US hints at state support for domestic ORAN push

The US government is thinking of subsidising US tech companies to help them get better at 5G software, in the hope that will solve the Huawei problem.

The rumour comes courtesy of the WSJ, which actually has a named source for once. White House economic adviser Larry Kudlow told the Journal that the White House is ‘working with’ tech companies to help them raise their game when it comes to networking software. This would enable the US to be self-reliant on 5G in the advent of the Open RAN movement getting to the point when it was actually useful.

Presumably US tech companies have previously tried to take on Huawei in the networking market but failed. What a few top tips from President Trump will do to tip the balance in their favour is unclear, but a shed-load of public cash never does any harm. Among the companies involved in the initiative are AT&T, Microsoft and Dell, apparently, but Ericsson and Nokia also seem to have been adopted by the US for the purpose of this exercise.

Unsurprisingly Dell and Microsoft are especially keen to get involved, cognisant as they presumably are of the massive new market available to them is networks can be run by software sitting on any old server. Apparently Michael Dell has even gone on the record as saying “software is eating the hardware in 5G.”

While we would never suggest that some US tech companies might exploit the current use of Huawei as a pawn in the trade war with China, we can imagine the likes of Dell exaggerating the short term prospects of ORAN in order to tell budget-holding politicians what they want to hear. For further analysis, check out this Light Reading piece.

RootMetrics US numbers indicate TMUS/Sprint merger is a good idea

The performance metrics of the four US MNOs confirm a significant gap between the big two and the other two.

RootMetrics did a deep dive into the networks of Verizon, AT&T, T-Mobile and Sprint over the second half of last year. In the customary way it then published top-line performance numbers and ranked the networks according to a few sub-criteria. As you can see in the first table below, Verizon comes top in nearly all categories, with AT&T close behind and the other two lagging considerably. We’re not sure why AT&T isn’t number one in any of the speed categories but it’s presumably explained somewhere in the methodology.

The report also takes a specific look at 5G and finds some pretty major variations in performance. Verizon got so excited about the finding that ‘Verizon’s 4G LTE speeds were faster than the low-band 5G median download speeds of T-Mobile in Chicago and Los Angeles and identical to AT&T’s low-band 5G median download speed in LA,’ that it published a special press release. This doesn’t come as a massive surprise since TMUS is devoting so little spectrum to its 5G right now.

The more significant issue raised by this report is how far behind TMUS and Sprint remain on most key metrics. This would seem to support the case for their merger, since the resulting economies of scale, buying power, etc, would allow greater investment in the network. Whether or not that would actually come to pass, or whether shareholders would trouser the cash instead, is hard to predict. But it seems counter-productive to insist they continue to struggle as second-tier MNOs.

AT&T finally launches proper 5G

Almost a year after rebranding its LTE-A as 5GE, US communications group AT&T has launched full-fat 5G in ten cities across the US.

AT&T is the last major network to make this step, but launching in 10 markets at least takes it past Sprint’s current tally. Subscribers in Birmingham,, Indianapolis, Los Angeles, Milwaukee, Pittsburgh, Providence, Rochester, San Diego, San Francisco and San Jose will all get access to AT&T 5G so long as they have also shelled out for the Samsung Galaxy Note10+ 5G.

“With the launch of AT&T 5G for consumers, we’re bringing our customers new and innovative ways to connect with each other, their entertainment and their communities,” said Kevin Petersen, SVP of AT&T Mobility. “Today’s launch sets the stage for the development of new and immersive experiences as we prepare to deliver AT&T 5G nationwide in the coming months.”

“We believe 5G technology will be game-changing, and we continue to help drive this next wave of innovation,” said Scott Mair, President of AT&T Technology Operations. “We were the first in the U.S. to offer commercial mobile 5G, and this is the next step as we build to nationwide service in the first half of 2020.”

It’s hilarious that AT&T is sticking with its ‘first to 5G’ claim, considering its 5GE stunt was universally ridiculed. This proper 5G is still subject to marketing gimmickry, however, coming a it does in regular 5G and 5G+ varieties. The latter augments the low-band 5G that is unlikely to excite many people with some high frequency stuff that will most probably only be available to people sitting on a 5G small cell.

