On Wednesday November 7, 2012, AT&T announced its Project Velocity IP (VIP) Plan. In short, it details AT&T’s plans to shift 99% of its network away from TDM to IP.
I’ll provide more details in a moment, but this is really what we learned today: Small Cells will play a BIG role in AT&T’s network; AT&T has no plans to deploy FTTH on any scale; Wireline remains an important asset – if optimized properly; Virtualization, Mobility and Symmetrical Bandwidth would be key network requirements for the Enterprise segment; and finally, Cloud and LTE will drive new, high-growth business opportunities.
Project Velocity-IP (VIP)
AT&T finally provided details on its plans for its rural markets and its broadband expansion. Called Project Velocity IP (VIP) – AT&T plans to invest $14B to (1) expand 4G LTE to 300 million POPs by the end of 2014; (2) expand its U-verse platform to 57 million homes, reaching 75% of its customer locations by the end of 2015 and (3) expand its Fiber deployment to 1 million additional business customers – covering 50% of multi-tenant office buildings within AT&T’s wireline area by end of 2015.
Of this $14B – $8B will be spent on the wireless network and $6B will be spent on the wireline network.
Project VIP – Wireless
AT&T plans to increase the number of 4G LTE PoPs from the original planned 250M to 300M by the end of 2014 – which will effectively double the number of PoPs from the end of 2012. This is expected to provide 4G LTE broadband coverage to 99% of its customer locations.
They will achieve this via a spectrum management plan that includes near-term, mid-term and long-term goals.
Short Term (2012-2014): aggressively enhance existing position through capacity enhancements (acquire spectrum in secondary markets)
Mid-Term (2015-2017): deploy 30MHz of WCS spectrum
Long-Term (2018 & beyond): FCC auctions, network architecture evolution
As part of this plan they will also deploy the following:
10,000 Macro Sites
40,000 Small Cells (starting with 3G UMTS and 4G HSPA+ in 1Q13 and LTE + WiFi in 2014)
Good news for ALU and Ericsson!
Project VIP – Wireline
First it should be noted that AT&T – after considerable studies – will not implement a structual separation of its wireline operations nor will they sell off large portions of its wireline network. The main reason? It simply did not provide shareholder value. Instead they plan to operate this portion of their network under a new model.
As such, AT&T will invest $6 Billion to expand U-verse to an additional 8.5 million locations, bringing the total to 33 million that can receive the U-verse bundle of voice, video and data by the end of 2015.
In addition, they will upgrade (currently in the process and likely to be completed end of 2012) ATM DSLAMs serving 24 million locations to IP-DSLAM.
According to AT&T, broadband market share is growing in U-verse markets, versus non U-verse markets where DSL declines are prevalent.
There remains a portion of the market that will not be upgraded – in these markets, AT&T will offer its LTE product to offer faster broadband speeds.
As of the end of 3Q12, AT&T served 7.1M U-verse Broadband subs; 4.34M U-verse IPTV subs and 2.73M U-Verse voice subs. Those customers taking the bundle generate $170 per month ARPU.
Finally, AT&T announced plans to implement additional DSL technologies such as bonding and vectoring to increase speeds on DSL.
By end of 2015:
90% U-verse customers up to 75Mbps
75% U-verse customers up to 100Mbps
80% IP-DSLAM customers up to 45Mbps
50% IP-DSLAM up to 75Mbps
In addition to the expansion on U-verse, AT&T plans to build out Fiber-to-the-Building (FTTB) to 1 million multi-tenant locations, which will cover 50% of all MTU’s within their territory.
Investments in wireline will likely benefit ALU (U-verse expansion & FTTB)); ADTRAN (IP-DSLAM expansion) and Ciena (FTTB expansion)
This move to all All-IP network provides what AT&T referenced as the service provider trifecta: Better Revenue Opportunity, Lower Operating Cost and Better Customer Retention.
Look for our research note which will provide more details on this announcement.