In an exclusive interview, AT&T’s CEO Randall
Stephenson admits that Verizon Wireless has an early lead on
LTE but says it will catch up, and its HSPA+ back-up makes more
sense. Interview by Alan Burkitt-Gray
Stephenson: HSPA+ gives broadband coverage at 2-3
across the US, with LTE available to 70 million by the end of
AT&T chief Randall Stephenson has responded to Verizon
Wireless’s plans to launch LTE by starting a 4G
speed war in an interview with Global Telecoms Business.
In an exclusive interview with GTB, Stephenson says AT&T
will cover 70 million people across the US by the end of 2011
— and has a significant advantage over Verizon
Wireless, because AT&T already has a fast 3G network that
will provide a broadband wireless service outside the 4G LTE
"The one thing you have to avoid is for customers on a six to
seven meg [LTE] experience to fall back to something sub-meg,"
says Stephenson. "It’s very important to have a 3G
layer with the 4G on top. The beauty of this is the handsets
are forwards and backwards compatible."
AT&T has already upgraded it 3G network to HSPA running at
7.2 megabits a second, says Stephenson, "and we’re
now on path to have HSPA+ largely deployed throughout the
country by the end of this year". This will run at up to 20
megabits. But Verizon Wireless’s 3G network, which
runs on the Qualcomm EV-DO standard, is slower than HSPA, he
Stephenson was talking to Global Telecoms Business within days
of Verizon Wireless’s long expected announcement
that it would launch in 38 metropolitan areas in the US, with
services available to one third of the population.
Stephenson admitted that Verizon Wireless "has been very
aggressive" with its LTE plans. "But we have a very elegant
path, just working the [HSPA] speed up and up while
you’re working to get the LTE ramped, and then you
step off to LTE."
So at 70 million by the end of 2011, 22% of the population,
AT&T is more than a year behind Verizon Wireless, but he
promises "a very aggressive ramp" in 2012 and 2013. "When you
think of a three to five year horizon, between us and Verizon I
don’t think there will be a whole lot of
difference," says Stephenson. "They will obviously take a lead
as you move into 2011, but they are a little more incentivised
to move faster, because their architecture, CDMA, does not have
this upgrade path that we’re talking about."
That’s because it’s the compatibility
between HSPA and LTE that is key, he suggests: both are members
of the same GSM family of technologies, and the GSM industry
has ensured that new terminals will work on previous generation
"The one thing you have to avoid — we’ve
learned this with 3G — is the whiplash," he says. By
this he means the reaction of a customer who drives out of the
4G coverage area and confronts the reality of an older, slower
Ethernet to cellsites
That’s why, he says, AT&T has been focusing on
deploying HSPA+ "broadly and ubiquitously throughout the US" a
the same time as "investing very, very heavily in fibre to the
cellsites, [using] native ethernet to the cellsites".
This means that there is "a broad layer" of good broadband
coverage, with two to three megabits a second "across the US",
with "the LTE capability on top of that". Most of the US has
been covered with HSPA+ in 2010, but "there are a few places
left to take care of next year", he adds.
How fast will LTE be? Stephenson is candid: "When you get these
networks fully loaded they’re never going to go as
advertised," he says. But, then, he adds, neither is HSPA.
"If you take HSPA+ and you go out to west Texas and put two
people in a cellsite you can get 20 meg. Take HSPA+ and put it
in downtown Manhattan and you load a cellsite, even with fibre
backhaul, probable the best you’re going to get is
two to three meg. LTE will be the same thing. Take LTE out to
west Texas and you can get 50 meg. You load these things up and
you’re not going to get that kind of performance."
But "even on a loaded basis", the new network should produce "a
fairly broad LTE experience at six to eight [megs] and then a
backstop with HSPA+", says Stephenson. "We think that is a
very, very compelling proposition for a lots of the new
services we’re going to be rolling out, that the
industry will be bringing forward."
