The majority of the investment will be used to offer IPTV, which brings programming to television sets through telephone lines using Internet Protocol, or IP, the method used to send data between computers over the Internet.
The expansion will also include bringing DSL Internet service to many rural areas that do not currently have the service. DSL, or digital subscriber line, connects computers to the Internet over phone lines, but is faster than traditional dial-up.
AT&T spokesman Kerry Hibbs said the expansion would not have been possible without the passage of statewide video franchise legislation in March.
Currently, cable companies have to negotiate service contracts with individual cities and municipalities to offer television programming - an often time-consuming endeavor. Under the new law, which will take effect in August, companies can obtain statewide contracts from the Public Service Commission.
Proponents of the legislation said it would increase competition among telecommunications companies and lower prices for consumers. But critics have charged that the law could result in customers having to sign service contracts, would eliminate some government access programming and did not contain adequate consumer protections.
The PSC Chairman, Jeff Davis had voiced concern earlier this year that the law did not authorize his agency to enforce consumer protections for the franchises the law requires his commission to issue.
AT&T pushed strongly for the legislation's passage, saying it would streamline the negotiations process and allow the company to more easily offer television service.
"(It) will allow us to bring the service to consumers much faster," Hibbs said.
The bill's sponsor, Sen. John Griesheimer, R-Washington, said Tuesday he was pleased with how much money AT&T was planning to invest.
"I knew that the amount would be big," he said. "But it's even better than I had ever dreamed or hoped for."
IPTV infrastructure will first be built in St. Louis and Kansas City, Hibbs said, but he did not know when the service would be available. He indicated that IPTV would be expanded to other areas, too.
Hibbs said the technology behind IPTV allows features that aren't available with cable television. For instance, Hibbs said, IPTV can offer picture-in-picture, fast channel change and remote access to DVRs, or digital video recorders, which can record television programs for later viewing.
With IPTV, Hibbs said, customers could program their DVR with a cell phone or from the office via the Internet, while fast channel change will eliminate the slight lag typically experienced with cable when switching between networks.
"Because this is all hooked up to the network, there's going to be some rather amazing things you can do with your TV that traditionally people haven't been able to do through traditional cable," Hibbs said.