AT&T Preps U-verse. Will Expand Media Universe

by David Goetzl, Oct 24, 2006, 8:17 AM

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AT&T's foray into television service is moving slowly, although the company says that's by design. The telecom giant said Monday its telco TV offering, AT&T U-verse, is in only 3,000 homes so far.

Given the 30,000 potential customers in San Antonio, Texas, its hometown, that puts the adoption rate since the June launch at 10%. AT&T CFO Rick Lindner said its marketing approach "is producing good results, with deployment on track."

AT&T will begin offering the service in the Houston market late next month with HD service. (It's been in test mode in advance of the launch.) It will then launch HD in San Antonio. After that, an HD-capable AT&T U-verse will be rolled out to 15 markets by the end of the year.

It's unclear how many homes the service will then be available in, Lindner said. AT&T has been slower to expand its telco TV service than Verizon, which is already in seven states including Texas, and the New York City DMA, where its aggressive marketing includes a TV campaign.

Part of the reason for AT&T's gradual rollout of the service is that the company wanted to wait until it was prepared to offer HD en masse--to give it a marketing edge and avoid additional costs. For example, in San Antonio, it will incur expenses to retrofit current customers with HD-capable equipment.

"We didn't want to put too many customers on the platform before we had the HD capability," he explained.

On a conference call to discuss AT&T's third-quarter results, Lindner said, AT&T U-verse's "picture quality is excellent, [its] features and user interface, I think, beat cable in side-by-side tests." But cable companies have been quick to dismiss telco TV as anything but an imminent challenger. Any threat, they've said, is years away.

AT&T and Verizon want to add television service to their offerings to compete with cable companies, which are profiting from a triple-play bundle of TV, phone and Internet service. TV is the two telcos' missing link; it could be a "quadruple play" with wireless service tossed in.

Although the rollout for Verizon's FiOS TV has a wider footprint than AT&T so far, its adoption rate appears to be in line with AT&T: 10%. The AT&T figure is derived from a small hometown sample, where customers may be partial to it.

Verizon has said it wants to be in 175,000 homes by the end of the year, out of a footprint of 1.8 million homes--about 10%. The company says it wants 3 million to 4 million FiOS TV customers by 2010.

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