AT&T will spend an estimated $18-$19 billion on capital
expenditure in the current financial year, about 15% of revenue
that was $123 billion in the last financial year, but
Stephenson is unwilling to say how much of that sum is going on
"You would expect our capital spending as a percent of revenues
to continue to run for the long haul in the mid-teens range,"
he says. "What you’re seeing is our fibre
infrastructure investment decrease, our 3G investment decrease.
That will be replaced over the next couple of years by 4G
investment as well as spectrum acquisition — and
we’re going to be acquiring spectrum for a long
Spectrum is key, and US government decisions on how it is
allocated will probably affect the structure of the industry
there, he suggests.
"The resource that is most instrumental in making mobile
broadband a reality at high levels is spectrum. It is a limited
resource. The government is doing everything they can
— they’re moving fast. The government
recognises that this is an issue that will serve as a governor
or limiter of where this industry can go. They’re
working hard to get more spectrum."
But Stephenson worries that this spectrum is divided up between
a number of large players and so is "probably not the most
efficient way to deploy that spectrum. When you carve it up
among multiple providers it is probably the least efficient
means for allocating spectrum."
Operators need continuous spectrum to deliver broadband
wireless effectively. "Four and five, even, large scale
national providers and a couple of lower-end providers is
probably not a rational structure in an industry with this kind
of capital intensity. So I envision that over time you will see
structural changes in the industry," says Stephenson.
"It’s economic gravity."
Following the icon
Stephenson has been chairman and CEO of AT&T since 2007. He took over
from Ed Whitacre, the man who was largely responsible for
rebuilding the company from the original break-up of the Bell
System back in 1984, when AT&T was hived off from seven
newly independent regional operators as a long-distance and
international company. Whitacre "was like the icon of the
industry", says Stephenson. (GTB interview with Whitacre
in 2001 is here)
His predecessor became CEO of one of those regional operators,
Southwestern Bell, in 1990, renamed it SBC and took it through
an energetic series of acquisitions, including AT&T itself
in 2005, taking over the name as well as the company, and then
finishing off by buying neighbouring regional operator
BellSouth in 2006.
Stephenson also goes back to Southwestern Bell. Born in 1960,
he joined in 1982 in the company’s IT organization
in Oklahoma. He spent time in Mexico City looking after
SBC’s interest in Telmex, and later became the
company’s CFO. He was COO for three years,
responsible for all wireless and wired operations, before
So despite his consuming enthusiasm for wireless broadband his
background gives him considerable understanding of the fixed
world — another area where AT&T is competing
vigorously with Verizon, though in a different way.
While both giants offer mobile coverage across most of the main
US markets, because of the way the industry was broken up in
1984 AT&T runs the local fixed network in some parts of the
country, Verizon in most of the others, with Qwest —
now becoming part of CenturyTel — in some other
Both AT&T and Verizon have their own characteristically
different strategy for fixed broadband. Verizon believes in
fibre to the home, a project called FiOS; AT&T is rolling
out U-verse, which installs fibre to a neighbourhood node and
then uses high-speed DSL over copper into
"We launched it five years ago and it was industry-changing,"
says Stephenson. For many years the industry was wondering "how
do you build a pipe to a large number of homes with enough
speed to accommodate multi-channel multi-streaming video?" he
says. "In 2001 I asked our chief technology officer if we would
ever be able to multi-stream video over copper — and
he said 'never, because the physics won’t allow
But the CTO was wrong, says Stephenson nine years later.
"Today, over copper cables, we are streaming four simultaneous
high-definition video streams into homes, plus 15-20 meg of
broadband speed, plus voice service."
By the end of 2011 AT&T plans that U-verse will be
available to 30 million homes, compared with 15 million or so
now for Verizon’s FiOS and a maximum, according to
current investment plans, of 18 million.
