How AT&T Inc. Plans to Up the Competition Among High-Speed Internet Providers

By Markets

The technology from thatAT&T (NYSE: T) is developing via Project AirGigcould help the company bring high-quality broadband to markets which currently lack internet service, and it could also help consumers in all markets by giving them another provider to choose from, increasing competition among the various companies. In this clip fromIndustry Focus: Consumer Goods, Vincent Shen and Daniel Kline look at the longer term prospects for AT&T's efforts.

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A full transcript follows the video.

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This podcast was recorded on Sept. 27, 2016.

Vincent Shen: Frankly, there'sgoing to be more and more need in terms of high-speed access to the internet. Gartner estimates that right now, there's six billiondevices that are connected in the world. That number could explode to over 20 billionin the next four years, when you have more mobile devices, more wearables, smart appliances, smart cars,and the countless other technologies that companies are connecting right now to make them more effective and efficient and usable.

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A few quotes that I pulled from the AT&T announcement -- one thing they mentioned is, "Thistechnology will be easier to deploy than fiber, can run overlicense-free spectrum,and can deliver ultra-fast wirelessconnectivityto any home or handheld wireless device." The thing that reallyjumped out to me is the license-free spectrum.I know all the technical details aren't there,but what we do know, and we talked about it in the past,is the fact that companies have spent billions upon billions of dollars in the past two decades atspectrum auctions. So it's interesting to see where that goes.

Daniel Kline:Theother thing this does, when we talk about spectrum --if you're AT&T, which hasalready invested tens of billions of dollars in your wireless network, if you create a nationwide internet network across power lines, you'realso creating the ability forhotspots for your phones. We see this withT-Mobile,where they're saying, "Hey, we don't really have great service in your area. We'll actually give you a device that makes your house a better hotspot so you can make phone calls." In theory, AT&T couldsupplement its already very good wirelessnetwork with this Wi-Fi network created by this technology. So, it might lower the value of spectrum for some of its competitors that have spent billions.T-Mobile andDishcome to mind as people sitting on a lot of spectrum. So, this really could be a game changer. But, they have to prove that it works.

Shen:Yeah. Andsomething else I should clarify on the more technical side is,with these radio stations that they're addingto the antennas, the core of this Project AirGig, the connection is still originating,based on comments from the company, either from their current cell towers or the main hubs they use to connect, for example, a lot of theirhome subscribers.

Another quotefrom that press release, "Project AirGig delivers this last-mile access without any new fiber-to-the-home, and it is flexible enough to be configured with small cells or distributed antenna systems,"like the ones you mentioned, Dan, that they stress are very low-cost. No need to build new towers, no need to bury new cables in the ground.

The thing that's interesting, Sarah and I talked last week about drones, and a big potential they had in shipping and logistics comes from the coverage of that last mile, which, in that case, is really costly for carriers. In this case, having cables laid down on your property, if you want cable broadband access,I was just looking this up, coststens of thousands of dollars,if not hundreds of thousands of dollars. It's a big problem for people in new developments, more rural developments,depending on your location and distance from the nearest hub. So, potentially another way this technology is addressing a very costly problem.

Kline:Yeah,it solves the problem,especially in underpopulated areas. I referencedmy family home in New Hampshire. The reality is,I have maybe 10 or 15 neighbors in two or three miles. It isn't worth it for whoever the cable provider -- it's satellite television for most of us. But,in the more populated parts of the town, whoever the cable provider is, it isn't worth it to them to run underground or even above-ground cable to my house. What are they getting out of it? An extra $80 a year from me? How many years will it take? And we've seen stories aboutindividual houseseven in populated areas that don't have cables run, and Comcast will want $15,000 to $20,000 --I'm making those numbers up a little bit,but it's very high numbers-- in order tobring the wires that last mile.

This solves that problem. And it also gives an alternative. I know I live in a high-rise building now, and I have one provider. I have no choice. I have to go with whoever has wired my building. But, there's power lines directly outside my window. So, if AT&T had this, might I be able to use that for leverage, and say, "Yeah,I'm going to get AT&T, lower my price."This takes it a step. If we have one nationwide internet provider that can serve most people,then internet becomes a commodity and prices start to go down.

Shen:Yeah. Essentially, as long as your apartment has line of sight to that radio station that they set up with AirGig --

Kline:Absolutely.I have AT&T DirecTV,so unfortunately, an AT&T alternative may not work. But, let's pretend I had Dish. Dish could say to me, "We're the only provider, we're going to go up 50%." Now, of course, my building could say, "When the contract's up, we're going to kick you out." But then they have to wire somebody else. Ourprevious location where we lived did that. They changed providers,and it cost the homeowners association $350,000 in new equipment. These are not easy decisions. Butif you take the technology out of it,then it becomes a free-for-all. When I walk into a store, if Coke and Pepsi are different prices,I can decide based on which one I want and based on cost without some of the limitations I have with internet service.

Daniel Kline has no position in any stocks mentioned. Vincent Shen has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Gartner. The Motley Fool recommends T-Mobile US. 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.