Company / division: AT&T
In my first piece about the UK backlash against YouTube by advertisers last week, I said that I saw no reason why the trend shouldn’t spread to the US, because the same issues applied here too. Now we’re starting to see signs that – despite YouTube’s somewhat vague reassurances earlier this week that it would do better – US advertisers are indeed beginning to jump on the bandwagon too. And the first big name is AT&T, one of the biggest advertisers in the US, and that’s likely to lead to more. As I’ve said in previous pieces on this topic, this is a thorny issue for YouTube, which can’t simply remove all ads from more obscure videos. Even its existing standards for which videos are suitable for advertisers are sometimes controversial, as this Guardian piece suggests, so going further down that road is likely to alienate at least some smaller creators, and of course have implications for Google’s revenue as well. At least some financial analysts are already downgrading Alphabet on that basis, and if this continues to snowball I’ve no doubt we’ll see more of that. Update: this story is moving fast: Verizon, Enterprise, and GSK have also joined in.
via USA Today
After Google Phone Fizzles, Huawei Turns to AT&T for U.S. Expansion — The Information (Mar 21, 2017)
Based on the headline, I thought this was about Huawei finally being able to sell phones through AT&T’s postpaid business, because that’s the holy grail for Chinese manufacturers, and remains stubbornly unavailable to them at AT&T or any other major US wireless carrier. Where the Chinese vendors have had some success is in the prepaid business, and AT&T currently carries several ZTE phones on its GoPhone prepaid brand, as well as one Huawei phone in a partnership with Walmart. However, what’s actually happening here is that AT&T is certifying Huawei’s own chipset for use on its network, which is really just a possible first step to getting more Huawei phones onto AT&T store shelves. Huawei’s lack of brand awareness in the US continues to be its single biggest challenge – something that hasn’t really changed over the years. I remember having conversations about this with Huawei executives at CES at least six years ago. Until that changes, there’s very little incentive for AT&T to give over shelf space reserved for familiar brands consumers recognize to a relative unknown like Huawei.
via The Information
CTIA, which is the industry association that represents the largest US wireless carriers, is arguing before the FCC that it shouldn’t be subjected to new rules on sharing data it collects on its users. The carriers have argued that Google and other online service providers aren’t subject to the same rules (those companies are regulated primarily by the FTC rather than the FCC) and so for consistency’s sake the carriers should be treated the same way. This is really about a technical definition of the word “sensitive” – clearly the kind of data being talked about here is indeed enormously sensitive, but the real question is how disclosure of that data is regulated. This matters because, for example, AT&T as a fiber broadband carrier in certain parts of the country has offered a service discount for customers who consent to tracking of their web browsing history and so on, something which it argues Google does all the time without explicitly asking for users’ permission to do. What the carriers are arguing here is that it should be allowed to continue to do this kind of thing without having to ask users to opt in first. The carriers look likely to win given the current hands-off policy stance of the FCC, which means more erosion of user privacy for users, but the proper approach would be for the FTC and FCC to work together to craft a set of consistent rules that would apply to all players that get access to similar data, rather than each regulating in a vacuum.
via Ars Technica
Depending on your perspective, this is either the broadband industry’s dirty little secret, or a natural consequence of the investment characteristics of fiber broadband. What’s happening here is that broadband providers like AT&T tend to invest the most in broadband infrastructure in areas where they’re likeliest to see a return on that investment, in other words those areas where takeup is likely to be highest, which in turn are disproportionately going to be more affluent. In the past, some cities have required universal coverage as part of franchise agreements to avoid this kind of redlining, but that has changed in recent years, at least in part because of Google Fiber. Google’s big innovation in deploying fiber was to encourage municipalities to bend over backwards to get the service, which turned the usual model of cities extracting concessions from providers on its head. AT&T then said to the same cities that it was happy to deploy fiber on the same basis if it was offered the same inducements and benefits, thus enabling its rapid deployment of fiber-to-the-home infrastructure in recent years. This FTTN infrastructure predates that model, but we’re going to see a lot more of this redlining in the years to come, and cities only have themselves to blame if they allow companies to operate in this way. Meanwhile, this ability to redline is the single biggest driver of faster broadband deployment in the US today, even if access to that faster broadband remains very uneven.
