The New Vision for AT&T

on January 13, 2016

Over the last few years while at CES, I have been invited to meet with Glen Lurie, now the president and CEO of AT&T Mobility. When I met with him in January of 2014, he was the president of AT&T’s Emerging Devices division but later that year he was promoted to CEO of the entire division, which is heavily focused on mobile.

I distinctly remember our conversation from CES 2014 because in that discussion he shared a vision of mobility that was a bit new to the tech scene. He told me then his goal was to put a cellular connection in all vehicles and make them a mobile data hub. Some cars already had cellular radios in them to provide services such as OnStar, but his goal was to have every new car include an AT&T cellular connection in it when they rolled off the manufacturing line. AT&T went as far as to create a special R&D Drive Studio in Atlanta where they could help auto makers design and innovate around a cellular modem embedded in their vehicles.

When I met with Mr. Lurie this year he updated me on this vision and stated his goal of getting these modems in vehicles has been highly successful as 9 of the 16 automakers have deals with AT&T to include their modems in their cars. Ford just announced they plan to equip 10 million of their cars with AT&T cellular radios in the next five years.

Given the success of that vision, I asked him what his new goal is for AT&T Mobility. He told me he has now turned his attention to an even grander vision, one that would allow every AT&T customer to get content on any device they have any way they want it. He believes mobility and video is the future and, with that in mind, AT&T recently bought Direct TV and is becoming the only truly integrated company in the US.

He also believes they need to simplify the lives of their customers by giving them just one bill that covers all of their services and, by being integrated and delivering voice, data, video and connected home through their Digital Life IoT play, they can do that. It is clear from my discussion with Mr. Lurie this year that AT&T has put the pieces together to deliver one of the most integrated set of services any company could offer in our digital age.

While I can see how this vision gives them a serious competitive advantage, and to date AT&T has very high customer ratings, there are three key concerns I have about this strategy and its ultimate success. The first has to deal with execution. For this to work, AT&T has to deliver persistent connections all of the time and any place a person happens to be. That is a huge issue even with the current networks they have in place. It means they need to continue to make major investments in improving their networks, coverage and ultimately better speeds through these connections if they want to truly deliver on this goal of content, any way their customers want it. If these connections are slowed down by increased network traffic or drops often and does not perform up to the demands of AT&T’s customers, providing an integrated solution may not be considered a good thing to some.

The second concern is the data costs that come with delivering an integrated solution. By adding video streams to the equation and promising content anywhere, people will be tempted to actually use these services, which eat up data and thus increase their costs. Mr. Lurie points out they have created these buckets of data at what they consider a fair price and, from a competitive standpoint, that’s true. However, a family with teenagers who believe connectivity is a right, not a privilege, can eat through an entire month’s data plan in a couple of days.

I see the cost of data as one of the bigger problems AT&T will have with this integrated approach and one they will have to address much sooner than competitors who cannot deliver a similar set of broad services under the same company banner.

The third thing concerns perceived services vs what AT&T can actually deliver. In our research with consumers they show great interest in a vision of getting their content their way, any time they want it but, at the moment, they consider this somewhat of a pipe dream. Besides spotty cellular connections and inconsistent access to Wifi, consumers have a hard time believing this vision can ever be real. This will be a big marketing challenge for AT&T. While they have the pieces in place, convincing consumers they can deliver on this idea and in a cost effective way will be problematic. Also, the idea of having a single supplier of all of these services and features may not be perceived as a good thing. Relying on a single vendor to meet all of their digital needs could be risky.

I have no doubt Mr. Lurie and his team will work hard to deliver on his newest vision of the future. But I believe this one might be harder to achieve compared to what we now see as the inevitable need to put a cellular radio in a car to handle diagnostics, deliver new safety features and serve as a data hub. While the vision is sound, how they execute, market and deal with the need for more consumer friendly data prices will ultimately determine how successful this new focus will be in the future.