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AT&T serves up 5G plans with healthy dose of pragmatism

AT&T will spend $6 to $8 billion between 2022 and 2024 to deliver 5G services over its new midband C-band spectrum licenses to 70 to 75 million people in 2022 and 100 million people in "early" 2023, the operator said during its analyst event Friday.

Those targets sit behind the goals that executives from Verizon and T-Mobile outlined during their own analyst events earlier this week. Specifically, T-Mobile said it will cover 250 million people with its midband 2.5GHz spectrum by the end of 2022 without any increase in its capital expenses. Verizon, meanwhile, said it expects to cover 250 million people by 2024 via spending an extra $10 billion on its network over the next three years.

Perhaps in response, AT&T executives shied away from the kind of grandiose, change-the-world statements about C-band spectrum and 5G that peppered the Verizon and T-Mobile analyst events.

"There's not one solution that's going to meet all consumer demands or expectations," said AT&T's Jeff McElfresh, CEO of the company's communications business, in explaining the operator's focus on both 5G and fiber. "Our value proposition is to serve customers how they want to be served with enough bandwidth and capacity and speed, and we'll let the technology service architecture meet that demand or that need."

Midband realities

McElfresh also said that there are significant challenges in deploying midband spectrum like the C-band. "When you get up into the midband segment of spectrum, while it offers us really wide bandwidth for speed and capacity, its coverage characteristics don't penetrate [buildings and other locations] as effectively as the lowband does," he said. "And so as we design our network and our offers in the market, you will see us densify our wireless network on the top of our investments in fiber."

That's a decidedly different stance from Verizon. For example, Verizon's Adam Koeppe told Light Reading this week that the operator would be able to cover the "vast majority" of its ultimate C-band buildout target – 250 million people – using its existing cell site locations.

T-Mobile executives, though, have acknowledged that they will have to increase the number of cell towers in the operator's network to successfully deploy a midband 5G network.

"Midband spectrum is midband spectrum, it's never going to propagate like lowband spectrum," agreed AT&T CEO John Stankey during the operator's analyst event. "And I don't think – whether you're operating at 2.5 [GHz] or elsewhere – you're going to change that. Nominally speaking, is 2.5 somewhat better than the C-band? Yeah, nominally speaking, it's somewhat better. You have a decision to make, which is if you want that 2.5-gig spectrum to work inside, you're going to have to change your cell grid pretty significantly to make it work really effectively."

Stankey also sought to downplay the importance of midband spectrum like the C-band in relation to AT&T's other networking technologies, including fiber. "We think midband spectrum has its role – it has its role in being a premium mobility product – and we think there's better ways to deal with what's going on inside most of the walls of society."

Both Stankey and McElfresh put more emphasis on the benefits AT&T expects to derive from its expanded fiber buildout than the benefits it might see from the $27.4 billion it spent acquiring C-band spectrum holdings.

Fixed wireless obstacles

Specifically, the executives noted that AT&T is seeing usage on its fixed, wired networks growing at a 38% five-year compound annual growth rate (CAGR), to 317GB per month per user. Meanwhile, growth on the operator's mobile network reached 35% CAGR, to 5.6GB per month per user, during the same period. Further, the company said the ratio between downlink and uplink traffic is shifting from 10:1 to 5:1.

McElfresh said such trends will make it hard for 5G to meet users' in-home broadband needs. "Boy, that starts to put a real tax on a mobile network," Stankey agreed.

As a result, both executives reiterated that AT&T has no plans to join Verizon and T-Mobile in a broader, consumer-focused fixed wireless Internet offering. McElfresh said AT&T would only engage in "niche" fixed wireless buildouts in locations mostly adjacent to AT&T's fiber network.

On the business side, though, AT&T did earlier this week announce an expanded fixed wireless offering on its 5G network.

Promotions and expansions

Overall, though, AT&T's McElfresh said the operator would continue working to gain share among smartphone users by pursuing the kinds of promotional offerings that it leveraged in the fourth quarter. That's noteworthy considering the financial analysts at MoffettNathanson estimated recently that those promotions may be costing AT&T as much as $2 billion per quarter.

Interestingly, after its analyst event, AT&T did announce a few additional 5G expansions. The company said it would begin offering lowband and highband, millimeter wave (mmWave) 5G connections to consumers on its older unlimited data plans for no extra charge. The operator also said it would extend its mmWave 5G network in 2021 to new locations, including 17 sports stadiums, 30 company-owned retail locations and seven airports.

Finally, in an interview with CNBC, Stankey suggested that AT&T could eventually benefit from the development of new applications and services for speedier 5G networks, such as virtual reality applications.

"I think we're very much in that early stage with 5G," he said. "We're going to find plenty of use cases and applications for this bandwidth."

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— Mike Dano, Editorial Director, 5G & Mobile Strategies, Light Reading | @mikeddano

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