AT&T’s planned 3G upgrade, which would boost the capacity of its high-speed packet access (HSPA) networks, will be complete by the end of the year–but only in six markets. AT&T (NYSE:T) today revealed that the majority of the network upgrades won’t happen until 2011, right about the time the operator will be launching its first long-term evolution (LTE) networks.
We reported last spring that AT&T planned to double the capacity of its 3G networkthrough an incremental software upgrade that would expand HSPA’s theoretical capacity from 3.6 Mb/s to 7.2 Mb/s over a standard 10 MHz carrier. At the time AT&T vice president of technology realization Scott McElroy said AT&T would begin the upgrade process later this year, putting today’s announcement right on track. What’s surprising is the relatively slow pace of deployment once the process gets started.
AT&T will complete the 7.2 Mb/s upgrade in Charlotte, Chicago, Dallas, Houston, Los Angeles, and Miami this year, but rather than follow-up with a massive rollout in 2010, its committed to ramping up only 25 of the top 30 markets that year. The bulk of the upgrades appear to be scheduled for 2011, at the end of which 90% of its 3G footprint will be equipped with the new software, AT&T said in a release today.
On the one hand, the slow pace is understandable. AT&T can’t just slap new software modules in all of of its Ericsson (NASDAQ:ERIC) and Alcatel-Lucent (NYSE:ALU) base stations. It has to upgrade capacity all the way down the pipe, which in this case means replacing copper-fed connections with fiber ones. Doubling capacity on a cell won’t do much good if that newly freed bandwidth runs smack into a copper bottleneck when it leaves the site. AT&T did point out that the HSPA upgrade was being done concurrently with its initiative to increase backhaul capacity throughout the network.
On the other hand, AT&T is in need of capacity sooner rather than later. The huge popularity of the iPhone along with the increasing number of other data-hungry smartphones, netbooks and embedded consumer electronics devices has already taken a toll on the 3G network, and it will only get worse. The 7.2 Mb/s upgrade was supposed to solve many of those problems, but it looks like many regions of the country will have to wait a year or more to see that capacity improvement. AT&T has other alternatives to adding bandwidth, though. During his interview, McElroy explained that AT&T has started turning up multiple HSPA channels in some markets and has even started using cellular 850 MHz frequencies for HSPA. If AT&T can’t improve the efficiency of the cell right away, it can add more cells.
The big question is what the upgrade timeline does for the rest of AT&T’s evolutionary roadmap. AT&T is supposed to begin the transition to evolved HSPA (or HSPA+) later this year, which would sextuple current levels of capacity. Presumably that would mean a full rollout of HSPA+ in 2010 and 2011 in advance of AT&T’s commercial launch of 4G networks in 2011. But at its current pace, AT&T will still be rolling out its the 7.2 Mb/s upgrade when its first LTE sites go live–to say nothing of HSPA+.
Deploying LTE and upgrading HSPA simultaneously makes sense, since they’re separate networks both of which AT&T plans to use for the foreseeable future. But the 7.2 Mb/s upgrade and HSPA+ are both software upgrades to the same infrastructure–it makes no sense to do both simultaneously if you can just go straight to 21 Mb/s with HSPA+. That leads me to wonder if the HSPA+ is a lot further off in the future than AT&T has let on. HSPA+ has already been commerically deployed in other regions of the world, so the technology now should be available to AT&T. The only thing probably holding it back is its lack of a robust backhaul network to support it. While AT&T touted its LTE plans in its announcement today it conspicuously mentioned nothing about HSPA+.
It’s also worth pointing out that AT&T’s HSPA upgrade timeline looks an awful lot like the LTE rollout schedule for Verizon Wireless (NYSE:VZ, NYSE:VOD). While Verizon won’t have commercial networks live this year, it has stated it would have 30 markets covering 100 million pops live by the end of 2010, which closely tracks AT&T 25 major markets. AT&T may be looking to pit 7.2 Mb/s HSPA as a defense against Verizon’s LTE and Clearwire’s (NASDAQ:CLWR) WiMax, while it readies its own 4G network. If that’s the case, AT&T will have a hard time besting either competitor on speed or cost of delivery, but it will have a built-in advantage in the number and variety of devices. If AT&T can offer tolerable broadband speeds on a 3G network, it could feasibly draft behind its competitors in the 4G race for a year or two.