Is Project AirGig the Next Big Thing for AT&T Inc?

By Markets

AT&T (NYSE: T) recently announced that it was testing new technology through its Project AirGig. Per the company press release, the core idea is simple:

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Where There Are Power Lines, There Can Be Broadband

Though the project is still in its early phases, the company believes that the ability to attach small, inexpensive radio stations to existing utility infrastructure could help the company deliver high-speed internet connections to millions of customers, especially those currently living in underserved areas.

In this clip fromIndustry Focus: Consumer Goods, Vincent Shen is joined by Motley Fool contributor Daniel Kline to discuss how the technology works and what it might mean for internet users all over the country.

A full transcript follows the video.

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This podcast was recorded on Sept. 27, 2016.

Vincent Shen: We're talking about big bets here, I want to move on to our next topic. That is with AT&T and their Project AirGig. The news came out about a week ago. The headline here is essentially the ability for them to use power lines to deliver internet to underserved areas. Can you give us a little more detail?

Daniel Kline: Yeah. Underserved areas are the ones that make the most sense, because they don't have Internet. But really, these are inexpensive. They didn't provide any specific expense details. Clip-on antennas that use the power lines, they don't directly transmit the Internet through the power line, but they use the power lines to deliver wireless. It creates the ability to bring Internet connection to any place that has power lines, which is the vast majority of the country. So, yes, it could help them bring it to underserved markets, and that would be, 1. meeting legal obligations they were supposed to meet anyway, and 2. it would, in theory, allow them to create a national or at least semi-national Internet competitor where they could go in and say, "Yep, we don't have fiber, we don't have wires, we don't have any of this, but if you want a $39.99 Internet package, we could offer it to you." That could really shake up the system.

Shen: Yeah. The company has been pretty mum on the more technical details. Everything they've put out so far, like that press release, there's a video that accompanied it, it's very interesting, but they're very adamant in clarifying that the signal does not travel through the power lines themselves. It has something to do with electricity. The one thing I notice, the only thing they mention with voltage, is that they try to connect the antennas to the medium voltage lines, but that's only because -- Ars Technica covers this -- their location on the electrical utility poles tends to be the highest up with a clear line of sight. So, it basically allows antennas to get the best signal travel from each radio.

Kline: It's worth noting that this is in maybe not early testing phases, but AT&T did an awful lot to dial down expectations. This works in their private testing on their facility. They have not brought it out to the widespread, and there's spectrum issues, there's other things that could cause problems here, but this is very promising technology that we're probably about two years away from actually seeing in the field. As someone who spends some of his time in rural New Hampshire where I have satellite Internet that works about as well as dial up, and we do have power lines, a high-speed alternative would be something that would be absolutely perfect for me and my neighbors.

In theory, with a two-year time clock, this puts all the incumbents, Comcast, Cox, Charter, whoever is providing your Internet, it puts them on notice and says, "Maybe some better technology is coming." And we already had some vague things out there. Googlehas its blimps, and Facebook has made noise about deploying some mobile Internet options. But, this is a concrete possibility where the infrastructure is already there. If I'm an incumbent who is slowly ticking up broadband prices, maybe this puts a little bit of a check, and maybe it gets me to actually deliver to markets that don't have service right now.

Daniel Kline owns shares of Facebook. Vincent Shen has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Facebook. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.