John Stankey Is Not A Big Fat Liar

AT&T President John Stankey is a big fat liar, nearly all the reporters and talking heads seem to believe. “Everyone” is saying AT&T needed the 2 gig cap because of congestion – except AT&T. Stankey personally promised thousands of investors on the quarterly call AT&T's congestion problems will be solved within months. He's restored the capex cuts and they are upgrading their network. Two of the best engineers I know expect him to succeed.
I believe Stankey is right and there's absolutely no operational reason for a cap at a low 2 gigabytes – about 90 minutes of quality TV each week. 2 gigabytes would be even more ridiculous for Verizon's soon-to-launch LTE network running at 5-12 megabits. Even at the low end, you'd run past 2 gigabytes in less than an hour a month. LTE is 2-4 times as efficient as 3G, which is enormously profitable with an implicit 5 gigabyte cap, so the natural cap in the LTE generation is 10-25 gigabytes for basic service.
Wall Street thinks the low cap is about higher prices and price discrimination. “These new wireless bundles from ATT seem demonically brilliant! See the cap rates? ATT is going to be flowing in extra money and quickly,” one of the best wrote.
People inevitably will use more mobile bandwidth and consumers will ultimately pay as much as 50% more because of the change. The low cap also protects the telcos' lousy and over-priced video packages.
Stankey's cap, if successful, is a dagger in the chest of the National Broadband Plan, especially affordability. The heart of the plan is releasing more spectrum in the hope that will yield increased competition. That was a long shot, the planners knew, but possible.
With this low cap almost everyone will need to maintain their landline broadband. There's nothing wrong with a cap at a reasonable level at least as high as today's 5-10 gigabytes. A 2 gigabyte cap would be destroyed by the market if Verizon + AT&T weren't marginalizing wireless competition.
Julius Genachowski needs to think clearly and act decisively. He's invited me in to talk, and affordability and rural availability will be my focus, along with avoiding waste of public money. Unless I write something he doesn't like and he rescinds the invitation.
iPhone connections are still struggling in New York and San Francisco, but 90% of AT&T's 3G networks are reliably delivering megabit speeds. AT&T has massive amounts of unused and underused spectrum in most of the U.S. although it takes 6-18 months for some of it to come online. Two of the best engineers in the U.S. tell me wireless congestion can be almost eliminated except at Katrina type emergencies with 5 and 10 gigabyte caps. Models from Adtran suggest 20-30 gig caps (or higher) are practical in the LTE generation.
That guarantees the broadband plan will fail to make connections “affordable.” The only tool the plan proposes is making more spectrum available and praying that new wireless entrants will be significant competition to 25-100 megabit cable and VDSL. Not even the authors of the plan thought that likely to work, but politics prevented them doing anything more effective.
. Two of the best engineers in the U.S. tell me wireless congestion can be almost eliminated except at Katrina type emergencies with 5 and 10 gigabyte caps. Models from Adtran suggest 20-30 gig caps (or higher) are practical in the LTE generation. There's nothing wrong with caps if they are economically sensible. The problem is that AT&T placed the cap much too low. Scott Wallsten reminds me peak pricing rates more directly address any problems, but caps are simpler to implement and understand.
More customers mean massive increases in revenue, more than enough to pay for the equipment needed to serve them. Lindner reports EBITDA margin in Q1 was up 380 basis points to 44.5%. That's huge.Saturday, 12 June 2010 18:08

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