An AT&T executive has affirmed the company’s plan to spend billions of dollars building out its fiber and wireless network over the next few years, with the ultimate goal of connecting more than 30 million homes and businesses to its ultra-fast broadband infrastructure by 2025.
In an interview with the Financial Times newspaper, AT&T’s Chief Executive for Communications Jeff McElfresh said the company will ramp up its spending to $24 billion by 2023 in order to achieve that goal.
That money will also be used to build out and improve AT&T’s fifth-generation (5G) wireless network, which currently lags behind its closest competitors, T-Mobile and Verizon.
If realized, the amount committed to its 5G and fiber infrastructure build-out would make AT&T the largest private investor in American infrastructure, the Financial Times said.
The commitment of funds comes amid AT&T’s recent decision to remedy two blockbuster media deals — one to purchase satellite company DirecTV in 2015 for $67 billion in cash and debt, the other to acquire Time Warner (now WarnerMedia) and its assets for $85 billion.
Both deals were an attempt by AT&T to diversify its business by incorporating a pay television service with its online and wireless offerings, while at the same time adding content that could be used as an incentive to keep customers subscribing to AT&T’s services. But those plans ultimately failed to materialize: High programming costs in the pay TV industry prompted DirecTV customers to drop their service, and AT&T’s decision to incorporate Warner Bros. content into a relaunched HBO-branded streaming service was largely seen as a flop (at launch, it was unavailable on Roku and Amazon Fire TV, the two biggest domestic streaming TV platforms) until the company started offering same-day theatrical releases.
Those deals caused AT&T to bleed cash, something that stoked the ire of its shareholders. Earlier this year, the company began to remedy that situation: In February, AT&T reached an agreement with investment firm TPG Capital that would lead to the phone company spinning off DirecTV into a separate business, with TPG acquiring a minority stake. It followed up that deal with a surprising move in May to spin off WarnerMedia into a company of its own, one that will ultimately merge with Discovery Networks.
Since last year, AT&T has also divested some of its smaller content products. In December, it sold anime-centric streaming service Crunchyroll to Sony for $1.175 billion in cash; four months later, it offloaded Chilean broadcast operation Chilevisión to ViacomCBS for an undisclosed amount of money.
Those deals were designed to help AT&T get back to its roots: Being a telecom, unburdened by the headaches of being a pay television or content operator.
“Walking away from content was the right call,” McElfresh told the Financial Times. “What we do next is very unclear — being just a wireless and broadband company isn’t very exciting, and the competition has become [significantly] harder.”
That’s because its rivals, Verizon and T-Mobile, were investing heavily in their own 5G networks while AT&T was focused on diversifying its business products. Those competing strategies allowed Verizon and T-Mobile to pull ahead in the 5G race — Verizon has the fastest speeds in major metropolitan markets thanks to its millimeter wave technology, while T-Mobile has the largest overall 5G network footprint following its acquisition of low-band gigahertz radio spectrum from Sprint.
In recent marketing initiatives, AT&T has fallen back on an old line — that its wireless network is the “most dependable.” Some studies have shown this to be true, but that’s not the same as saying a network is the fastest or the largest, which are two elements consumers tend to think about when selecting a wireless carrier.
Both Verizon and T-Mobile have relied on non-telecom perks to keep subscribers locked in to their service, with each offering a deal to bundle free access to streaming services (Disney Plus, Hulu, Discovery Plus and Apple Music for Verizon; Netflix on T-Mobile). Unlike AT&T, neither T-Mobile nor Verizon own or control the streaming products.
It is not clear if AT&T will take the same approach once it splits off WarnerMedia — the company has leveraged extended, one-year free trials to HBO Max on some of its wireless and broadband Internet plans (its most expensive plans on each product include free access to the service without a time limitation), but it has not committed to doing so once it cedes control of WarnerMedia to Discovery next year.
Instead, AT&T appears to be focusing on a different strategy: Price. The company recent began running promotions for its AT&T Prepaid service that offered unlimited 5G access with a copious amount of priority data for just $50 a month, making it one of the cheapest unlimited 5G data plans with priority network access in the industry.
A few months ago, the company also began trialing flat prices for its AT&T Fiber service in four major metropolitan markets, including Sacramento. The service offers three packages to select from: One with download speeds of 300 megabytes per second (Mb/s), a second with 500 Mb/s and a third with 1 gigabyte per second (Gb/s). The most expensive of the pack costs less than $100 a month, and unlike its closest competitor Comcast, upload speeds are the same as the download speed in each package.
Not everyone has access to AT&T Fiber — some customers are left with the slower AT&T Internet-branded service, which offers only 100 Mb/s for around $55 a month plus taxes and fees. AT&T’s commitment to invest billions of dollars over the next few years will hopefully get those households and businesses up to speed.