U-verse "continues to have an upgrade path, because we use IP
to deliver video streams", says Stephenson. "Everything we do
is on an IP layer — our video service, our broadband
service is an IP product, even our wireless service is an IP
product and our enterprise business." It is all using a
"It gives us a wonderful opportunity to scale and create new
services that cross all of these platforms. That’s
what you’re going to see — we have an
award-winning video product, but with IP there is the
opportunity to integrate other services."
For example, U-verse customers can now buy Uverse Mobile: "You
can receive the same capability on your mobile handset. In fact
your mobile handset while you’re sitting at your
TV can serve as your remote control," says Stephenson.
And if the 20 megabits fixed link to your home is not enough,
"we have pair bonding to take your speeds up," he says.
"There’s a long way to go —
we’re very excited about it."
AT&T is not saying no to fibre to the home. "It will be
selective. That’s the beauty of IP. I
don’t care what the transport mechanism is. I
don’t care if it’s copper, I
don’t care if its fibre, I don’t care
if it’s wireless. IP is IP. You use whatever
transport mechanism you need. You just change the transport
medium. You don’t have to change the operating
system, you can be very targeted and selective."
Competing with cable companies
Stephenson is clearly proud of the results of the investment.
AT&T says that U-verse "is the fastest growing TV provider
in the country, with more TV subscribers added than any of the
major TV providers reported in 2010". The company says it has
added more TV subscribers than any of the major TV providers
reported for the past five consecutive quarters.
In its territory, it is gaining at the expense of the cable
operators — the companies that are challenging
AT&T with local phone services in many regions. The service
gained nearly three-quarters of a million subscribers during
the first three quarters of 2010, says the company, while the
major cable providers reported combined lost just over a
Since Stephenson took over three years ago "the change I have
witnessed has been radical", he says. But, "as radical as the
growth has been, as radical as the adoption curve has been, I
believe we are at the very beginning, the nascent stages of
where this will go."
For the past three years the industry has ridden the the
smartphone curve. "We’re at about 60% penetration
— and that probably goes to 80. But smartphones are
probably yesterday’s game," he says.
"Tomorrow’s game is the tablet environment. These
tablets are really beginning to move very quickly. The
capabilities of those tablets are causing everybody to pause
and say what does this mean as it relates to media, as it
relates to video, as it relates to any number of things
— health care and so forth."
We are at the very beginning, he notes. "To all intents and
purposes there has been only one broadscale launch of a tablet"
— the Apple iPad — "and there are several
coming out this holiday season", he says. "This is going to
explode, the whole tablet environment."
And he’s particularly enthusiastic about medical
applications. "When you think of a 10-year time horizon, I
think the way your body is diagnosed and your body is treated,
wireless connectivity will be a dramatic part of how that is
Not just tablet devices and smartphones for monitoring health,
but, he adds, "there are scientists who are working with the
idea of cells we inject into your body that have wireless
interconnectivity that allow not just diagnosis within your
body but treatment within your body. Think about where this
Back to the present, given what he’s said about
the attractions consolidation has in the US market, what does
Stephenson think about the worldwide structure of the
"I do believe you will begin to see global consolidation," he
says. "It will make sense to have a handful of global providers
that can offer wireless connectivity to key mature and emerging
When? "I can’t give you a timeframe," he says.
Will AT&T have a role? "Obviously AT&T would have to
look at it because we are a premium player in the largest
economy in the world and it would only make sense to leverage
that in other parts of the world." But: "We don’t
comment on M&A."
And how does Stephenson see his future at AT&T? Will he
last as long as Whitacre? "I’m very early in my
tenure here, I hope," he says. "I think I would be bored out of
my mind in any industry other than this one. There is not
another industry that has the technological challenges, that
has the global scale advantages, the labour issues.
It’s a very, very stimulating industry. And I just
love it dearly."
What haven’t we covered? "Did we talk about mobile
broadband?" he says. GTB
Other recent AT&T interviews in Global
Interview: Kathryn Morrissey of
Interview: Ron Spears of AT&T 2009
Interview: Bill Archer of AT&T 2008