AT&T Launches Telco TV In 7 Markets, Plans To Out-Maneuver Cable With 'Quadruple Play'

AT&T is busy. It has launched its fledgling telco TV service in the extended San Francisco area, but continues to miss deadlines promised for its national rollout. Still, this week, AT&T plans to announce that the service will kick off in seven additional markets--although the company declines to name them.

So far, the service known as AT&T U-verse--which is intended to compete with cable and satellite operators as another way to get multichannel TV service--has launched in parts of San Antonio, Houston, San Francisco (also Oakland and Fremont) and San Jose (also Sunnyvale and Santa Clara). San Francisco and San Jose are in the same DMA, but AT&T considers them two separate markets.

AT&T says it will be in 11 markets by Jan. 1--down from the 15 it initially promised by that date. An AT&T representative said the delay is to ensure that all the kinks are worked out, so customers continue to get "the best experience" when it debuts in a community. Any hint that the service is rife with technical hitches could taint the product. As is, AT&T faces a challenge in introducing it to consumers as a viable alternative.

The AT&T representative said that expansion into new markets will continue next year, but declined to cite any goals.

One advantage that U-verse could hold over large cable operators for consumers: its large bandwidth capacity, possibly allowing it to offer more channels than cable. It now offers the much-hyped NFL Network (on upper-level tiers), which cable operators Time Warner and Cablevision are not carrying, due to a dispute with the NFL over rights fees.

For advertisers, the speed (and specific markets) of U-verse's rollout is significant. It could offer them a third option for running spots on the local avails cable channels give to operators. Plus, AT&T may lower prices, compared to cable and satellite operators, to jump-start interest.

AT&T says it will offer TV service to customers in 19 million homes by the end of 2008. Leading cable operators, such as Comcast and Time Warner, have downplayed any threat--at least in the near term--from telco TV services offered by AT&T and competitor Verizon. (Verizon says it will make its FiOS service available to 18 million homes by 2010.)

So far, AT&T says about 10% of eligible customers in the areas it serves have opted for the service. If the goal of 19 million homes is met, and AT&T can double the adoption rate to 20%, its distribution would be equivalent to the fifth-largest cable operator, passing Cablevision.

Cable operators have had notable success with the rollout of the so-called "triple play" service, in which they offer TV, Internet and phone service as a bundle. AT&T will offer the same bundle next year; so far, phone service is not part of U-verse.

Eventually, AT&T plans to out-maneuver cable with a "quadruple play" that offers a bundle with wireless phone service. (Verizon already offers the triple-play bundle and plans to go with the "quadruple" as well.)

The AT&T rep also said DVR features could provide a leg up, including the opportunity to program DVRs from any Web connection worldwide, and the ability to record up to four programs at once.

Verizon is farther along than AT&T with its FiOS TV service, offering it to 150 communities in eight states, including the New York City area, where it has run a TV campaign to attract customers.

An email from Verizon referred to the scope of AT&T's slower-than-anticipated rollout as "oft-announced, often-changing and often delayed plans," showing that the two telcos may be building a rivalry, even as they each battle cable and satellite.