AT&T’s wireless chief on 5G: ‘Early opportunities are going to be in enterprise’

AT&T’s top wireless executive laid out his vision for 5G, noting that the company’s wireless business contributes 39% of AT&T’s revenues and more than half of its earnings.

“We are first where it matters most,” AT&T’s John Donovan said of the operator’s move to 5G. "The early opportunities are going to be in enterprise."

“We’re seeing a lot of demand from enterprise customers for blurring the line between what has historically been a wide area network, mobile, with a local area network, which has traditionally been wired,” he said during an AT&T analyst presentation featuring all of the company’s top leadership.

Donovan pointed to two specific announcements that AT&T has made recently as evidence of how it plans to play in 5G. First, he cited AT&T’s announcement that it is working with Samsung to create “America’s first manufacturing-focused 5G ‘Innovation Zone’ in Austin, Texas. The goal of the testbed will be to provide a real-world understanding of how 5G can impact manufacturing and provide insight into the future of a Smart Factory,” the company said in its September announcement.

Second, Donovan cited AT&T’s exclusive deal with Magic Leap to power the startup’s augmented reality goggles with 5G.

Donovan said those announcements are "only really the tip of the iceberg" for 5G, and he said that they hint at "materially different use cases" enabled by the technology.

"We are looking at use cases in verticals like retail, healthcare, financial, education, public safety,” he said. “So we're going to take advantage of what we're doing in the enterprise space and all of the verticals and have all of that solutioning carried over into 5G."

Donovan also reiterated AT&T’s previous 5G rollout promises: that it will launch 5G in parts of a dozen cities this year, expanding to 19 next year, first with a puck and then with a “series” of 5G smartphones in 2019.

However, Donovan didn’t offer much more commentary on 5G beyond those mostly general statements. Instead, Donovan and the rest of the company’s executives spent much of their time discussing AT&T’s video strategy, a strategy the company has built through the acquisitions of DirecTV and Time Warner. That’s noteworthy considering CEO Randall Stephenson touted the company’s analyst presentation this week as a critical one for the company because “we’re now at a place where we’re going to start sharing plans with you.”

Specifically, Stephenson explained that the average American household spends around $300 per month on communications and entertainment, generally split evenly between those two. “These categories grow at about GDP,” he said, or sometimes faster. “The mix within these categories is constantly changing,” he added.

But, Stephenson noted, more and more of Americans’ communications are now conducted over wireless networks rather than wired networks. “As we go faster on 5G, I think you're going to see those trends accelerate; more and more is going to move into the wireless category,” he said.

And in video, Stephenson said that consumers are increasingly “rebelling” by eschewing “oversize” bundles of TV channels, and they are instead forming direct streaming relationships with media brands.

"We at AT&T have 370 million direct-to-consumer relationships,” Stephenson said, explaining that the company’s new Warner Media business will be able to leverage those relationships in order to sell more content to AT&T customers.

Despite Stephenson and Donovan’s emphasis on 5G, company executives also touched on AT&T’s LTE network. Donovan said that AT&T would continue to work to bolster and improve its existing LTE network—he said that, in some markets, AT&T is adding 50% more spectrum to its network with the deployment of FirstNet’s 700 MHz spectrum and other spectrum bands. And that, combined with the deployment of technologies like LAA and LTE Advanced, would significantly improve customers’ wireless experience.

“That’s providing not only capacity for us, that's providing also a lot of network performance in speed and some of those things that customers find very valuable,” Donovan said. “You’re going to see us get loud on the network quality.”

Added Donovan: "We expect the momentum we've seen here in 2018 in the wireless business to continue on into 2019."