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A Closer Look At AT&T's "$14 Billion Investment"  Posted: February 25, 2013

A Closer Look At AT&Ts “$14 Billion Investment” Announcement

On February 11, the Kentucky State Senate Economic Development, Tourism and Labor Committee heard testimony from AT&T regarding $14 billion in capital investments that had been announced by AT&T on November 7, 2012. The Senators were told that “AT&T has announced that we plan on spending $14 billion in investment across the nation,” and that the CEO of AT&T “has said how our company will make those investment decisions. He said that he’s going to send more of the 21st century investment to states with 21st century regulations.” The plain implication was that eliminating the public’s right to stand-alone basic phone service, and ending PSC jurisdiction over service reliability, would help bring Kentucky more of these dollars.

Yet it appears that any new investment by AT&T over the next 3 years will be much less than the $14 billion. From the November 7, 2012 AT&T announcement:

“Investment expected to be approximately $14 billion over three years - $8 billion for wireless initiatives, $6 billion for wireline initiatives; Total capital spending expected to be approximately $22 billion for each of the next three years.” (Emphasis added).

$14 billion over a three-year period represents around $4.6 billion for each of the three years. If the $4.6 billion for 2013-15 is all new investment, one would expect that AT&T’s total capital spending would increase by $4.6 billion for each of those years over AT&T’s capital spending in 2010 and 2011, before the announcement.

AT&T’s 2012 Annual Report, filed with the Securities and Exchange Commission (SEC) reports total “construction and capital expenditures” for 2010 and 2011 as $20.3 billion (2010) and $20.27 billion (2011). With AT&T’s construction and capital expenditures averaging around $20.3 billion for both 2010 and 2011, and AT&T’s statement that even with the $14 billion investment, total capital spending for 2013, 2014, and 2015 will be approximately $22 billion for each of those years, the actual increase over baseline capital expenditures from 2010 and 2011 appears to be only $1.7 - $1.73 billion, and not $4.6 billion per year.

Based on AT&T’s own numbers, it appears that only $5 billion of the $14 billion represents new investment above the usual construction and capital expenditures in 2010 and 2011.

Of that $5 billion (an increase of only 8% over 2010 and 2011 capital spending), how much could Kentucky expect if it ends the right to stand-alone basic phone service and PSC jurisdiction over the quality of that service? If recent history is any indicator, not much.

The 2006 telecom deregulation bill was touted by supporters as the path to new investments in telecommunications in Kentucky. How much additional construction and capital investment has AT&T made in Kentucky since the General Assembly deregulated all of the telecommunications services other than basic local service? AT&T testified in committee that it has spent approximately $1 billion in Kentucky since 2006; which is the equivalent of $200 million per year for 2007 through 2012, or a mere 1% to 1.1% of AT&T’s total capital investment nationwide in their networks during that period. It is unclear how much, if any, of that was investment above what would have been made if HB 337 had not passed in 2006.

SB 88 contains no commitment that a single dollar more of the $22 billion in construction and capital expenditures that AT&T projects for 2013, 2014, and 2015 will come to Kentucky if the protections of current law regarding basic phone service are jettisoned. When will we learn?

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