AT&T is the latest to make a curious ‘nationwide’ 5G promise

Like T-Mobile US, AT&T has somehow figured out a way to deliver 5G at nationwide scale over the next six months.

For those who sit in the rural locations where 4G signal is still somewhat of a gamble, the claim from AT&T must come as a surprise. But it seems AT&T has taken the bait and is following T-Mobile US down the 5G rabbit hole with an absurd claim it will deliver nationwide 5G in the first half of 2020.

“When we introduced the U.S. to 5G last year, we started with a business-first and experience-based strategy to lay the foundation for innovation to come,” said Thaddeus Arroyo, CEO of AT&T Consumer. “We’re now introducing consumers to the future of wireless with broad 5G service included in our best unlimited plans for 5G devices like the Samsung Galaxy Note10+ 5G.”

The Samsung device is the first in the AT&T portfolio which will make use of low-band spectrum, explaining how the glorious ‘nationwide’ claim can be realised. The expansion of the 5G network using the enhanced coverage airwaves will focus on the larger metropolitan areas over the next couple of months.

What remains to be seen is whether this can be justified as delivering on the 5G promise. Both AT&T and T-Mobile US will make use of low-band spectrum in an attempt to meet the nationwide claim, though these airwaves will not be able to deliver the eye-watering speeds many are expecting in the 5G era. Both could be setting themselves up for considerable criticism with brash promises.

Interestingly enough, despite 5G not being a reality just yet AT&T has decided to launch a ‘5G+’ service. It might sound like an interesting proposition, but once again AT&T is stretching the truth in pursuit of an advertising tagline. 5G+ is 5G making use of mmWave spectrum. It will be faster, but it is still 5G.

Once again, the US telcos are making some ‘creative’ claims to compensate for a tricky situation. The European telcos are surging forward with 5G deployments in the mid-band spectrum, a much more attractive compromise between speed and coverage, while the US telcos struggle to make 5G work appropriately in the mmWave airwaves.

US telcos need to access the valuable mid-band spectrum frequencies, but these have been allocated elsewhere over bygone years. The FCC perhaps needs to take a more proactive stance, as 5G delivered over the low-band frequencies will not create the connectivity euphoria which has been promised.

FTC forcing through rethink on data throttling

The Federal Trade Commission (FTC) has come to a settlement with AT&T over a 2014 lawsuit on data throttling in unlimited tariffs.

While few consumers will have knowledge of data throttling clauses in ‘unlimited’ tariffs, the practise is widespread. It is of course a nuance rather than being directly misleading, though this settlement might well create precedent to shift the approach to data throttling in the US.

“AT&T promised unlimited data – without qualification – and failed to deliver on that promise,” said Andrew Smith, Director of the FTC’s Bureau of Consumer Protection. “While it seems obvious, it bears repeating that Internet providers must tell people about any restrictions on the speed or amount of data promised.”

The complaint was initially filed in 2014 suggesting AT&T was misleading millions of customers with the practise of data throttling. Although there might be an argument for throttling extremely heavy users on a basis of reasonable use, it does appear AT&T went too far. The FTC suggested AT&T was throttling speeds to such a degree some common applications become difficult or nearly impossible to use.

In the case quoted by the FTC, AT&T sold ‘unlimited’ plans to 3.5 million customers but then throttled speeds once 2 GB of data was consumed in the billing period. At the time, this would have been considered a hefty allowance, though many would have surpassed this quota.

The $60 million sum paid by AT&T to settle this complaint will partly be used to refund customers who signed up for the services in 2014. Those who are still AT&T customers will have the refund automatically applied to their account.

As telcos are now exposed to the threat of a FTC fine, there might well have to be a rethink as to how data throttling is applied to data tariffs.

Firstly, this settlement will not mean the end of data throttling, however the telcos will have to consider whether the current cut-off point would be deemed appropriate. It is perfectly reasonable to restrict the consumption of data in very extreme cases, though the FTC will have to agree to these quotas being reasonable.

