AT&T’s Planned $1 Billion Global Network Investment Promises Enhanced Services and Reach for Multinational Customers

| Mar 7, 2008 | Business Network Services - U.S. | Competitive Update

| Analysts: Siow Meng Soh, Cindy Whelan

Current Perspective: Positive
Vendor Importance: High
Market Impact: Moderate

Event Summary

March 5, 2008 – AT&T has announced its investment plan for 2008 to expand its network and solutions portfolio. AT&T will spend $1 billion globally. The carrier's international expansion plans include new submarine cables, additional core MPLS routers, Ethernet VPLS in a few locations, network-to-network connections, DSL access in China and new data centers. AT&T will also develop capabilities to support unified communications and enhance its BusinessDirect portal.

Analytical Summary

• Current Perspective: Positive on AT&T’s $1 billion investment to enhance its networks and services in the U.S. and worldwide during 2008. The carrier’s investment in expanding the depth and breadth of its reach into Europe, Asia and the Middle East will boost AT&T’s competitive position globally. AT&T plans to increase network capacity, improve network resiliency and provide better international in-country coverage. The company will also be extending the reach of services such as Ethernet VPLS and will be enhancing unified communications capabilities.

• Vendor Importance: High to AT&T, because its investment plan addresses areas where there is customer demand (e.g., improved network resiliency, better international in-country coverage and new application performance management tools) and closes gaps with competitors (e.g., greater international DSL coverage). AT&T's global investment plans follow on to the vision the carrier set in late 2007 (see “AT&T Analyst Event Shows Carrier Poised for Growth in ’08,” December 14, 2007). AT&T shows that it remains committed to invest in areas that will bring them benefits.

• Market Impact: Moderate on the enterprise service market, because AT&T is already a well-established entity in the global telecommunications arena, with an extensive multinational enterprise customer base. AT&T’s investment will certainly strengthen its competitive position around the world, although many areas covered by this investment plan are to close gaps with competitors in specific areas. On the whole, however, AT&T’s moves to extend its reach and services in its existing footprint as well as into emerging markets will strengthen the carrier’s position with its current customers, and will be a strong incentive for prospective customers to consider AT&T.

Recommended Competitor Actions

• Competing global carriers can highlight that investment in network and services is an ongoing process. They can highlight their investments and achievements in 2007, and give customers and prospects insight into focus areas for 2008. Competitors should examine the services and regions where AT&T is investing, and determine if they need to make similar efforts to match AT&T’s expanding network reach and bandwidth increases.

• Competing carriers focused on the U.S. should point out that AT&T's investment plans are largely focused on international expansion. They can describe themselves as focused entirely on providing quality service to customers on the home front while AT&T directs its budget to build out facilities and search for customer revenue abroad.

• While AT&T has indicated that it plans to add a subsea route between Europe and Asia, it has not released details. Several competitors such as SingTel, Tata Communications and Verizon Business can point to recently announced plans to enhance network capacity and resiliency in the Asia Pacific region. For instance, Verizon Business can point to its Trans-Pacific Express and trans-Pacific and trans-Atlantic network mesh deployments as evidence that it has made real progress.

• Competitors can also point out that they already have some of the elements mentioned in AT&T’s investment plan. Carriers such as Verizon Business, PCCW Global, SingTel and Telstra have already deployed Ethernet VPLS in several destinations. Orange Business Services can also highlight that it already has extensive international DSL coverage.

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Competitive Positives and Concerns

Recommended Vendor Actions

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