Fierce

AT&T isn't that perturbed by recent pricing changes at its Tier 1 wireless rivals, according to a report from financial analysts who met with AT&T CFO John Stephens.

The report, by Credit Suisse analysts Joseph Mastrogiovanni, Henrik Herbst and Michael Baresich, notes that from AT&T's perspective, the "recent competitive activity is similar to what they've seen in the past, indicating management feels the market remains rational." In the meeting, the analysts said Stephens "stressed the importance of network quality over price, which is likely why we have continued to see low churn."

T-Mobile US, AT&T and other carriers have in recent months changed their rate plans in multiple ways, offering larger data buckets to some customers, raising prices on others and in general trying to retain customers and go after those who might be willing to switch.

Meanwhile, AT&T is plowing ahead with its LTE network build-out, which now covers around 280 million POPs. AT&T aims to hit 300 million by the summer. The analysts said that Stephens reiterated "the importance of network speed and quality in reinforcing" the company's competitive position.

The TDD spectrum in the 2.5 GHz band that Sprint acquired from Clearwire is "a powerful resource for Sprint to catch up to its competitors" and can enable the United States' third-largest mobile operator "to provide super high speed data connections," according to a report from Strategy Analytics.

The report, written by Guang Yang, Strategy Analytics' senior analyst for wireless networks and platforms, further notes that Sprint's 2.5 GHz spectrum is key to enabling the operator to become the "king of data speed." Sprint has said it owns around 120 MHz of 2.5 GHz spectrum in 90 percent of the top 100 US markets. By deploying LTE, operators are moving to an IP architecture that makes it easier to hack because it's a familiar territory for hackers.

However, the research firm's report may not have been issued at the most opportune time for Sprint. The Federal Communications Commission has been reviewing the spectrum screen it uses when assessing industry mergers and acquisitions and whether spectrum caps are needed in the upcoming 600 MHz auctions in order to equalize spectrum holdings among US mobile operators.

Sprint has contended that its vast holdings of 2.5 GHz BRS and EBS spectrum should be not be compared directly to lower band spectrum held by the nation's two largest operators, AT&T Mobility and Verizon Wireless. For example, in February, Sprint proposed the FCC adopt a "weighted wireless broadband spectrum screen" that would accord perceived competitive advantages to spectrum under 1 GHz.

AT&T CFO John Stephens said it would "surprising" for federal regulators to approve a deal for Sprint to merge with T-Mobile US so soon after they quashed AT&T's bid to buy T-Mobile.

While he said he did not have any specific view on a transaction -- because there is no formal deal between Sprint and T-Mobile -- he noted that for several years AT&T has pushed for more industry consolidation because of increasing data demands, capital requirements to upgrade networks, and a shortage of available spectrum. He noted that the government obviously disagreed, thwarting AT&T's proposed $39 billion takeover of T-Mobile in 2011.

"It would be interesting to see if the government varies from that," Stephens said. "I don't think they will." He said the industry would have to see what happens, but that it "would be surprising today if they changed or reversed that opinion."

Verizon Wireless could potentially tap new business models thanks to LTE Multicast technology, though it will take a few years for customers to take advantage of it on a widespread basis, according to a top Verizon executive.

Verizon Communications CFO Fran Shammo said the technology could open up new possibilities for Verizon that don't exist today. Those include the ability to sell content rights in terms of hour-long time slots, pay-per-view events or sporting events like the World Cup. There exists "a lot of ability with Multicast to really generate additional revenue for the industry," he said, but added that "the ecosystem will have to develop here." LTE Multicast, sometimes called LTE Broadcast, uses evolved Multimedia Broadcast Multicast Service (eMBMS). Essentially, the technology allows the same content to be sent to a large number of subscribers at the same time, resulting in a more efficient use of network resources than each user requesting the same content and then having the content unicast to each user. The Verizon CFO also touched on several other hot-button issues at the conference. Notably, he said that Verizon does not want to move away from the traditional US model of offering device subsidies in exchange for customers signing two-year contracts.

Edge is "another option for our customers" that Verizon does not force, Shammo said. "We believe that the subsidy model is an extremely good one," he said. "It's done wonders for us in this industry. I think that to abandon it is a mistake."

[March 10]

AT&T CEO Randall Stephenson said that the model that has prevailed in the US wireless industry for years of customers getting subsidized devices in exchange for signing two-year contracts is radically shifting.

Stephenson said that competition ramped dramatically in 2013. It was sparked mainly by T-Mobile US, which shifted away from contracts and device subsidies and has since kept up the pressure, offering to pay the early termination fees of customers who switch to T-Mobile and trade in their devices. Other carriers have embraced device financing models in the wake of T-Mobile's actions.

Stephenson said the average customer now "has a lot more transparency" and can more clearly understand the value proposition of what carriers are offering. They can see the cost of devices more clearly and then force carriers to compete more directly on network quality and pricing. Customers are opting to choose lower monthly pricing in exchange for paying for the device up front or in installments, Stephenson said. "The customers are overwhelmingly choosing that equation," he said.