Secondly, the telcos will have to make more of an effort to educate the customer on the purpose of data throttling as well as increase awareness as to when it will be introduced. As it stands, most of these unattractive elements of contracts are usually buried in the terms and conditions though this will have to change.

This is of course not the only example of a US telco finding themselves in hot water because of data throttling. During California wild-fires last year, Verizon throttled the data services of a fire department

Ultimately, many consumers will not be impacted, however with data consumption rapidly increasing through more data-intensive applications and a broader array of connected devices, more will be in the future. The US telcos will have to ensure the data throttling practices are evolving with the progress of connectivity, as well as being more transparent when customers sign-up to contracts.

AT&T delivers bullish 3-year outlook amidst a mixed Q3

US telecom and media giant AT&T has reported a steady Q3, with revenues slightly down coupled with improved operation. A bullish 3-year outlook to further de-leverage is welcome news to the capital market.

The company lost 1.2 million premium pay-TV subs, but the HBO business registered growth. The corporate level revenue of $44.588 billion is a 2.5% decline from a year ago (2% decline on constant currency). Operating income grew by 8.7% to reach $7.901 billion, up from $7.269 billion a year ago. EPS was dropped by 23% to $0.50.

When it comes down to business group level, the Communications group delivered a largely steady result. Wireless service revenues edged up, helped to a large extend by the increase in postpaid subscriber base (including 173,000 postpaid smartphone subs) and the upward move of postpaid ARPU ($55.89, up from $55.58 a year ago). The entertainment part of the Communications business was less steady. The company lost 1.16 million “Premium” pay-TV subs (DirecTV satellite and U-verse IPTV) and 195,000 OTT-TV (AT&T TV Now) customers. The total number of AT&T pay-TV subs stood at 21.56 million by the end of Q3, down from 25.15 million a year ago.

Numbers from WarnerMedia, the second largest business group of AT&T, epitomised the “mixed” nature of the results. The total group level income went down by 4.4% to $7.8 billion, but HBO reported an impressive 10.6% year-on-year increase in revenue to reach $1.8 billion, and the $714 million operating income represented a 13.7% growth.

The strong performance of HBO came at a time when AT&T is about to launch HBO Max later today. Priced at $14.99, the current HBO package is the most expensive offer among the major video streaming services (Netflix and Amazon at $12.99, Disney+ at $6.99, Apple TV+ at $4.99). It remains to be seen how AT&T will choose between maxing the user base by pricing HBO Max more aggressively and defending profitability by retaining it at the premium tier.

Guidelines to 2022

The company delayed its Q3 results reporting by a week to finalise its discussion with activist investor Elliott Management Corporation. Presumably as a result of that discussion, AT&T published a rather detailed 3-year financial guidance (to 2022). The key items include growing revenues by 1-2% CAGR, EBITDA target set at 35%, free cash flow to reach $30-32 billion, and no major M&A planned.

The items that made most headlines are related to debt reduction. Specifically, AT&T promised to “Pay off 100% of acquisition debt from Time Warner deal; net-debt-to-adjusted-EBITDA5 of 2.0x to 2.25x in 2022”. Its current net debt to adjusted EBITDA ratio is 2.5, down from 2.66 at the beginning of the year.

According to the analysis by the Washington Post, the Time Warner deal could have cost AT&T over $108 billion including the debt it assumed from Time Warner at the acquisition. AT&T would not be able to pay off its debts, which stood at $153 billion by the end of September (coming down from $166 billion at the end of 2018) with the income generated from its business operations. This means more non-critical assets will be divested. The company is on way to generate $14 billion through asset monetisation in 2019 and plans to recoup $5-10 billion of non-strategic asset sales in 2020.

“The strategic investments we’ve made over the last several years have given us the essential elements to meet growing demand for content and connectivity,” said Randall Stephenson, AT&T chairman and CEO. “Our 3-year plan delivers both substantial and consistent financial improvements over the next 3 years. We grow revenues, EBITDA and EPS every single year, and free cash flow is stable next year, but then grows in both of the next two years, as well. And all of this is inclusive of our investment in HBO Max.”

