AT&T to Pump Billions Into Networks

Telco's $14B ‘Project Velocity IP’ to Expand U-verse, Wireless
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AT&T is doubling down on its U-verse strategy and plans to pour billions into 4G broadband. But the telco still doesn’t have an appetite for a pricey fiber-to-the-home buildout.

As part of a three-year, $14 billion capital-investment plan, AT&T said it will widen its fiber-based U-verse network by more than one-third — or about 8.5 million additional customer locations, for a total potential of 33 million homes — by the end of 2015, while boosting downstream Internet speeds to up to 75 Megabits per second.

The telco outlined the plan, dubbed Project Velocity IP (VIP), at its annual investor day last Wednesday (Nov. 7) in New York. Project VIP includes efforts to expand and enhance both its wireless and wireline IP broadband networks.

As expansive as it is, AT&T still isn’t planning to roll out fi ber-to-the-home in any broad way, as Verizon Communications has.


AT&T expects capital spending to be approximately $22 billion for each of the next three years, a 15% hike over previously forecast levels, before returning to pre-Project VIP levels. Of the extra $14 billion, $8 billion is pegged for wireless and $6 billion for wireline.

“This is a major commitment to invest in 21st Century communications infrastructure for the United States and bring high-speed Internet connectivity — 4G LTE mobile and wireline IP broadband — to millions more Americans,” AT&T CEO Randall Stephenson said in a statement.

The telco expects that three key growth areas — wireless, wireline data and managed information-technology services — will comprise 90% of total revenue by 2016, up from about 80% today.

On the day after President Obama was re-elected for a second term, Washington policymakers responded positively to AT&T’s investment commitment.

AT&T’s announcement “is proof positive that the climate for investment and innovation in the U.S. communications sector is healthy,” Federal Communications Commission chairman Julius Genachowski said.

In addition to the U-verse expansion, AT&T plans to deploy “IP-DSLAMs” to deliver high-speed Internet access and voice-over-IP service to 24 million customer locations in its wireline service area by year-end 2013. The U-verse IP-DSLAMs will offer Internet speeds of up to 45 Megabits per second, with a path to deliver even higher speeds in the future, according to AT&T.

For the remaining 25% of AT&T’s wireline footprint where it is “currently not economically feasible to build a competitive IP wireline network,” according to the company — representing about 19 million customer locations — AT&T will use its expanding 4G LTE wireless network to offer voice and high-speed IP Internet services.

According to analysts, winners from Project VIP will be wireless-equipment companies, followed by consumer broadband then enterprise providers.


Roughly half of the wireline investment is going into the U-verse expansion, which at 8.5 million additional homes passed is bigger than analysts had expected. Unlike Verizon’s FiOS, the AT&T U-verse network typically delivers data and video via fiber-to-the-node connections with copper-based DSL to customer premises.

The largest likely beneficiary of the bigger U-verse universe: Alcatel-Lucent, AT&T’s current 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.”


The U.S.’s biggest telco is investing an additional $14 billion to expand U-verse, advanced DSL and wireless networks over the next three years, forgoing a broad fiber-tothe- home buildout for now.


Key components of AT&T’s Project VIP:

U-verse Expansion: Fiber-to-the-node network to expand to 8.5 million more homes, to total of 33 million by end of 2015, and provide Internet speeds up to 75 Mbps.

IP-DSLAMs: Advanced digital subscriber line broadband technology, capable of delivering up to 45 Mbps, will be available to another 24 million homes by end of 2013.

Commercial Wireline: Fiber-to-the-premises network will reach an additional 1 million business-customer locations.

Wireless: Long-Term Evolution network expansion to cover 300 million people in the U.S. by year-end 2014, up from previous target of 250 million people by end of 2013. LTE will cover 99% of customer locations in AT&T’s 22-state wireline service area, including the 25% where the telco says it isn’t “economically feasible” to build a competitive wireline network.


John Eggerton contributed to this report.