AT&T Will Have to Increase Spending on Network Upgrade, New Report Predicts

Market Wire, February, 2007

AT&T will alter the strategy on its broadband network upgrade within the next 12 to 18 months to match the capabilities of competing cable networks, market research provider Pike & Fischer predicts in a new report.

The telecommunications giant has begun rolling out a service called U-verse, which delivers everything from super-fast Internet service to multi-channel television. To deliver the service, AT&T is building an architecture called fiber-to-the-node, or FTTN, at a cost of up to $4.6 billion. FTTN involves laying fiber-optic lines to neighborhoods and from there linking to homes via conventional copper lines.

U-verse is currently only available in parts of 11 metropolitan areas. In its new analysis of the U-verse business strategy, Pike & Fischer projects that AT&T will be forced to increase its network investment to carry the fiber lines right up to homes -- a costlier approach known as fiber-to-the-premises -- as it expands its deployment on a large scale.

Unless AT&T makes that investment, the U-verse service will not keep up with the cable industry's improvements in bandwidth and functionality, says Tim McElgunn, chief analyst for Pike & Fischer's Broadband Advisory Services and author of the report.

"AT&T is attempting to position its TV service as superior to cable, but there's nothing to prevent those competitors from matching the U-verse features over time," McElgunn said. "Pair bonding and compression, AT&T's current response to its network's bandwidth limitations, will not change copper to glass and will not provide AT&T with a long-term solution, in our opinion."

Pike & Fischer, a BNA company, offers a host of legal and business information products covering the telecommunications industry. "AT&T U-verse: Analysis of the Business Strategy" is priced at $799 and can be purchased at www.broadbandadvisoryservices.com . For analyst commentary or an executive summary, contact Tim McElgunn at 856-751-6723 / tmcelgunn@pf.com .

For more information about Pike & Fischer's Broadband Advisory Services, visit www.broadbandadvisoryservices.com or contact Jonathan Wentworth Ping at 212-576-8741 / jping@pf.com .

For analyst commentary or an executive summary, contact: Tim McElgunn 856-751-6723 Email Contact Contact: Jonathan Wentworth Ping 212-576-8741 Email Contact