Project Angel crashes
When AT&T Wireless (www.attws.com) announced its departure from the wireless-broadband business Wednesday, it left no doors open.“We’re going to exit this business completely,” said CEO John Zeglis, calling the decision “as clear cut as it is bittersweet.” In discussing third-quarter earnings, Zeglis noted that the division was assigned the fixed-wireless initiative when it went public as a tracking stock in early 2000. The service provided both data and local phone service. Once AT&T Wireless became an independent company at the beginning of this year, it no longer had to protect AT&T’s long-distance base with fixed-wireless connections, and it also no longer had the AT&T balance sheet to fund the operation.
Although targets were downsized, by third quarter, AT&T Wireless no longer could meet its objectives for fixed wireless. Towers were taking too long to locate and costing more than anticipated; the cost of premises installations rose following a dispute with a supplier; problems with the RBOCS over number porting and backhaul provisioning did not improve.
These challenges probably could have been met, Zeglis said, but only by delaying the business a year on its financial model.
“We don’t have that kind of patience,” he said.
Charles Golvin, Forrester Research (www.forrester.com) analyst, said once AT&T Wireless was an independent company, it no longer was concerned with the strategy of providing an end-run on local phone service, something that mattered more to the parent company.
“They want their mobile subs to use the phone in place of their home phone, so they certainly don’t want to give (customers) another solution for their home fixed line,” he said.
AT&T Wireless first attempted to sell the business, but was unsuccessful as far as the service itself was concerned, although there is interest in purchasing the R&D component, Zeglis said.
Shutting down will cost about $1.3 billion, which includes a $1 million write-down in assets. This will be charged in the fourth quarter. It will take a few months to shut down the service, which currently serves 47,000 customers.
AT&T Wireless uses PCS and WCS spectrum for the service. The PCS spectrum will be allocated to mobile services. The WCS spectrum could be sold or used for data transport.
But coming on the heels of Sprint’s (www.sprint.com) announcement last week that it is stepping back from wireless broadband until technology matures, the AT&T news is not good news for the wireless-broadband industry.
“This is definitely something that will make people doubt fixed-wireless further,” Fuertes said. “It always was going to be smaller than DSL and cable, but it still has a part to play in the market.” He said that instead of a 20% market share, it could be 15% or 10%.
Golvin said that fixed wireless is likely to be relegated to places where DSL and cable don’t reach and don’t make sense. In a report issued in late September, he predicted that widespread deployment of fixed-wireless wouldn’t take place until 2004. Good technology is available that will eliminate line-of-sight concerns, and the CPE continues to decline in price, but problems with capital and spectrum issues will delay deployments, he predicted.