This is an interesting but not altogether unexpected step. There’s an analogy here to Amazon’s discounted Echo-only music service, which takes advantage of the same limitations to offer a lower price for something that would normally cost more. GM is now offering $20 for unlimited data, which is the same as it used to charge for 2GB of in-car WiFi data. AT&T continues to sell in-car connectivity to carmakers at a rapid rate – about a million subs per quarter – but these subs are mostly extremely basic at the outset, covering just in-car telematics for a few dollars a month. Only if subscribers actually start buying the additional features such as OnStar and this kind of in-car WiFi does AT&T start to generate a more meaningful revenue per user, so being more aggressive about the pricing, especially as AT&T reintroduces unlimited plans for its own services, makes a lot of sense. And of course since GM gets a cut, it’s strongly incentivized to sell these services too.
I think there’s actually more going on with these new plans than most of the coverage I’ve seen suggests. Firstly, the unlimited plan AT&T currently sells is going away as an option for new customers, so these two new plans are AT&T’s unlimited offer going forward. Secondly, I suspect it’s also going to lead with these over its tiered data plans going forward, even though those tiered plans will remain available for at least a while. What’s really happened here is that AT&T jumped in quickly by opening up its existing unlimited offer two weeks ago when Verizon opened that can of worms, but this is the offer it really wants to put in the market from here on out. And that’s important, because when AT&T opened up its offer, that had two implications: no more benefits from bundling AT&T and DirecTV service, which had been an important driver of net adds for DirecTV, and a cap on revenue per user for those switching to unlimited. These new deals restore the benefit for bundling with DirecTV (it’s now a $25 bill credit every month), and provide a structure which allows for an up-sell over time between two tiers of unlimited service. That allows AT&T to continue to differentiate on its unique selling point, which is wireless-TV bundles, while also creating the idea that all unlimited isn’t created equal. For now, there’s basic unlimited with SD video and a 3Mbit/s speed cap, and then premium unlimited with tethering, the bundle discount, and HD video. That opens the door to other unlimited tiers or options down the line as well, and therefore increasing ARPU over time. I do think competitors are going to aim at that 3Mbit/s speed cap in their advertising, and if you look at the details of these plans they’re still overly complex, but these new plans should definitely help AT&T sell both more wireless and TV subs.
5G Schedule Moves Up to 2019 – PCMag (Feb 27, 2017)
As I expected, 5G seems to have been a big theme at MWC this year, with lots more marketing type announcements but also some actual products being announced, albeit ones which should technically be described as pre-5G. The headline here is a bit funny, because of course it’s in these companies’ interests to suggest 5G is more imminent than previously thought, but it’s not up to them how quickly the technology gets deployed – that’s entirely up to the carriers, and I’m still very skeptical that we’ll see 5G available to more than a handful of locations before 2020 in the US (or probably anywhere else). And of course the idea that Qualcomm’s 5G modem would premiere in an iPhone seems laughable – Apple has been deliberately slow to adopt both previous wireless generations (3G and 4G), because the early trade-offs between performance and battery life make early entry unappealing. I don’t see that changing with 5G. But as a previous piece suggested, 2017 is going to be the year of pre-5G commercial trials, which is an important step along the path to eventual mainstream rollout and adoption.
AT&T Expands Access to Unlimited Data (Feb 16, 2017)
Well, that didn’t take long at all – at the beginning of this week neither of the two largest US wireless carriers offered unlimited data plans to all customers, and by the end of the week both will. This has financial implications for both carriers, though they’re hard to predict – both have had unlimited customers before but have been slowly weaning them onto tiered data plan, and taking the limits off again could lead to dramatically higher usage especially if many users switch to these new plans, which are fairly aggressively priced. At AT&T, though, there’s another impact, which is that it has been using unlimited data as a marketing strategy to drive DirecTV subscriptions, because that was the only way to get on one, but that will now go away, so we may see lower DirecTV net adds going forward (AT&T added 1.2 million of these bundled subs in Q4, and had almost 8 million at the end of the year). Next quarter’s earnings season for the wireless carriers will be very interesting – it’s going to be one of the hardest ones to predict in a long time.
