Trying to make the case to Wall Street that it has to spend money to make money, AT&T announced plans to invest an additional $14 billion in infrastructure upgrades over the next three years -- a 15% hike over previously forecast levels (see AT&T to Expand U-verse to 33 Million Homes and AT&T Applauded for Broadband Investment Commitment).
Under the telco’s Project Velocity IP (VIP), the company expects to spend about $22 billion in each of the next three years on capex up from about $19 billion this year. Of the extra $14 billion, $8 billion is pegged for wireless and $6 billion for wireline.
According to analysts, the winners will be wireless equipment companies, followed by consumer broadband then enterprise providers.
Roughly half of the wireline investment going into the U-verse expansion, which at 8.5 million additional homes passed is bigger than analysts had expected. The largest beneficiary: Alcatel-Lucent, AT&T’s DSLAM vendor for fiber-to-the-node deployments.
“Our industry contacts indicate that AT&T will trial DSLAM solutions for the U-verse expansion using Alcatel-Lucent equipment,” George Notter, Jefferies & Co.’s managing director of communications equipment equity research, wrote in a research note. “We have not heard about any other potential vendors getting involved, specifically Adtran or Calix.” He added that AT&T’s IP-DSLAM planned rollout to 24 million homes could bring additional business to Alcatel-Lucent and Adtran.
Meanwhile, Notter said, AT&T’s stimulus spending also could boost sales incrementally for DOCSIS equipment makers such as Arris, as MSOs will need to remain competitive with AT&T’s plans to boost downstream speeds (to up to 75 Mbps in U-verse territories and up to 45 Mbps in IP-DSLAM areas). But I wonder how big a lift AT&T’s plans specifically could provide here, given that cable operators can easily top those connection speeds using DOCSIS 3.0 gear they have already been deploying over the last three years.
On wireless, Alcatel-Lucent and Ericsson will be winners from the emphasis on 4G LTE, according to Raymond James communications equipment analyst Simon Leopold.
Other vendors that stand to gain include optical transport and routing equipment makers, including: Ciena, Fujitsu, Juniper Networks, Cisco Systems. “This wireline and wireless investment needs backhaul,” Notter pointed out.
Apps developers, too, were happy (’appy?) about AT&T’s infrastructure spending binge.
The investment “will have an immense impact on app makers” by expanding the capacity of its broadband networks, said Morgan Reed, executive director of the Association for Competitive Technology, a trade group that represents 5,000 small and midsize app developers.
Finally, even though AT&T is not undertaking a massive fiber-to-the-home project a la Verizon FiOS, the Fiber to the Home Council Americas noted that the telco expects to extend fiber-to-the-premises access to 1 million business locations.
“By running fiber directly to more commercial properties and cell towers, and setting the pace for other providers to follow, this initiative will go a long way toward ensuring that U.S. wireline and wireless networks lead the world in broadband capacity and performance -- because fiber makes all the difference,” FTTH Council president Heather Burnett Gold said.
But there could be some losers from AT&T’s Project VIP.
Adtran’s HDSL business could further decline, Notter noted, because pulling fiber to more enterprise locations obviates the need for HDSL. Plus, AT&T expects to essentially cease new investments in about 25% of its wireline footprint, focusing on using LTE to deliver high-speed data and voice.
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