When it comes to what qualifies as strategic or non-strategic, Stephenson told investors “we have no sacred cows. We’re always open to making portfolio moves.” However, DirecTV, albeit being highlighted by Elliott as one of the failed acquisitions, is not viewed as a target to liquidate in the near future. The business “will be an important piece of our strategy over the next 3 years”, said Stephenson.

The guideline largely reflected what Elliott’s letter to AT&T has demanded. In addition to the defence of DirecTV, probably the only other exception AT&T has made in its guideline was Elliott’s call for management change – AT&T stated “CEO transition not expected in 2020”.

AT&T flogs some European holdings to raise cash

US TMT group AT&T is raising $1.1 billion from the sale of its majority state in Central European Media Enterprises.

CME operates across Bulgaria, the Czech Republic, Romania, Slovakia and Slovenia and seems to be mainly involved in TV, both advertising and subscription-based. AT&T got hold of a 60% share in CME thorough its acquisition of Time Warner and has apparently decided Eastern European telly is no longer part of its grand plan.

Paying off a bit of its vertiginous debt pile presumably is, though, so the $1.1 billion AT&T will trouser from this deal is not to be sniffed at, as well as the $575 million in CME debt it was guaranteeing. In corporate-speak reducing your debt pile is called ‘de-levering’.

“The sale is consistent with AT&T’s plans to monetize non-strategic assets as it continues to pay down debt,” said the brief announcement. “Given the company’s confidence in reaching a net debt-to-adjusted EBITDA ratio in the 2.5x range by the end of this year, shareholders should expect that share buybacks will be in the mix in the fourth quarter of 2019, along with continued de-levering.”

We have to assume CME is ‘non-strategic’ due to its location, rather than its areas of business, since it operates in precisely the areas AT&T paid so much for Time Warner to gain access to. It also seems fair to assume that this is part of a broader process of Time Warner pruning by AT&T and that other holdings outside of the US will also be made available for sale.

US operators collaborate in one more effort to make people care about RCS

AT&T, Sprint, T-Mobile and Verizon have created the Cross Carrier Messaging Initiative to push the Rich Communications Service standard on Android.

RCS is championed by the GSMA, which has been banging on about it for over a decade. It’s positioned as the heir apparent to SMS, offering all sorts of ‘rich communications’ such as images, group chat. That all would have been pretty handy when it was first proposed, but since then there have been countless OTT messaging apps launched, such as WhatsApp, which seem to provide at least everything RCS does. So it’s hard to see what the point of RCS is in this day and age.

The US operators clearly disagree, however, hence this announcement. It’s easy to see why operators, and therefore their lobby group, would want to promote a messaging standard that they have greater control over. But what is less obvious is the incentives smartphone users would have to switch to it. Presumably most would reflect on their current messaging app portfolio and conclude that if it ain’t broke, don’t fix it.

“People love text messaging for a reason,” said David Christopher, GM of AT&T Mobility. “Texting is trusted, reliable and readily available – which is why we’re using it to build the foundation of a simple, immersive messaging experience. This service will power new and innovative ways for customers to engage with each other and their favourite brands.”

“The CCMI will bring a consistent, engaging experience that makes it easy for consumers and businesses to interact in an environment they can trust,” said Michel Combes, CEO of Sprint. “As we have seen in Asia, messaging is poised to become the next significant digital platform. CCMI will make it easy for consumers to navigate their lives from a smartphone.”

“At the Un-carrier, customers drive everything we do, and that’s no different here,” said John Legere, CEO of T-Mobile. “Efforts like CCMI help move the entire industry forward so we can give customers more of what they want and roll out new messaging capabilities that work the same across providers and even across countries.”

“At Verizon, our customers depend on reliable text messaging to easily connect them to the people they care about most,” said Ronan Dunne, CEO of Verizon Consumer Group. “Yet, we can deliver even more working together as an industry. CCMI will create the foundation for an innovative digital platform that not only connects consumers with friends and family, but also offers a seamless experience for consumers to connect with businesses in a compelling and trusted environment.”

