AT&T Takes Business U-verse to the Max with Internet Max 18

| Dec 19, 2008 | Business Network Services - U.S. | Competitive Update

| Analyst: Cindy Whelan

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

Event Summary

December 17, 2008 – AT&T launches U-verse High Speed Internet Max 18 and support for static IP addresses with U-verse to business customers in over 70 U.S. markets. Internet Max 18 offers 18 Mbps downstream/1.5 Mbps upstream. The cost of the service includes unlimited access to AT&T’s nationwide Wi-Fi network and wireless office networking. AT&T offers optional email storage and email security packages, and customers can lease or purchase a four-port wireless modem with a built-in two-tier firewall. Internet Max 18 is $85 per month; static IP addresses are available in blocks with as few as eight addresses for $15-$40 per month.

Analytical Summary

• Current Perspective: Positive on AT&T’s launch of Business U-verse Internet Max 18 and the addition of static IP addresses to Business U-verse, because the higher speed tier allows the carrier to offer customers a competitively-priced alternative to cable broadband services. Internet Max 18 supports 18 Mbps downstream/1.5 Mbps upstream for just $85 per month, and the carrier decreased the price of its 10 Mbps service to $70 per month, offering small businesses two Internet service options priced below many cable broadband offers at similar speed tiers. Small businesses rely on their Web sites, while larger businesses benefit from the additional security of static IP addresses to branch locations, and AT&T now makes static IPs available with U-Verse as well.

• Vendor Importance: High to AT&T because the carrier launched Business U-Verse in May 2008 (see “AT&T Launches Business U-verse, Offering 10 Mbps Downloads Today and Setting the Stage for New Business Services in the Future,” May 14, 2008) with the promise of higher speeds and static IP addresses to be added in the future, and AT&T has made good on that pledge. Although the primary target for U-verse is the consumer market, small business customers represent a growing base that need not only the higher speed services, but may also purchase optional services such as Web Hosting, Tech Support 360, Remote Vault and other options. Support for static IP addresses will draw in small businesses that wish to host their own Web site or email services. AT&T’s ability to keep pace with cable operator speed tiers and offer business-class Internet service at a competitive price with useful options will strengthen the carrier’s ability to market against these competitors.

• Market Impact: Low to moderate on the SMB market because, although AT&T is a highly recognized name and Business U-verse Max 18’s speed and price is competitively priced against competing offers from cable operators and CLECs, availability of the service is still limited to pockets within AT&T’s 22-state local service area. Small businesses that have access to Business U-verse will undoubtedly find the offer attractive, and competitors will need to be aware of the new service and have a plan to compete against it. But the service is not yet available to a large percentage of small businesses within AT&T’s regions.

Competitive Positives and Concerns

Recommeneded Vendor Actions

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Recommended Competitor Actions

• Many cable broadband services are expensive when purchased as standalone products, and they need to lower their standalone business broadband prices. Time Warner Cable’s 15 Mbps service is around $280 per month and Cox 15 Mbps service is north of $300 per month. These operators require customers to purchase voice and/or video services in order to get a better price.

• Comcast needs to emphasize its 22 Mbps/5 Mbps service, which is available for just $99.95 per month, offering customers not only faster downstream service, but substantially faster upstream service as well. Comcast could consider a business voice and 22 Mbps Internet bundle promotion in its markets where U-verse is available in order to tempt customers away from AT&T.

• Covad’s business was built on providing reliable, economical services to the small and medium business market. When compared to high speed Internet offers from AT&T as well as Verizon and Qwest, Covad’s Business DSL monthly rates are substantially higher, in some cases more than twice the price. Although Covad has struggled financially over the last few years, the carrier should evaluate its service prices and take rates to determine if a boost in subscribers from decreased prices would outweigh any revenue decline.

CLIENTS ONLY

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