AT&T’s early move to counteract inflation and raise prices was the right thing to do, according to AT&T Communications COO Jeff McElfresh.
McElfresh, who appeared at the Bank of America C-Suite TMT Conference on Thursday, said it’s always hard to raise prices, but AT&T’s price increase was for a segment of customers on the oldest rate plans that didn’t have access to 5G or the latest and greatest features and benefits.
“We didn’t do a broad stroke across the entire customer base,” he said. “We looked at a cohort of customers that were on the oldest rate plans that didn’t have access to 5G or some of the best features and benefits.”
The transition off those plans is in “mid-flight” right now, as the changes took effect in June, so AT&T associates are now helping that customer base move to other plans and they’re having some success in doing that, he said.
“It’s never pleasant raising prices,” he said. “As consumers, we don’t want prices to rise,” but if “we don’t put inflation into check as a country, as a point of policy, rampant inflation is just not healthy for the economy or commerce.” Therefore, he said, AT&T is encouraging policy makers to address what it sees as a macroeconomic headwind for just about all businesses.
Now the third-place service provider in the U.S. wireless industry, AT&T is making “solid progress” in stepping up its game in the offers that it’s making and products that it serves, according to McElfresh.
AT&T led the industry in wireless postpaid phone growth for the last two consecutive quarters. Since it began its transition, it’s added 5.3 million postpaid phone customers to the wireless business in the last seven quarters, which is something AT&T had not been doing very successfully prior to that, he said.
“The most consistent operator over the past two years has been AT&T and that was never the case in the past,” he said. “We continue to operate the same go-to-market strategy we announced nearly two years ago. We have not increased our aggressiveness. We have not increased our promotional offers. We have held steadfast” and even retreated a little bit in its offers while “competitors have been dancing around, trialing different and various offers. Yet the momentum of AT&T continues.”
In October 2020, AT&T said it was "uncomplicating wireless" by offering the same phone deals to both new and existing customers, something its rivals were not doing at the time. Since then, other service providers have started to offer them on a regular basis.
AT&T’s “best deals for everyone” strategy not only triggered immediate traction from its customer base but attracted competitors’ customers to AT&T, he said. “We’re doing a better job delivering value and serving customers,” and distribution channels are performing better as well as the network.
Why AT&T isn't big on FWA
AT&T is not as bullish about fixed wireless access (FWA) as T-Mobile and Verizon, and it boils down to physics, according to McElfresh.
“We know that the physics of fixed wireless cannot serve the demand” for what a household or business is looking for when it comes to high-quality broadband connectivity, he said. Uplink is becoming more important, and the only technology that offers a great experience is a fiber-fed network.
AT&T can serve a last-mile customer with a wireless solution, but it’s not going to out-perform one that’s directly served by fiber. “We’re not opposed to fixed wireless,” he said. “It’s just not our lead offer.”
In fact, AT&T has hundreds of thousands of fixed wireless customers today. Fixed wireless can serve segments that don’t have access to fiber, and it will pursue that, but it’s not a big part of the growth trajectory.
Mid-band spectrum position
T-Mobile boasts a vast amount of 2.5 GHz spectrum and a multi-year head start on deploying 5G mid-band spectrum over its rivals AT&T and Verizon. Verizon is building out its C-band markets as fast as possible and didn’t buy any at 3.45 GHz, which is part of what the Department of Defense (DoD) relinquished.
As a side note, T-Mobile President of Technology Neville Ray said during a June 3 UBS investor conference that AT&T has to deploy what’s effectively two radios for the 3.7 GHz C-band and 3.45 GHz spectrum because the U.S. “kind of strayed” with the insertion of 3.5 GHz CBRS between those bands. He said T-Mobile can wait until there’s truly a “one, single combined radio, not two integrated radios” molded together. That fully combined radio is expected to be available next year, he said.
But while Verizon and T-Mobile can use their mid-band spectrum for FWA, that is not why AT&T spent big bucks on its mid-band licenses, according to McElfresh.
“If all I had was a wireless network” without a scaled fiber network, “I might have no other choice than to leverage my wireless spectrum portfolio to go grow my business. But at AT&T, we’re not restricted to that. The fact that we’ve got two platforms that we can grow on gives us the ability to make smart decisions geography by geography,” and play the long game, he said.
Is AT&T going to be behind on covered PoPs or spectrum depth with mid-band relative to its competitors? He said yes, that is the case, but “guess what? We’ve been winning. Why are we winning? We’re not winning because we don’t have the most spectrum deployed,” he said. “We’re winning because we’re focused on serving customers, and I can’t stress that enough.”