Here are the things the CCMI says RCS brings to the table:

  • Drive a robust business-to-consumer messaging ecosystem and accelerate the adoption of Rich Communications Services (RCS)
  • Enable an enhanced experience to privately send individual or group chats across carriers with high quality pictures and videos
  • Provide consumers with the ability to chat with their favourite brands, order a rideshare, pay bills or schedule appointments, and more
  • Create a single seamless, interoperable RCS experience across carriers, both in the U.S. and globally

Of these the B2B angle seems the most compelling. There is still a surprisingly vibrant business around automated application-to-person (A2P) messaging, which typically operators use to communicate with their customers. The switch to RCS would bring a lot more options to that business. And then there’s the fact that you don’t need to know whether someone has an OTT app installed in order to send that message, although it should be noted that Apple shows no sign of supporting it.

But there’s no getting around the fact that RCS is essentially a direct competitor to OTT messaging which, thanks to the inability of operators to act with any kind of urgency, now has a massive head start in the marketplace. Perhaps if more of them belatedly get their acts together as the US operators have they can start to build some momentum, but we’re not holding our breath.

Vodafone and AT&T are proving that partnerships mean prizes in IoT

The IoT world is nothing new in telecommunications, but it’s becoming clear that the players which can negotiate the largest geographical footprints will be in the strongest position to exploit it.

Although there will be plenty of opportunities for IoT potential to be realised in the domestic markets, the big prizes will be realised across international borders. Multi-nationals are the ones with the budgets to invest in this embryonic and largely unproven segment, but to work alongside these companies the telcos will have to prove they have the networks to support the ambition.

Unfortunately, many telcos are limited to their domestic markets. This will make the prospect of partnerships and collaboration all the more important moving forward when offering IoT services.

“Extending our collaboration with AT&T to offer NB-IoT roaming helps our customers to easily deploy their connected devices between the U.S. and Europe,” said Vinod Kumar, CEO of Vodafone Business. “We want to make technology adoption simpler for our customers to help them achieve their business outcomes and by pushing forward the standards and linking up our IoT network with AT&T’s, we’re doing just that.”

“For the IoT to live up to its promise, it must be global,” said Chris Penrose, Senior Vice President of Advanced Mobility and Enterprise Solutions for AT&T. “More and more of our enterprise customers are launching IoT applications across multiple countries. Working with Vodafone we can offer our customers simplified deployments to help scale their IoT plans across the U.S. and Europe.”

Vodafone is arguably in one of the strongest positions worldwide to capitalise on the IoT trends. In terms of the global presence, few can compete with the breadth of Vodafone assets, as you can see from the map below.

The global presence is not necessarily a unique selling point for Vodafone, as any company with ambitions to be a global enterprise services telco will have something similar. Each of the big players in the enterprise services market, including AT&T, will have partnerships in place to emulate this scale, however when these agreements were initially negotiated, we suspect IoT services were not included.

In owning assets in a notable number of markets, Vodafone has a head-start. It does not need to negotiate as many partnerships for global IoT services as its competitors, though it certainly does need to fill in some very notable holes. The US being one of them.

The US is a significant market for anyone involved in the telco world. Vendors will want to supply equipment to some of the largest single networks, while enterprise service telcos will want to tap into the bank accounts of the multi-nationals which fuel the worlds’ largest economy. In partnering with AT&T for NB-IoT as well as LTE-M and other elements, Vodafone has a physical presence in the country it can point to.

The same can be said the other direction also. Although it might be one of the largest telcos worldwide, owned assets at AT&T are limited to the US and Mexico. This is not good enough if you want to be in discussions with multi-national corporations, you need to be able to meet their global ambitions.

Alongside this agreement with Vodafone Business, AT&T has also recently announced partnerships with the three Canadian telcos to expand its presence into the uppermost half of North America.

Partnerships are not the most exciting part of the telecommunications industry, but in the world of IoT where bigger usually means better, they are critical. Those who can most effectively build their presence outside of the assets which are owned by the telco will look like the most attractive IoT enterprise service providers.