| This analysis examines the status of AT&T’s new U-verse rollout, including the company’s pricing, technology and regulatory strategies for expanding the new service. The report includes initial customer metrics and outlines systems-integration challenges that the company faces as it builds the network that will carry U-verse services. We conclude that AT&T will be forced to significantly increase its investment in network infrastructure as U-verse scales. The report includes valuable qualitative forecasts, our recommendations to the company regarding its overall strategy for the service, and AT&T's responses to our conclusions.
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INTRODUCTION:
STATUS AS OF JANUARY 2007
Customer metrics
PRICING STRATEGY
TECHNOLOGY STRATEGY
Integration issues
Pair-bonding plans
AT&T Homezone: Complementary or Cannibalistic
REGULATORY STRATEGY
CONCLUSION
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AT&T Will Have to Increase Spending on Network Upgrade, New Report Predicts
SILVER SPRING, MD, Feb. 7, 2007—AT&T will alter the strategy on its broadband network upgrade within the next 12 to 18 months to match the capabilities of competing cable networks, market research provider Pike & Fischer predicts in a new report.
The telecommunications giant has begun rolling out a service called U-verse, which delivers everything from super-fast Internet service to multi-channel television. To deliver the service, AT&T is building an architecture called fiber-to-the-node, or FTTN, at a cost of up to $4.6 billion. FTTN involves laying fiber-optic lines to neighborhoods and from there linking to homes via conventional copper lines.
U-verse is currently only available in parts of 11 metropolitan areas. In its new analysis of the U-verse business strategy, Pike & Fischer projects that AT&T will be forced to increase its network investment to carry the fiber lines right up to homes—a costlier approach known as fiber-to-the-premises—as it expands its deployment on a large scale.
Unless AT&T makes that investment, the U-verse service will not keep up with the cable industry’s improvements in bandwidth and functionality, says Tim McElgunn, chief analyst for Pike & Fischer’s Broadband Advisory Services and author of the report.
“AT&T is attempting to position its TV service as superior to cable, but there’s nothing to prevent those competitors from matching the U-verse features over time,” McElgunn said. “Pair bonding and compression, AT&T’s current response to its network’s bandwidth limitations, will not change copper to glass and will not provide AT&T with a long-term solution, in our opinion.”
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Tim McElgunn
Tim McElgunn, our Chief Analyst, has more than 20 years of experience and expertise in market sizing, forecasting, segmentation and share analysis in emerging and legacy segments of the telecommunications industry. He focuses on the business strategies and competitive status of U.S. cable companies, telephone companies, satellite TV providers and broadband-enabled application providers such as Google, Yahoo and Microsoft. Before joining BAS in November 2006, Tim headed up U.S. consumer broadband analysis for eight years at Stratecast, a division of Frost & Sullivan. He also held senior analyst positions at both Datapro/NBI and Gartner Dataquest. Contact Tim at 856-751-6723 / tmcelgunn@pf.com.
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