Is AT&T too big and scattered to succeed?

by Steve Blum • , , , ,

Att vans

With the acquisition of Time Warner’s movie and TV production companies, AT&T theoretically has the assets to become a vertically integrated content creation, packaging and delivery behemoth. But not all of its assets – including its management team – are necessarily well suited to the task.

AT&T’s challenge is to avoid outrunning its ability to manage three very different types of businesses: entertainment production, subscription-based linear video distribution and a huge heterogeneous telecoms network. Two of those businesses – subscription video and telecoms – are changing rapidly, and AT&T needs both vision and capital to stay in the game.

So far, it appears to be short on both. There’s a limit to what you can do with a satellite video network. DirecTv will never be interactive, so it can’t leverage its distribution investment to create on demand services that mimic over the top (OTT) providers in the same way cable companies can.

AT&T’s telecom business is also showing the strain. It’s holding back on 5G and fiber upgrades, and increasingly relying on its existing 4G infrastructure and technology. AT&T is replacing copper networks in rural and other less lucrative communities with 4G-based fixed wireless service , in part by relying on federal public safety and universal service fund subsidies. It’s also investing in marginal 4G upgrades and labelling it 5G. Well, 5Ge. But, as AT&T intends, it’s easy to miss the little e.

Outside of the limited areas where it’s investing in fiber upgrades, AT&T’s networks are taking a back seat to more specialised players in its footprint. Cable companies can deliver faster broadband service more widely and have a plausible chance of creating OTT-like video services that are only available inside a provider’s own network, via fast lanes that are isolated from the public Internet. OTT companies are sucking up consumer viewing hours and pure play, or near pure play, mobile companies could move more quickly towards true 5G service (although Verizon has put its early and much hyped pre–5G deployments on hold).

It will take an exceptionally talented and diverse executive team to pull these ill-fitting assets together into a unified programming and telecoms juggernaut. AT&T’s “fix” for HBO, for example – simply telling everyone to start producing more great stuff – and its disingenuous, if not downright deceitful, mislabelling of 4G service indicates that it doesn’t yet have the management and vision it needs to prevail over the long run.

For AT&T, success might end up defined as simple survival.