In the US, in markets where AT&T has advertised its U-verse pay-TV service for 24 months or more, its penetration rate is more than 20%, Ralph de la Vega, who runs AT&T’s wireless and consumer operations, said in a meeting with Wall Street analysts. The 20% is a number that most cableco partisans said AT&T and Verizon would never achieve.
Other announcements include the company will this week pass the 2 million count for U-verse pay-TV subscribers and the company is upgrading its mobile network to provide speeds of twice the current rate. The upgrade is a software update and will not increase the company’s capital expenditures.
The upgrade, de la Vega said, is a more customer-friendly path to the 4G technology LTE. Arch competitor Verizon Wireless is skipping the interim upgrade and deploying LTE beginning early 2010. He said AT&T’s approach of an interim step to LTE will allow it to offer more handsets.
The company’s success with the iPhone has overloaded the company’s mobile network, especially in the San Francisco and New York areas. Some 3% of its smartphone users, mostly with iPhones, take up 40% of its mobile broadband bandwidth. It’s a problem lots of companies would like to have, but would want to be better prepared to solve. He said that no other mobile phone operator is dealing with the growth in traffic AT&T has encountered. Internet radio is said to be an application that’s eating up a lot of bandwidth.
De La Vega said the company is taking two steps in the near term to reduce congestion. It will increase the capacity of its wireline backhaul that carries the wireless traffic in New York and it will install more mobile cells in the San Francisco area.
The company, he said, is also considering financial incentives to subscribers to reduce their seemingly eternal usage. AT&T, he said, and other operators will inevitably have to implement pay-per-usage plans to make subscribers aware of their usage.
Pay-per-use is, of course, the way most people pay for utilities.
From a bottom-line standpoint, de la Vega said, the iPhone has been a winner. Despite a large subsidy by AT&T, the company has kept margins in the mid 40% by keeping operating costs the same and increasing the revenue it gets per user.