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AT&T's $1B Global Capex Pledge

AT&T Inc. (NYSE: T) has ramped up its global capital expenditure plans for 2008, pledging to spend $1 billion on its international network and systems in 2008 -- with subsea cables, MPLS nodes, video gear, and hosting capabilities on its shopping list.

And with VPNs and Ethernet services now largely trusted and accepted by the global business community, the carrier’s VP of global ventures and business development, Geoff Webster, says AT&T now has the chance to tap the potential demand for content distribution services, with video the main application driving that demand.

Where the money’s going
Of the total capex, AT&T is spending about $380 million on what it calls its "core data and voice service" capabilities -- investments in VOIP, VPN, video, and Ethernet access and DSL capabilities. AT&T plans to be offering business DSL services in 21 markets by the end of 2008.

"The advantages of MPLS VPNs and Ethernet access are now well understood and not disputed, and are accepted by nearly all of our customers. With MPLS VPNs, having multiple services over a single connection with inbuilt security is a value proposition that now has significant traction with multinational organizations," says Webster. (See Survey: Enterprise Ethernet Services Are Hot.)

With VPN services now broadly adopted and accepted, AT&T has made content distribution a new strategic imperative, and is investing in video servers and network capacity upgrades to deal with the bandwidth-hungry traffic.

"Content distribution is a very exciting area, and we see traction growing in the next few years driven by streaming video and videoconferencing," says the AT&T man. "Next-generation videoconferencing, including Cisco Systems Inc. (Nasdaq: CSCO)'s Telepresence and new capabilities from Polycom Inc. (Nasdaq: PLCM) and Tandberg ASA (OSE: TAA), have great potential." (See Cisco, Nortel Tee Off in Telepresence, Polycom Intros HDX, and Tandberg ODs on Codian.)

Demand for such services is expected to grow, believes Webster, as chief information officers (CIOs) at large companies start to take "green issues" into consideration in their corporate strategies, and finally start to use conferencing services as an alternative to international travel to cut down on costs and reduce carbon footprints.

A further $320 million is being spent on "networks," which includes subsea cables and new MPLS points of presence (POPs).

New subsea capacity will be added in cables connecting North America with Japan, Southeast Asia, and Australia, upgrades in the Caribbean, and in connections to India, where AT&T is becoming increasingly active, and the Middle East. (See AT&T Goes Long Distance in India and AT&T India Names Prez.)

As for its MPLS nodes, the carrier is adding POPs in markets where it already offers MPLS services, including France (Paris), Russia (Moscow), Kuwait, India (New Delhi and Kolkata), Japan, China (Shanghai), Singapore, South Korea (Seoul), and Guatemala. AT&T says it offers MPLS services in 137 markets worldwide.

About $150 million is to be spent on enhancing AT&T's international hosting capabilities, says Webster. The carrier is adding 180,000 square feet of hosting capacity in its 38 global centers, he notes, and is launching new services, such as WAN acceleration, unified communication, and managed hosting that require new capital investments.

A further $150 million is to be spent on what AT&T calls "customer experience" capabilities, such as online portals and network and service monitoring capabilities for large firms.

Much larger overall investment
Webster says this year's investment, which supports AT&T's international business customers, is significantly higher than in 2007, when it stood at about $750 million, and way ahead of 2006, when AT&T spent about $400 million on its global infrastructure and systems.

That increased level of investment reflects growth opportunities with multinational companies, he says. "We can justify the capex because of the perceived opportunities -- you can infer from this that the global business is increasingly important."

AT&T doesn't break out its global revenues or provide financials for specific markets, but Webster notes that the international operations are part of AT&T's Enterprise Services business, which reported a near 21 percent increase in revenues from IP-based data services such as virtual private networking, hosting, and managed Internet services in the fourth quarter of 2007. (See AT&T Turns in Strong Q4.)

— Ray Le Maistre, International News Editor, Light Reading

materialgirl 12/5/2012 | 3:46:10 PM
re: AT&T's $1B Global Capex Pledge Nice to know ATT has an extra $1B to invest in overseas expansion when they lack the cash to install FTTH or a decent 3G network in their monopolized domestic markets.

Also nice to know that ATT management sees Ethernet as meaningful AFTER competitors have proven its usefulness to their customer base. If ATT always had the monopoly they are in the process of re-creating, we would still be using expensive frame relay. ATT would be rich and the rest of us headed to the poorhouse.
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