Full Speed Ahead As U.S. Carriers Invest Billions; Is It Too Much?

AT&T’s network problems have been well-documented, but going forward, it may not be an exclusive problem as consumers increasingly access da…

AT&T’s network problems have been well-documented, but going forward, it may not be an exclusive problem as consumers increasingly access data from their phones — across all networks.

Mike Woodward, AT&T’s VP of Mobile Device portfolio, said this morning at a mobile breakfast in Seattle, that we have hit a tipping point in mobile data. He said over the past six quarters, the number of megabytes being consumed by AT&T (NYSE: T) subscribers has soared 5,000 percent, and that three-fourths of the phones being sold today either have a Qwerty keyboard or touchscreen. In all, one-third of the devices on AT&T’s network qualify as an integrated device.

Based on that trend, the WSJ reported today that despite a deep recession, AT&T and Verizon (NYSE: VZ) plan to spend as much as $35 billion combined in 2009. T-Mobile USA has also said it is investing heavily. However, Michael Mace, principal at Rubicon Consulting, who also participated in the panel discussion organized by Chetan Sharma Consulting, cautioned about overzealous spending. Mace: “Mobile data has finally taken off, but what are the limits of that growth? We have the tendancy to run off the edges of the cliffs. How many people are willing to pay $50 a month extra? It’s not everyone.”

While that’s true that there will always people who just want to make a call, and only want to pay for the minutes they use to talk, the goal today is on faster networks and fatter pipes. Woodward: “When I first started my job was to drive adoption of wireless data. We don’t have to do that anymore. We have to keep up.” Separately, the WSJ quoted Verizon’s Ivan Seidenberg as saying at a Goldman Sachs investors conference in New York that investment is the key: “The whole idea here is for us to not take our foot off the gas and we will not take our foot off the gas.”

To be sure, there’s some incentive. Woodward said if a megabyte over the Edge network costs $1 to deliver, it’s only 14 cents on HSPA and only 3 cents on LTE, the company’s future 4G network technology (Wi-Fi is even cheaper). “We are well motivated to move to LTE…Will the demand ever stop? I don’t think it will.”

And, while that makes it sounds like the payoff will eventually come, it’s not reflected in stock prices or in the carriers’ profit margins. AT&T’s stock is down 7.5 percent this year and Verizon is down 13 percent.