Tracing AT&T’s Capital Expenditures Over Time – Hal Singer (Feb 10, 2017)
One of the most pervasive stories out there about net neutrality is that, despite threats from the big telcos to reduce investment if it was made law, they have in fact increased spending since NN rules were introduced. This analysis looks at AT&T specifically and argues that its capex has actually gone down over the last three years if you back out the extra investment from its ownership of DirecTV and Mexican wireless assets. AT&T is complex because it no longer breaks out its wireline and wireless capex, but the headline picture here is certainly different from what you’ll see in most coverage of this issue.
via Hal Singer
T-Mobile likes OpenSignal, Speedtest.net, and other network testing services and apps which rely largely on reporting from users’ devices, as opposed to the industry’s traditional reliance on professional testing services like RootMetrics. And the reasons are obvious: T-Mobile consistently puts in a much better showing in these reports than it does on the ones used by the rest of the industry. On the basis of this OpenSignal report, it looks like T-Mobile is basically tied with Verizon for the network available in most places and at the highest speeds nationally. That totally flies in the face of the reporting done by the professionals (see this RootMetrics report for H1 2016), and also goes against official coverage numbers from the other carriers.T-Mobile reasonably make the claim that the OpenSignal results are from real people actually using its networks throughout the country, not from testers only going to certain places, but self-selecting surveys of any kind are always unreliable. The reality is that T-Mobile has caught up a ton over the last few years with the two big carriers, but it’s still behind in coverage and quality, and you’ll see far more people complaining about their T-Mobile coverage than AT&T and Verizon customers do. Perception also lags reality – T-Mobile still has a reputation for poor coverage and quality even as the true gap with the big guys narrows.
AT&T Reports Fourth-Quarter Results – AT&T (Jan 25, 2017)
AT&T is the second of the big US carriers to announce its Q4 results, after Verizon earlier this week. On balance, AT&T’s results look a little better, with the lowest postpaid phone losses in a long time, and decent overall TV growth, mostly thanks to DirecTV Now. AT&T is executing on what I’ve called its ampersand strategy, with 7.9m subs now taking a DirecTV-AT&T mobile bundle with unlimited data. This strategy is also the underpinning of the Time Warner merger, which AT&T apparently still expects to close later this year. AT&T continues to report stronger growth in connected devices – everything that isn’t traditional phones and tablets sold to businesses or end users – than any of the other carriers, and that growth has really helped offset some of the weakness in the phone business in recent years, as has its prepaid growth, mostly under the Cricket brand. Overall, AT&T is still pretty well positioned when it comes to US wireless competition.
These numbers get crunched every year, and are always an insight into the sometimes complex relationship between tech companies and the US government, as well as the very different strategies pursued by the various companies – Apple spends far less than some of its peers (less even than Facebook, which is a fraction of its size), while Google is always a big spender. The other thing I’m always struck by is the relatively tiny size of the spending – even Google’s $15.4m lobbying spending is minuscule in the context of its overall business – Apple’s spend was a fraction of a hundredth of a percent of its revenue for the year. It’s also interesting to see which issues the companies lobbied on: Apple lobbied mostly on technical issues directly related to its business, while Google lobbied more broadly on trade and immigration policy as well as several technical topics. All this will obviously potentially get a lot more complicated under the new administration, which has so far had a much more adversarial tone towards big tech companies than its predecessor.
AT&T’s Streaming Service DirecTV Now Peaking At 35,000 Simultaneous Users – StreamingMediaBlog.com (Jan 20, 2017)
Update: AT&T has now released official numbers, with over 200k paying users. So it appears Dan’s estimates were a little short. Though given that AT&T offered a free Apple TV for those who committed to three months of service, it’s possible some of those users aren’t active and will churn shortly.
Dan’s very good at what he does, so I have no reason to doubt that he’s in the right ballpark here, and these numbers are interesting in their own right. What’s even more interesting is how poorly this service has performed, and how unapologetic AT&T has been about it. I met with Enrique Rodriguez, the CTO for AT&T’s Entertainment Group, at CES, and although he acknowledged there were issues, he downplayed them. I have had better luck than some with the service once the first few days were over, but many people are still clearly having lots of issues, which is just baffling for something AT&T talked up so much ahead of time. Moreover, the platform AT&T is using for DirecTV Now is the same one it plans to use for Sunday Ticket online, its TV Everywhere services, and more going forward. I’d hope things start to change quickly here, because the way things are going right now this doesn’t look pretty.