AT&T's Fighting a Two-Front War

The nation's No. 2 wireless carrier is fighting off both T-Mobile and Google.

Chris Neiger
Chris Neiger
Apr 17, 2014 at 10:15AM
Technology and Telecom

The competition is heating up for AT&T (NYSE:T). The company is fighting a battle for both its wireless services and its high-speed home Internet right now. T-Mobile (NASDAQ:TMUS) and Google (NASDAQ:GOOG) (NASDAQ:GOOGL) have all but declared war on the wireless carrier, and there are no signs of letting up.

T-Mobile's latest promotion of 1GB of tablet data through the end of the year. Source: T-Mobile.

The dogfight in the sky
T-Mobile has brought the fight to AT&T with its Un-carrier promotions -- including everything from cancellation fees, tablet data, monthly pricing, and more. Here are some of T-Mobile's biggest efforts to snag AT&T customers:

  • Paying cancellation fees: Just three months ago T-Mobile offered up to $650 per line for people who switch from another carrier to T-Mobile. AT&T responded with a $450 credit for T-Mobile customers if they switch to AT&T's smartphone plan. 
  • Pricing restructure: T-Mobile's been aggressive with its low-cost monthly service plans and cancelled its service contract commitments. AT&T fired back by lowering some of its shared family plan costs by up to 20%.
  • Tablet tango: T-Mobile already offers 200 MB per month free for life when users bring their cellular tablets to the network, or buy one from the company. But its recent move upped the free data by 1GB until the end of 2014, and cut the cost of cellular tablets by up to $130. So far, AT&T has yet to respond.

T-Mobile's CEO, John, Legere, has been very vocal about his plans to take on AT&T, with one of his 2014 New Year's resolutions to "give AT&T a break... or not." Legere also crashed AT&T's Consumer Electronics Show party back in January, before he was kicked out by AT&T security.

But responding to T-Mobile's latest moves isn't the only skirmish AT&T's had to deal with. Another war is brewing with an even stronger opponent.

Google Fiber is up to 100 times faster than the average Internet speed. Source: Google.

The burgeoning land battle
Google's been expanding its fiber network, providing speeds up to one gigabit per second, or about 100 times faster than current average Internet speeds. The company partially started Fiber as a way to encourage telecoms to offer faster Internet at more competitive prices -- and its paying off.

Google's Internet initiative is starting to expand into some of AT&T's territory, with the company recently announcing it will offer Google Fiber in areas of Raleigh and Durham in North Carolina, right where AT&T was planning to bring its U-Verse with GigaPower.

That's not the first time Google and AT&T have staked out the same position, either. Last year, Google brought its fiber network to Austin, and AT&T announced just a day later it would bring its GigaPower to the city as well.

While Google Fiber is still in just a handful of locations in the U.S., the ultrafast connection starts at $70 per month and is driving AT&T to expand its GigaPower fiber network into new communities and match prices with Google. 

AT&T's current position
Right now, Google doesn't seriously threaten AT&T's Internet business revenue. Google's Internet footprint is so small and only offers an ultra high-speed connection that may be too pricy for many consumers. But the fact that AT&T has to compete against Google in the Internet business should be at least a little troubling for investors. Google's taking the long-term strategy of pushing telecoms to offer faster Internet at cheaper prices, and the company isn't stopping its program anytime soon.

As for the wireless space, T-Mobile is likely having more of an effect on AT&T's business. With AT&T making so many changes to its plans and pricing strategy to match T-Mobile's, the company is clearly trying to convince customers to stay, or win them back.

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While neither Google nor T-Mobile are going to take AT&T down anytime soon, both pose serious risks to the company over the long term -- and that's nothing for investors or AT&T to take lightly.