AT&T's CTO defends wireless network

SAN DIEGO--AT&T's chief technology officer, John Donovan, is defending his company's wireless network, despite complaints about dropped calls and slow Internet access from frustrated iPhone users.

Donovan, who gave a keynote speech here at the CTIA Fall 2009 trade show Thursday, said that despite what people might be saying about problems on AT&T's network, his company is focused on providing customers with an excellent wireless experience.

"I'm not ignoring the criticism of our network," he told the audience. "I'm well aware of what's being said in the press, in blogs, and on Twitter. But I don't base my network plans on what I read on blogs. No one knows more about the wireless data customer experience than AT&T."

Since Apple's iPhone launched exclusively on AT&T's network over two years ago, customers have been complaining about dropped calls and slow data connections. The problems only seemed to get worse when AT&T and Apple began selling the iPhone 3G. In many cities, such as San Francisco, customers have complained that their iPhone 3G devices operate more on the slower 2.5G EDGE network than on the 3G network. And still others say that dropped calls have gotten worse.

Donovan and Ralph de la Vega, president and CEO of AT&T Mobility and Consumer Markets, whom I talked to after the keynote, each acknowledged that they have heard the complaints. But they wouldn't go so far as to admit that there is an actual problem. Instead they pointed to the rapid growth of data usage on their wireless network and the change in customer usage patterns. They also said that AT&T is doing everything it can to stay ahead of customer demand.

Surprisingly, Donovan and de la Vega downplayed the iPhone's role in this rapid increase in data usage on the AT&T network. Instead they pointed to the entire category of "integrated devices," which are mobile devices that can connect to the Internet. This category of phone includes smartphones, like the iPhone, as well as quick-messaging devices like the LG Neon.

Donovan said that AT&T has more customers using "integrated devices" than any other carrier in the U.S. In fact, in the second quarter of 2009 nearly 60 percent of AT&T's wireless subscribers bought an integrated Web device, he said. He said that wireless packet data has increased more than 18 times in the last two and a half years. And voice traffic on the AT&T wireless network has nearly doubled in that time.

Out with the old planning models
These customers and the increase in data traffic are putting strains on the network. Because data traffic tends to come in bursts and because it's often difficult to predict when and where subscribers will flood a given cell site with mobile Web usage, AT&T has had to rethink how it plans its network.

"There is nothing I look at more than customer usage patterns," he said. "There have been big changes in usage, which has forced us to throw our traditional planning models out the window."

While most people would assume that most of the wireless data traffic growth on AT&T's network comes from the iPhone, AT&T's executives said that isn't the case. De la Vega said that quick-messaging devices are actually driving a significant portion of data usage on the network.

"We have seen unprecedented growth on our network in the past couple of years," he said during an interview on the sidelines of the conference. "And the iPhone has certainly played a role. But it's not the only device driving growth. We have a lot of people going from basic feature phones to quick-messaging devices and other smartphones, which is driving data usage."

Donovan said that quick-messaging devices are the fastest growing category of device on AT&T's network.

In an effort to keep ahead of customer demand, AT&T has been spending billions of dollars on upgrading its network. Donovan said that AT&T spent more money in 2008 on its network than in previous years. The company's annual report indicates it spent about $20 billion in capital expenditures for its wireless and wireline networks in 2008. And this year AT&T is estimating it will spend between $17 billion and $18 billion on its wireless and wireline networks.

"We have been upgrading our network for two years," de la Vega said. "We are putting more of our 3G traffic onto our 850MHz spectrum, which will improve coverage and the quality of our network. We are down to the end of that process with only a few cities, like San Francisco, left."

Donovan said during his speech that AT&T has completed 90 percent of its 850MHz upgrade, with cities such as New York, Atlanta, Houston, and Denver already done. He said six major cities will get the faster network speeds this year, including Charlotte, Chicago, Dallas, Houston, Los Angeles, and Miami. And the company will have the HSPA 7.2 network up and running in 25 to 30 markets by mid-2010 with the goal of reaching 90 percent of its current 3G wireless footprint in 2011.

Looking ahead to 4G
Donovan also mentioned the company's plans for its 4G wireless network, which will use a technology called LTE, or Long Term Evolution. It's the same technology that AT&T's rival Verizon Wireless is using to build its 4G wireless network. Verizon has already begun building its LTE network and expects to launch the network commercially in 2010.

AT&T is testing LTE this year and will begin commercial deployments sometime in 2011. Donovan defended his company's plan to upgrade to HSPA 7.2 (for High Speed Packet Access) first rather than going straight to a 4G wireless technology, as its competitors are doing.

"If you're questioning whether AT&T will be left by its competitors who are in a rush, the answer is no," he said. "Succeeding in this market isn't just about fast speeds, but wide coverage. And it's not just about a device or two, but an entire portfolio of products."

Even though he didn't cite Verizon Wireless by name, it was clear which carrier he was targeting with his sharp comments. He showed a chart indicating how many LTE devices will be on the market in 2010, the year that Verizon is launching its LTE network, and it showed a very small number, with the curve indicating a rapid increase in LTE devices a few years from now.

"A rich network without devices is not the best of use of capital," he said. "AT&T's market timing will be right."