I recently read an article talking about how AT&T and Verizon had topped U.S. companies in annual investments in equipment. The article praised these companies for their investment and the stimulus they have provided the economy. The cited report even went so far as to call them “heroes”.
Read the original article here.
As I was reading the report and article, I had a few comments that I thought I would share with you.
Reasons for Massive Investments
It is true that AT&T and Verizon have made huge investments in their Internet and wireless infrastructure over the past couple of years and will continue to do so.
There are three reasons for these massive investments:
- Comcast had wisely invested billions in new equipment a few years back that has allowed them to sell broadband internet access for as little as $49.95 per month. AT&T and Verizon’s old Internet infrastructure could not match the high speeds, and their costs were high. In a wave of panic, AT&T and Verizon are now making huge investments in an attempt to catch up with the leading cable company in the U.S.
- AT&T and Verizon’s existing infrastructure is decades old. As the U.S. moves away from old legacy services to new IP-based services, so do they need to upgrade their infrastructure. By the end of this decade, the old public switched telephone network will be switched off for good. The old phone companies need to be ready.
- Mobile data use is going through the roof, with one data source indicating a 300% increase by 2017: AT&T and Verizon must invest in the infrastructure necessary to meet this growth. Additionally, AT&T has stated that they will use mobile and fiber as their two ways to get to their business customers in the future, replacing copper lines. They’ve got a lot of fiber to lay and a lot of wireless access to be built.
Hero or Playing Catch Up?
It’s about time. It is no secret that phone companies are tremendously profitable, making billions of dollars every year. However, they haven’t kept up with investments and now that Comcast and other companies are starting to kick their butts, they are starting to respond. Call me snarky, but I don’t believe that they deserve a huge pat on the back for being “Investment heroes of the U.S” as the report in Progress Policy Institute calls them. Rather, it’s about time to bring faster internet to the U.S.
Looking at Comcast
Comcast, having finished its state-of-the-art Internet infrastructure, is now focusing on investments in new services such as the X1 platform and wireless services.
Good News for Your Business
The fact that telecom companies are spending huge amounts of money on adding Internet and wireless capacity and bandwidth is good news for small to medium sized businesses. Internet speeds will continue to increase, and prices continue to drop as the competition finally heats up in this space.