Demand for wireless connections has surged in the past few years as Americans go mobile with their laptops, switch from landlines to cell phones and use new devices to surf the Internet and download videos.
That demand is a massive opportunity, as well as a threat to overwhelm wireless networks.
What’s a huge carrier to do? Grow more, says AT&T, which has seen a mind-boggling 8,000 percent increase in data traffic over the past four years. And that is why the company has forged a $39 billion deal to buy T-Mobile, said Ralph de la Vega, Atlanta-based president and CEO of AT&T Mobility and Consumer Markets.
The deal, which would put roughly 79 percent of wireless users into either the AT&T or Verizon network, now faces regulatory scrutiny.
The wireless business that de la Vega oversees now has 95.5 million customers.
De la Vega started his career in 1974 at Southern Bell — later part of BellSouth, which became the largest regional phone company, only to be eventually bought by AT&T. While the company is based in Texas, it’s one of the largest private employers in Georgia.
De la Vega came to The Atlanta Journal-Constitution last week for a wide-ranging talk about the industry and the future. Some excerpts from the discussion:
Q: What's the AT&T presence here?
A: We have 22,000 employees in Georgia. And, other than Texas, we have more employees in Georgia than any other state. And we have a payroll of almost $2 billion — do the math. Those are very good paying jobs — some of the best employment in Georgia. And we also have another 20,000 retirees.
Q: What is going to happen if the merger goes through?
A: We have done this before — when Cingular and AT&T Wireless merged in 2004. And that went very, very smoothly. People said AT&T (Wireless) was going down and that would drag us down, too, but we had record growth. We had the best people from both companies. You go for the best people, and we'll do the same thing here.
Churn dropped after the Cingular merger from 2.2 percent to 1.2 percent. Employees grew, the profits grew, the revenues grew. And we have the same team in place that did that merger. Everybody that came over at the officer level is still with us.
Q: How do you see AT&T's place now in the industry?
A: In the U.S., AT&T has been the pioneer. We were the first company that saw the impact. Now we have seen 8,000 percent growth in data in four years. And in the next four years, our forecast is for that to increase eight to 10 times.
If you take a smartphone — an iPhone or an Android — it uses 24 times the bandwidth of a regular phone. Take a tablet — you know, an iPad? That uses 122 times the bandwidth. Compare it to a highway. It’s like adding 20 times the cars on the highway. I view it as a huge opportunity.
Q: You mean to meet that demand?
A: We are sitting on probably one of the greatest growth opportunities that any industry has ever seen. Mobile broadband is growing like wildfire. The U.S. has become the epicenter of the world. We are far ahead of China. Far ahead of India.
The U.S. is the world leader in smartphones. It used to be Europe that led in phones — now we have more than anyone. It used to be Japan was ahead in applications. Now it’s the U.S. The United States is leading the world in this. And we are leading the U.S. And we’re based here in Atlanta.
Q: Is that huge increase in demand an explanation for the complaints about dropped calls? That the company's network couldn't keep up with the demand?
A: When we first put this technology in, we didn't know, the vendors didn't know what would be required of the equipment. The problem then was there was no equipment prepared for this. For instance, in New York City, we had to replace all of the radio relays. Every one. ... The surge of demand last summer meant that the equipment vendors ran out — companies like Alcatel-Lucent and Ericsson.
Q: In New York City, how many was it that you had to replace?
A: Hundreds.
What we’re facing now is a spectrum crisis. That’s where the T-Mobile merger comes in. Spectrum is a limited resource. Most of it is in use. We’re working to make more of it commercially available.
For starters, we use 5 megahertz as a control channel and so does T-Mobile. When we merge, we’ll only need one of those, so that frees up 5 mHz. And the coverage becomes much denser, and that gives us more capacity — 20 to 40 percent more capacity — right away.
Q: Is all this growth a migration — even a cannibalization — of your other, landline businesses? Do you see the wireless tail of AT&T wagging the dog?
A: When it comes to phones, yes, you see wireless replacing landline. But when it comes to video, we think our offerings are complementary. And really, it can't all go wireless.
Maybe someday there will be a technological breakthrough, some way to get more over the same bandwidth. But now there is not enough spectrum, not enough bandwidth on the planet to make that switch.
As for AT&T, I think wireless may dominate, but we will continue to be multifaceted.
Q: What about customer service? There are, as you know, some complaints, some issues.
A: We look at the numbers on churn, the numbers of defections, and we are leading [competitors in keeping customers]. ... And, when you take any network issues out, we are at the top. We are not perfect. We know that, and we want to improve. But today, I get as many accolades as I get complaints.
Q: Don't the critics say that the merger is bad for competition? That it would eventually mean that almost 80 percent of the country's subscribers would then belong to two companies, AT&T and Verizon?
A: If you look at the top wireless companies in the world, by number of customers, the U.S. doesn't have a carrier in the top 10.
The FCC will look at the question of what is in the public interest. The Department of Justice will look at what the merger means for competition. And, when they judge how much concentration there is in the market, both the FCC and Justice will look at it on a local basis.
After all, the customer makes a choice on a local level. And there are five or more competitors in most markets. You go to Alpharetta, if you go into a Walmart to see the phone choices, there’s probably eight. Still, historically, these types of mergers have required divestitures [in some markets], and it’s not unreasonable to assume this one will as well.
Q: Do you have any idea in which markets?
A: No, we don't know.
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