AT&T Plans Upgrade to Faster 3G with HSPA 7.2

| Jul 10, 2009 | Wireless Services - U.S., Enterprise Mobility U.S.

| Competitive Update | Analysts: Bill Ho, Kitty Weldon

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

Event Summary

May 27, 2009 -- AT&T announced it will upgrade its HSPA network to HSPA 7.2, providing higher speeds; the upgrades will begin later in 2009, with completion in 2011. The company is also nearly doubling the wireless spectrum dedicated to 3G in most metropolitan areas, adding more fiber optic back-haul for cell site capacity, and deploying 2,100 new cell sites. AT&T is also planning better, “seamless” integration of its 3G network with its Wayport WiFi assets and the launch of femtocells to improve in-building performance.

Analytical Summary

• Current Perspective: Slightly positive on AT&T’s announcement that it will be upgrading its 3G network to HSPA 7.2 “later in the year” with completion in 2011, since it reinforces the carrier’s positioning as having the fastest 3G network, which important to many consumer and business customers. However, it is pre-announcing an upgrade that will not start for several months and will take one to two years to complete. For those waiting for even higher speeds with an anticipated upgrade to HSPA+ (prior to a 2010 deployment of LTE), this message is a bit confusing. In addition, while the main thrust of the announcement is about speed (as well as enhanced spectrum and capacity), the carrier has not listed the expected average end-user speeds from the upgrade.

• Vendor Importance: Moderate to AT&T, as it already has a slight speed advantage over CDMA competitors Verizon Wireless and Sprint when it comes to 3G, which it has been using extensively in its marketing campaigns. This new upgrade will reinforce that message and make it more meaningful. Having the fastest network provides a reason for some customers to sign on, especially those that use mobile multimedia applications and content or access graphics-intensive Web sites, interactive databases, and video services.

• Market Impact: Moderate on the wireless services and enterprise mobility markets, because the speed war continues as wireless carriers upgrade their networks. While Sprint is now touting 4G WiMAX download speeds of 2-4 Mbps in Baltimore (compared to the current generation of HSPA that averages 700 kbps-1.7 Mbps), it will be a long time before Sprint 4G is widespread. In addition, both Verizon Wireless and AT&T are on an even higher-speed LTE path, with Verizon Wireless possibly launching by the end of this year and AT&T planning its upgrade to LTE in 2010. In the meantime, having a higher-speed 3G network will be a competitive advantage for AT&T and will let it continue to use “speed” to its advantage in its promotional materials.

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Competitive Positives and Concerns

Recommended Vendor Actions

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Recommended Competitor Actions

• Sprint and Clearwire should focus their marketing efforts on the speed capability of 4G. More importantly, each carrier should be making use of the vaunted WiMAX ecosystem to introduce and “swamp” the market with a large selection of 4G/3G devices to capture the early adopters.

• Verizon Wireless needs to execute on its plan to bring about LTE in 2009 and 2010 to capture first mover status in grabbing receptive consumers and enterprises. While it has mentioned 2009 as the year for its first deployments, this has not been followed up with firm dates, or a list of metros. If it deploys in 2009 it will have a temporary advantage over AT&T and potentially Sprint, depending on the speeds achieved and the number of metros in place.

• T-Mobile needs to jump to HSPA. Its current deployment of HSDPA alone (without a faster uplink) appears to be inadequate when all competitors offer higher uplink and downlink speeds with their mobile broadband offerings. If standards and capabilities permit, T-Mobile should take the plunge and move to HSPA+ and leapfrog AT&T’s 3G play.

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