became official this past Monday, makes this kind of content creator/distributor merger more alarming for consumers. AT&T already controls DirecTV and offers a zero-rating deal for AT&T Wireless customers who want to stream DirecTV content directly to their device without hitting data caps. With no restrictions on throttling or paid prioritization, those deals can get broader and more aggressive over time.  AT&T is investing heavily in DirecTV Now as their flagship OTT video service.  Now they can add all the Time Warner channels at lower cost and with no data caps for their broadband and wireless customers. And provide a fast lane (prioritized Internet traffic) for an expanded DirecTV Now! AT&T will now also own HBO Go streaming service, which might continue as a stand alone OTT service and/or be folded into DirecTV Now.

While the net neutrality issues are well-known, there’s less focus on the content side of the business, which has been particularly affected by the latest round of pending acquisitions. The output of the conventional studio system is increasingly concentrated in the hands of just a few mega-corporations like Disney (ABC, ESPN, Disney channels, etc), Comcast (NBC Universal), and AT&T (Time Warner). So while Netflix and Amazon are dealing with the post-net-neutrality challenges of streaming video over someone else’s network, they’ll also have to worry about where they get the content from.  Everyone knows Netflix and Amazon have created quality video content, but that alone won’t be sufficient to compete with the mega media/ ISP companies (Comcast is the largest ISP in the U.S.).

With the end of net neutrality, AT&T and Verizon can prioritize their own movies and TV shows, to the likely disadvantage of rivals such as Netflix, Hulu, Amazon, YouTube and future startups.

When Disney’s long-planned streaming service launches next year, the company will stop licensing Marvel and Star Wars movies to Netflix and show them exclusively on its new service instead. If AT&T follows suit, the forthcoming DC Universe streaming service could end up tied to HBO Go or DirecTV Now. Or they all could be folded into DirecTV Now. We think that video content studios and talent will start to line up behind their sister streaming services, and it will get harder and harder for OTT content providers to enter the video streaming market.

If AT&T wants to withhold “must have” programming from a rival telecom company, or charge more for it, that company cannot readily replace it. That was the crux of the government’s case — that vertical mergers, at least in this context, can reduce competition and harm consumers.

On the consumer side, less competition almost always causes prices to be raised.  Also, with less competition, companies have less incentive to provide good customer service and better products — because consumers have few options about where to take our business if we’re unhappy.  Finally, companies also are less motivated to innovate when there isn’t a lot of competition.  The implication here is that AT&T may invest less in mass market “5G” infrastructure (based on ITU-R IMT 2020 recommendations) and more on Direct TV Now streaming service and related video content.

Other Voices Weigh In:

Rob McDowell, former commissioner at the Federal Communications Commission and partner at Cooley LLP:

“The decision shows that the court recognizes that the marketplace is changing and business models are converging. Yesterday’s definitions of old channels of commerce are quickly becoming obsolete.”

Gene Kimmelman, a Justice Department antitrust official under the Obama administration and president of public-interest group Public Knowledge:

The ruling is a “very dangerous development for consumers. This enables the content and transmission companies to further consolidate and maintain their control over large bundles and high prices whether delivered on cable satellite or broadband.” Mr. Kimmelman predicted “an avalanche” of new transactions that would further consolidate the video and entertainment industries.

Mike White, former CEO DirecTV:

“This is just another major move in an industry undergoing profound change and disruption.”

“This merger will only accelerate the explosion of video streaming options at the further expense of traditional linear television.”

Gigi Sohn, former counselor to Tom Wheeler, ex-chairman of the FCC, and distinguished fellow at the Georgetown Law Institute for Technology Law & Policy:

The deal is likely to raise the price of Time Warner products and reduce programming choices, Ms. Sohn said. “I’ve never seen a media merger that’s had any benefit to consumers and this one is certainly no different. I think you’re going to see every cable and broadband provider looking to pair up with Hollywood studio programmers.”

Larry Downes, project director of the Center for Business and Public Policy at Georgetown University’s McDonough School of Business:

Mr. Downes said he expects to see a flurry of deal making, starting with Comcast formalizing its bid for 21st Century Fox assets. “What’s really going on here is the incumbents on the content and distribution side are so far fighting a losing battle against the new entrants. These deals are not signs of strength, they are almost desperate efforts to come up with new combinations of assets they can use to compete with Netflix and Hulu.”

“It really was a stunning rebuke of the Department of Justice,” said media analyst Craig Moffett. “Judge Leon was wholly unpersuaded by their case.”

Author David Dayan wrote: “While Judge Leon took pains to say in his ruling that “the temptation by some to view this decision as being something more than a resolution of this specific case should be resisted by one and all,” it’s hard to disassociate this smackdown from the cases to come. Any companies looking to merge can likely be confident that, even if they don’t intimidate the antitrust agencies out of challenging them, the courts will have their back. The champagne must be flowing in boardrooms tonight.”

End Quotes:

New York Times columnist Farhad Manjoo wrote about the end of net neutrality in two separate pieces::

“Today, the internet is run by giants. A handful of American tech behemoths — Amazon, Apple, Facebook, Google and Microsoft — control the most important digital infrastructure, while a handful of broadband companies — AT&T, Charter, Comcast and Verizon — control most of the internet connections in the United States.”

“As I’ve noted often in the last few years, big companies have been crushing small ones over and over again for much of the last decade. One lesson from everything that has happened online recently — Facebook, the Russians and Cambridge Analytica; bots and misinformation everywhere — is that, in the absence stringent rules and enforcement, everything on the internet turns sour. Removing the last barriers to unfair competition will only hasten that process.

It’s not going to be pretty.”

