July 3, 2006 AT&T Is Calling to Ask About TV Service. Will Anyone Answer? By KEN BELSON NY Times
http://www.nytimes.com/2006/07/03/technology/03iptv.html?pagewanted=print SAN ANTONIO Jesse Vallado looks like your average cable guy: tool belt around hips, golf shirt with company insignia and a van stuffed with gear. But Mr. Vallado, who has been installing television services for two decades, now works for the phone company AT&T not the local cable provider. Hunched over a cable box outside a customer's suburban two-story home in a gated community here, he plugs in adapters and a bunch of wires that will turn on AT&T's new television service, U-verse. While traditional cable and phone services run on separate lines, U-verse crams video, data and, in time, phone calls down one high-speed broadband line. Introduced here on Monday, the service allows users to view multiple channels at once, get information about programs instantly and eventually access some Internet content via their television. "We're on the ground floor of something that's going to revolutionize the industry," Mr. Vallado said. "We have the whole world looking at us." Investors, too, are watching to see whether the service will work well enough to attract the millions of new subscribers that AT&T needs to stave off rivals stealing millions of its phone customers. With U-verse, AT&T can assemble a package of television, broadband and phone services to match the bundle sold by cable companies. But cable providers like Time Warner Cable, which serves about half the homes in San Antonio, are fighting back. To keep customers from leaving, they are discounting their television and phone plans, throwing in premium movie channels and faster Internet connections. The face-off has turned San Antonio the home of the Alamo into a proving ground for the intensifying showdown between the phone and cable industries. What transpires here is expected to be repeated in the 15 or so other cities and towns (including Houston) where AT&T plans to introduce U-verse this year, and the 55 where Verizon now sells television. "The cable guys are not going to sit around and wait," Jeffrey Halpern, a telecommunications analyst at Sanford Bernstein, said. "They offer television, broadband and phone now, so if the Bells don't have television, they can't fight back." But building a television service and getting people to drop their cable or satellite plan are two different things. Like Verizon, which now sells programming in New York, Florida and five other states, AT&T is discounting heavily to attract new customers. For example, AT&T's middle-tier plan comes with 170 television channels, 31 premium movie channels and 17 music channels, a 3-megabit broadband connection, three set-top boxes, a digital video recorder and a Wi-Fi router for $94 a month, roughly equivalent to the already cut-rate cost of comparable service from Time Warner. Mr. Halpern and other analysts say that AT&T will have a relatively easy time capturing 10 percent of the pay-television market because some customers are eager to cut their bills. Enticing the next 10 percent will be much harder, though, because most cable and satellite subscribers are either happy with their service or unwilling to go to the trouble of switching providers. Yet AT&T and Verizon need to grab a substantial piece of the television markets they enter if they expect to recoup the substantial costs of overhauling their networks. This is particularly true for Verizon, which is spending $18 billion to string fiber optic lines all the way to consumers' homes. With that kind of network, Verizon will be able to sell far faster Internet connections and have a more durable network that will require far less money to maintain. AT&T has taken a different route. It is spending just $4.6 billion to install fiber optic lines only to consumers' neighborhoods and then to use existing copper cable the rest of the way. This will allow it to enter new markets more quickly, but its network may have to be upgraded later. The company also expects to spend $1 billion to hook customers up to the service, though analysts said that cost could rise if the service proves as popular as AT&T expects. Unlike cable companies and Verizon, which send every channel to every set-top box, AT&T only sends selected channels to the home. This uses far less bandwidth, so AT&T can use more of its older cables. And since phone calls, Internet connections and television signals will travel down the same pipe, they can be blended so that, say, incoming calls are announced on a television and digital photos from computers can be copied to digital video recorders for display on a TV. While other phone companies are using this so-called IPTV technology, AT&T is by far the biggest. By the end of 2008, the company expects to make the service available to about half, or 19 million, of the homes it serves in the 13 states where it sells local phone service. If all goes well, AT&T said 30 percent of those homes, or 5.7 million customers, will sign up for U-verse. AT&T also plans to introduce U-verse in the nine states where BellSouth operates, assuming regulators sign off on their planned merger. Not surprisingly, the gargantuan project has faced obstacles. AT&T and Verizon have had to go town by town to win cable franchises from municipalities. To shorten that long and expensive process, the companies have been prodding lawmakers in Washington to pass a bill that would streamline the process. Five states in AT&T's territory, most notably Texas, have already passed similar legislation. Technologically, AT&T needed to get the kinks out of crucial software from Microsoft, as well as develop new billing, sales and administrative teams, and open an office in Los Angeles to buy programming from Hollywood studios. Now, about six months later than originally anticipated, all the pieces are in place. "The technical risk we bought into two years ago, we feel like we jumped that hurdle," said Jeff Weber, the vice president in charge of U-verse products. "There is a lot of pressure to get the product out there. But I don't want to go faster than we should. We want to make sure the service is what we said it would be." Despite the importance of the project, AT&T is not trying to oversell U-verse. Just 5,000 customers will initially be able to get it in San Antonio. Instead of trumpeting the service on television, AT&T is going door-to-door with fliers, driving a specially outfitted ice cream truck on neighborhood streets and hosting parties where customers open their homes to their neighbors to show off U-verse. Todd Trcka (pronounced tri-KHA) and his wife, Lisanne, would be two good candidates. They were selected to test U-verse a few months ago and are now hooked on the service. Mr. Trcka gleefully channel surfs at high speed, noting that there are not the delays found on some digital cable and satellite services. With a click of the remote, he calls up screens with details of the show he is watching. With another few clicks, he can record it on his DVR. "They should prescribe Ambien because this guy doesn't sleep since he got this TV," Mrs. Trcka joked. She added that the parental locks were an easy way to keep her three kids from watching some programs. The Trckas have encountered some problems. U-verse does not have any high-definition channels, something AT&T hopes to introduce by the end of the year. Mr. Trcka said he also wished he could watch the Bevo-D channel, which is devoted to University of Texas sports that he had with his old Time Warner service. Still, the Trckas plan to sign up for the U-verse service when their trial ends because of the extra features. They also like the idea that they are among the first customers to get the new product. "The good news is we don't have friends with the service," Mr. Trcka said. AT&T, of course, is out to fix that. ================================================= George Antunes Voice (713) 743-3923 Associate Professor Fax (713) 743-3927 Political Science Internet: antunes at uh dot edu University of Houston Houston, TX 77204-3011 Reply with a "Thank you" if you liked this post. _____________________________ MEDIANEWS mailing list [email protected] To unsubscribe send an email to: [EMAIL PROTECTED]
