AT&T's 4G Battle Plan: 15 Major Cities in 2011

Douglas McIntyre

AT&T (T) will spread its 4G LTE network into a large number of U.S. cities this year, a move that puts it into direct competition with Sprint-Nextel's (S) Wimax 4G product and LTE technology deployed by Verizon Wireless (VZ)(VOD). "The next network evolution will arrive this summer with the addition of LTE in five markets – Dallas, Houston, Chicago, Atlanta and San Antonio. We plan to add another 10 or more markets in the second half of the year, and cover 70 million Americans with LTE by year-end," the telecom company announced.

AT&T will need to press into all of those markets by the close of 2011. Sprint and Verizon Wireless already offer super-fast wireless broadband in large cities such as New York. Each already sells several 4G-enabled devices, most powered by the Google (GOOG) Android OS.

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AT&T says it will spend $19 billion on its wireless and wired networks and infrastructure this year. But the portion of that which is going into 4G is a riskier investment than it might at first appear, because there's some question about whether 4G will take off. Will most consumers really want faster wireless broadband, especially if they have to pay a premium for it over 3G service? Many may find that 3G speeds, which allow for video-content viewing and social network applications already, are fast enough. And converting to 4G requires the purchase of a new handset -- a cost many wireless subscribers may not be interested in paying.

Another critical issue for 4G is how well it will work. AT&T's 3G networks have been overwhelmed by data traffic associated with Apple (AAPL) iPhones. Early adopters of 4G may like the higher speeds, but there's no guarantee that these networks won't also rapidly see customer demand for bandwidth exceed supply. AT&T could spend money to increase the carrying capacity of its troubled 3G network as an alternative.

The wild card in 4G's evolution is Apple. Current versions of the iPhone are not 4G compatible, and Apple has not signaled any plans to make a 4G device. The popularity of Apple's devices have been a key driver to the adoption of smartphones in the past: If the firm decides to take a wait-and-see approach on 4G, the growth of the service will be held back because the popular iPhone is not part of the product mix AT&T can offer its 4G customers.

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