With AT&T acquiring Time Warmer, big tech and media companies will likely get bigger via mergers and acquisitions.   That means more control, less competition, and little or no regulatory oversight.  Let us know how you feel about that by posting a comment in the box below.

 

 

 

AT&T’s Q1-2018 Earnings Report with Analysis of Business Revenues & Time Warner Deal Impact

Executive Summary:

AT&T  reported first-quarter 2018 results after markets closed on Wednesday April 25th. The telecom goliath reported adjusted diluted quarterly earnings per share (EPS) of $0.85 on revenues of $38.04 billion. In the same period a year ago, the company reported EPS of $0.74 on revenues of $39.37 billion. First-quarter results were a bit below the consensus estimates for EPS of $0.87 on revenues of $39.31 billion.

Operating cash flow totaled $8.9 billion and capital expenditures totaled $6.1 billion in the first quarter. Free cash flow totaled $2.8 billion.

AT&T reported total mobile subscribers and connections of 143.83 million for the quarter, of which 77.43 million were postpaid (contract) subscribers. That amounts to a loss of 78,000 postpaid customers, more than the 68,000 loss  analysts were expecting. Postpaid net additions totaled 49,000, far better than the 194,000 subscribers lost in the first quarter of 2017, but less than 10% of the 558,000 net adds in the fourth quarter of last year.  The company had a big surge in subscribers for its core wireless business during the quarter before this one, but analysts from New Street Research LLP are questioning the quality of those gains.

That’s largely due to aggressive promotions, like AT&T’s buy-one-get-one-free iPhone offer, which required customers who took advantage of the promo to add another wireless subscription. New Street’s analysts are concerned that if customers were prompted “to add lines they don’t need to get free or cheap devices,” a portion of those lines “will be disconnected in due course.” This means investors should watch for higher churn rates down the road. Already the benefits of such promos may be waning, with AT&T adding just 49,000 wireless postpaid customers in the first quarter, versus more than 550,000 in the fourth quarter.

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The DirecTV business lost 187,000 subscribers in the quarter, less than analysts’ estimate for a loss of 257,000. The DirecTV Now streaming service added 312,000 new subscribers.

AT&T saw declining business revenue in the first quarter (see Analysis below), as increased wireless sales to businesses and improved strategic service revenues failed to offset the decline in legacy services.

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AT&T Business Revenues by Carol Wilson of Lightreading:

AT&T saw declining business revenue in the first quarter, as increased wireless sales to businesses and improved strategic service revenues failed to offset the decline in legacy services. However, its chief financial officer pointed to an improving trend in business revenues, with slower declines, and said the move to a software-defined network is beginning to pay off.

Total business wireline revenues were $6.8 billion, down 7.9% year over year, or down 3.3% on a comparable accounting basis, according to AT&T Inc. (NYSE: T). Wireless business revenues were up nearly 4%, but wireline revenues were down 3% year over year, for an overall decline of 1.6% on a comparable basis.

This decline is “an improvement over recent quarters and similar to what we saw in the fourth quarter,” John Stephens, AT&T CFO, told analysts in the earnings conference call. “This improving trend in wireline is encouraging, and this comes before any expected bump from business activity we might see as the result of tax reform.”

AT&T saw a “significant improvement in business wireline margins where EBITDA grew year over year and margins were up 190 basis points on a comparative basis,” he noted, crediting the AT&T Business Solutions team with doing “a great job in driving cost management initiatives.”

Some of those operating expense savings came from the move to a software-defined network, Stephens said, as 55% of network functions were virtualized by the end of 2017.

AT&T also touted gains in what it calls “strategic business services,” which are the wireline offerings including virtual private networks, Ethernet, cloud, hosting IP conferencing, voice over IP, dedicated Internet, IP broadband and security services. Revenues in those areas grew about 6% or $166 million and represented 44% of total business wireline revenues and an annual revenue stream of $12 billion.

That growth could not offset a $440 million decline in legacy business revenues, however, as AT&T, like other telecom operators, continues to see businesses either move to competing carriers or replace legacy services with more cost-efficient offerings.

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Impact of the Time Warner Merger (if it happens or not?):

Without the deal, AT&T’s weaknesses will be more pronounced and its next chapter will be left open-ended—not to mention that nearly two years of planning, negotiations, adviser fees and legals costs will have been for nothing. If the deal does get done, the wireless-service and pay-TV provider’s bundling opportunities and bargaining power will be greatly enhanced, though it will also have to contend with an unprecedented level of debt that must be balanced against a dividend-hungry investor crowd and a costly but crucial 5G-network build. Interpreting the company’s quarterly results depends on which of these scenarios ultimately plays out.

This is week six of the merger trial, in which attorneys for the U.S. Justice Department are trying to make the case that a combined AT&T-Time Warner would be harmful to the industry and result in higher prices for consumers. While it’s still not clear how the judge will rule, shareholders are becoming more confident that the transaction will survive court. If it doesn’t, those shareholders may be forced to see two key operational metrics in a different light.

With Time Warner’s assets—namely HBO, Turner Broadcasting and the Warner Bros. film studio—AT&T will look like an entirely different company. It will look a lot like Comcast, and that’s part of the problem from the Justice Department’s standpoint. Time Warner will face its own challenges around advertising trends and trying to stuff its array of networks into limited streaming packages. But there’s no question that it will help make sense of Randall Stephenson’s expansion of AT&T into the pay-TV market and improve AT&T’s positioning and value proposition.

Should the Time Warner acquisition get blocked, it will mark a third deal disappointment for Stephenson. The first was AT&T’s attempt to buy T-Mobile back in 2011, which also faced regulatory opposition. DirecTV was the second—it got done, but it’s clear now that AT&T overpaid.

 

 

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