AT&T CEO: Network Upgrades In Progress, Pair-Bonding for Faster DSL & the 3G iPhone

Pair-bonding for faster DSL, 3G wireless, and a beefier backbone using OC-768 (40 gigabits per second) technology are some of the things in the immediate future for AT&T (T), the San Antonio, Texas-based phone company, according to CEO Randall Stephenson, who was in San Francisco last week for the Web 2.0 Summit.

Looking fit as a fiddle and sporting a Texas Tan, Stephenson had just come off the stage after charming the skeptical audience and skillfully dodging some of the prickly questions he was asked by John Battelle. In a quick private chat following his on-stage conversation, Stephenson soldiered on with his charm offensive, and outlined a vision for transforming the phone company into a communications company with an emphasis on broadband and wireless.

The New Network

I started off by asking him when AT&T will boost speeds on its DSL connections and give us at least a semblance of what is considered broadband in other parts of the world. He pointed out that while I might be buying a faster connection, it is unlikely that I’ll get anywhere close to it. “We constantly test throughputs on all other networks and from our tests, median throughput is around 256 kilobits per second,” he said.

The problem lies in the infrastructure used to deliver the content — from the data center gear to the networks that bits have to traverse. AT&T, he said, is building an OC-768-based nationwide IP backbone “that will address the issues of speed and latency and bring content to you faster speeds.” Of course, it means serving your content from AT&T data centers via AT&T pipes.

Google (GOOG), Stephenson pointed out, has put its data centers close to the end customer, allowing it to offer a superior experience; AT&T’s new wholesale content division, he said, will offer the same “closeness.”
Not that they are having any trouble selling. The company, he said, is experiencing strong demand for its bandwidth-related services, largely due to a boom in video-related activity.

AT&T is investing heavily in its network infrastructure primarily because the demand for bandwidth keeps increasing. “The early buyers are your big dogs like YouTube,” he said. The consumer traffic (driven by DSL) is up 40 percent per annum, while the boom in wireless broadband has sent the amount of bits being pushed up by a factor of four. Business-related traffic, he said, is up 60 percent or so over the past year.

The U-Verse Factor

The conversation then shifted to U-verse, and why AT&T was not pursuing an all-fiber strategy. Stephenson did an admirable job of defending his belief that his company’s U-verse (fiber to the curb + DSL) strategy was better than the all-fiber strategy adopted by Verizon (VZ). U-Verse is AT&T’s IPTV service, which is being slowly rolled out in different parts of the country and at present has over 100,000 subscribers. Getting U-verse service status to the mass-deployed level will take between three and four years.

AT&T’s IP-based video system is superior, he argued, because it’s able to send only the HD video channel that a subscriber has asked for, while other service providers are forced to pump out HD channels constantly.

“It’s not the question of fiber or copper,” he said. “What happens when you have to send 100 HD channels? The fiber capacity will get used up pretty quickly.” AT&T sends one channel that currently uses up 6 megabits per second.

“Pair-bonding is coming next year,” he said, which will allow AT&T to send out more than one HD stream at a time. (Some have forecasted that within five years, we will have 3 HD and 2 SD streams coming into our homes.) Pair-bonding, which will use gear from Alcatel-Lucent (ALA), will allow AT&T to connect homes to the fiber nodes at over 40 megabits per second. This is not the first time AT&T has brought up pair-bonding as a solution. (Related: Our post on pair-bonding.)

The 3G iPhone

As my allotted 15 minutes were winding down, I asked Stephenson why AT&T introduced the slow EDGE network for the iPhone, which is one of the reasons I am not using it any more. “Steve [Jobs] wanted to have ubiquitous coverage for the iPhone, and you have to remember it was two years ago when 3G networks were not everywhere,” Stephenson said. So they went with the slower EDGE network. So does that mean there will be a 3G iPhone soon? “Yes, there will be a 3G device,” is all he would say.

“As a consumer device, it has met all expectations, and for me personally it has changed how I travel,” Stephenson said of the iPhone. Two of his favorite iPhone activities, he said, are catching up on news via the use of hotel Wi-Fi connections, and watching “24.” He also uses the device to check his personal email, though not his email for work.

“From a business perspective, iPhone has brought in a lot of traffic to our stores and helped with the brand transition (from Cingular to AT&T),” Stephenson said. “So I am satisfied.”

Photo Courtesy: ZDNet/Dan Farber