John Stephens, AT&T’s chief financial officer, downplayed the carrier’s loss in a bidding contest for Straight Path’s millimeter wave spectrum and reiterated the carrier’s confidence in its current position, during a Q and A with Senior Research Analyst Craig Moffett at MoffettNathanson’s Media & Communications Summit 2017, held this week in New York City.
AT&T was outbid for by Verizon for Straight Path Communications, which reportedly holds an average of 620 megahertz in the top 30 U.S. markets, including 175 billion MHz-PoPs at 39 GHz and 39 billion MHz-PoPs in the 28 GHz.
“Our overall wireless strategy is comprehensive, including a deep fiber optic position and deep spectrum position,” he said. “Millimeter wave spectrum is an important piece. While we still need FCC approval to use the FiberTower [millimeter wave] spectrum, we think we will get a meaningful footprint out of that (400 megahertz nationwide) to build on at a very attractive price, providing tremendous broadband mobile speed capability.”
AT&T’s spectrum position is especially important as unlimited data plans have taken hold increasing the demand on network capacity, Stephens said, and AT&T is confident of its ability to compete now and into the 5G future.
“We are by far best positioned to compete on capacity. We have 60 megahertz that we can put into service to dramatically expand our capacity,” Stephens said.
Stephens listed signs of the carriers’ ability to compete, including fiber-optic footprint, the Project Velocity IP small cell expansion, carrier aggregation, MIMO, 4G speed increases, broadband to the home advances, 5G testing and 5G standards participation. He said the FirstNet contract will help jumpstart future capacity increases.
“The FirstNet contract gives us 2 by 10 megahertz of 700 MHz spectrum, very high-quality, low-band spectrum, which we can use for our commercial customers,” he said. “We have a check from the federal government for $6.5 billion on a co-pay basis to pay for most of it. We feel very, very good about our position.”
Stephens was asked how the carrier can avoid the commoditization of the network as it continues to increase network capacity. The answer was what AT&T is already doing, adding content through the DirecTV merger and the proposed Time Warner deal.
“Six million users already bundling our wireless and video products. That adds to the great experience,” he said. “Our smart phone churn in the first quarter was .9, which is dramatically good. So you can see the actual financial results.”
Providing content, in and of itself, is an important impetus for a carrier to increase its efficiency, as well as its capacity, before its network gets full and constrained and quality erodes, Stephens said.
“If you improve your capacity at the same time you deploy network functions virtualization and converting it to a software defined network, it will lower the ongoing operating costs, dramatically lowering the per-megabit cost to deliver the service. So you get higher quality at a lower price because of the network efficiency,” he said.