AT&T is on the prowl for more wireless spectrum as it struggles to provide enough bandwidth to handle the swelling data demands of smartphone users. The company and top rival Verizon Wireless have been lobbying Congress and the Federal Communications Commission to approve auctions of underused frequencies so that they can provide better mobile broadband Internet service.
The proposed auctions, for airwaves no longer used by television broadcasters, are also supported by CTIA, a wireless industry group. CTIA is projecting massive growth in mobile data usage over the next five years. Congress agreed yesterday to allow industry regulators to hold the auctions as part of a broader legislation package that would also extend payroll tax cuts and jobless benefits. Voting will take place in the coming days.
AT&T is also looking into the possibility of purchasing other mobile service providers, such as Leap Wireless, Dish Network or MetroPCS, according to The Wall Street Journal. You have to give the company points for persistence. Just last December AT&T was forced to drop its plan to acquire T-Mobile for $39 billion in the face of stern opposition by the FCC and Department of Justice, which saw the deal as anticompetitive. The failed bid to expand its mobile business cost the company a cool $4 billion in the form of a break-up fee it had to pay to T-Mobile parent Deutsche Telekom.
Finding a solution to the bandwidth problem is essential for AT&T. The company boasts that its data traffic has doubled each year since 2007, the year the iPhone was introduced. That number doesn’t tell the whole story, however, due to how AT&T has figured the growth rate. Data usage by existing customers is actually growing by just 40%. To arrive at the 100% figure, AT&T factored in new smartphone and tablet users, as well as existing users who are upgrading to or adding such devices.
Like Verizon and Sprint, AT&T is also building out a new 4G LTE network which can more efficiently handle a greater number of users. The company spent $20 billion on its wireless and wired networks last year, and $95 billion in the past five years.
While it slowly rolls out 4G across its vast service area and adds more Wi-Fi hot spots, the company’s method of mitigating the burden of so much data traffic has been to throttle network speeds for the heaviest data users with unlimited plans. In other words, since October AT&T has been limiting the connection speeds of the top 5% of data users. Predictably, this hasn’t gone over well from a customer service standpoint, and TechCrunch reports that throttling has been inconsistently applied, with some users who stay below their usage cap being inexplicably punished for bingeing on data.
While securing enough wireless capacity to give customers reliable smartphone performance is a necessity for all mobile carriers, it should be only one component of a more comprehensive strategy to reduce customer defection. AT&T and its competitors also need to focus on maintaining attractive and sensible pricing schemes, providing transparent and accurate billing to avoid confusion and anger, and rewarding long-term and high-value customers to maintain their loyalty.
These were all points among others also raised by management consultant Bain & Company last summer based on a survey it conducted of about 3,000 telecommunications customers. It concluded that mobile, Internet and pay-television companies need to “deliver consistently on the basics and then go the extra step to delight customers, as opposed to just avoiding offending them.”