AT&T Television Service? Don’t Expect It Any Time Soon

By Jerri Stroud, St. Louis Post-Dispatch

Jan. 24–AT&T Inc.’s new television franchise agreements with several local communities have raised some residents’ hopes that another alternative to cable and satellite TV service is on the horizon.

But the telephone giant is making no promises for when or where its television service will be available. And its performance in other markets suggests that St. Louisans could have a long wait.

AT&T has franchises with four communities here and is seeking them in more than 100 other Missouri cities and towns. In addition, it is backing a bill in the Missouri Legislature that would allow it to get a statewide franchise covering all communities.

AT&T plans to make its U-Verse television service available to half of its 19 million customers nationwide by 2008. In Missouri, the company expects to reach 25 percent of its customers by 2009 or 2010, and half of its customers within six years, said John Sondag, vice president of external affairs.

In San Antonio, where AT&T has offered U-Verse television service for nearly a year, about 30,000 homes “” 6 percent of the city’s households “” can get it. About 3,000 customers subscribe to the service there, analysts said.

AT&T introduced the service in 11 other cities late last year, but it’s available only to a few neighborhoods in those markets. They include Houston; Indianapolis; San Jose, Calif.; and Hartford, Conn.

“Their rollout has been very modest,” said Kent Custer, a telecommunications analyst with A.G. Edwards & Sons Inc.

“They’ve been going in and turning up one neighborhood at a time,” Custer said. When the service comes here, “I wouldn’t expect that all of a sudden that half the population in St. Louis would have it.”

Mike Paxton, a cable analyst with In-Stat of Scottsdale, Ariz., said, “It will take them years to become a significant competitor.”

Neil Smit, chief executive of Charter Communications Inc., said in a statement, “We take competition seriously and have successfully confronted it for a long time from AT&T and others by providing great value to our customers. We welcome whatever increased competition is presented by AT&T’s video plans “” provided it’s on a fair and level playing field.”

Paxton said the service AT&T offers has been “nothing substantially compelling, except that it’s not coming from a cable company.” In-Stat is part of publisher Reed Elsevier Group PLC.

Michelle Abraham, another In-Stat analyst, said AT&T has been turning up the service gradually so the company can be sure that it works well and that customer service meets expectations. Consumer reaction to the service has been mixed, with some satisfied and some experiencing outages.

Abraham says the service initially will be much like cable.

In cities where U-Verse is offered, the company sells packages ranging from about 100 channels to more than 300, including premium channels and high-definition service. Prices range from $59 to $119 a month, with discounts for customers who also have AT&T’s telephone and high-speed Internet service.

“The standard television services are just the beginning of what they want to offer,” Abraham said. In the future, the company will add new services like home video surveillance, which customers would be able to check from a cell phone or computer when they are away from home.

Lynda Starr, an analyst with Frost & Sullivan, a research company based in Palo Alto, Calif., agreed that to be competitive AT&T will have to offer features its cable competitors don’t have.

Features are needed Starr said AT&T probably will offer personalized weather, a program guide organized by a customer’s favorite channels and other features that will set it apart from cable.

“Price is initially what gets people to change” from a competing service, Starr said. “Without the features, you won’t keep them.”

Starr and Abraham said AT&T probably will get some customers to switch to their service here simply because it’s a new offering or because they’re unhappy with their cable or satellite TV service.

Getting the first 10 percent of a competitor’s customers is fairly easy, Abraham said. “It’s getting people who need a more compelling reason to switch” that is challenging.

AT&T’s service won’t work the same as cable, though the differences may not be apparent to the casual user.

Instead of delivering all the channels to a customer’s home, the service will send one channel at a time as customers select it from a menu. The reason is that AT&T is sending the signal over copper wires from neighborhood hubs. Copper has less bandwidth than the coaxial cable that cable companies use.

In San Antonio, for example, the company can offer only one high-definition channel to a household at a time, Abraham said.

“If you have more than one HD television, you can’t get different HD channels on each of them,” she said.

To offer the service, AT&T needs a fiber-optic cable from its main switching center to the hubs, each of which serves about 200 homes.

The company also must install a cabinet with the electronics needed to deliver TV programs over the copper lines. The cabinets go next to its existing green or beige equipment cabinets, which are familiar sights in neighborhoods where AT&T isn’t required to place them under ground.

Only the beginning AT&T is installing some of the fiber and cabinets in the St. Louis area now, but the company wouldn’t be specific on where the work is taking place.

Creve Coeur City Administrator Mark Perkins said the company has done some work in the community since the city approved a franchise with AT&T. However, it has yet to give the city a date for turning on the service.

Analysts say AT&T’s $4.6 billion program to extend TV service to half of its customers may be the start of a much bigger capital spending program that will be needed to keep the service competitive.

As more HD channels become available, customers will demand multiple streams of programming, said In-Stat’s Abraham.

“Then the telephone company will need to upgrade the network,” she said. The company may need to run fiber-optic lines even closer to customers’ homes. Verizon, another telephone giant, is running fiber to customers’ homes to provide its TV service.

Some may wonder why AT&T is adding a TV service. It’s all about competition. With cable companies siphoning off some of its phone and high-speed Internet customers, AT&T is striking back by offering television.

“The telephone industry in general is losing about 6 percent of its access lines per year “” and that accelerated in 2006,” said Custer, the A.G. Edwards analyst. About half of that loss is due to cable companies offering telephone service.

The main benefit of AT&T offering the service may be to limit cable companies’ rate increases and to force competitors to keep adding new services, Abraham said.

“I expect the competition between the two groups to really enhance the offerings that consumers see in the future,” she said.

—–

To see more of the St. Louis Post-Dispatch, or to subscribe to the newspaper, go to http://www.stltoday.com.

Copyright (c) 2007, St. Louis Post-Dispatch

Distributed by McClatchy-Tribune Business News.

For reprints, email tmsreprints@permissionsgroup.com, call 800-374-7985 or 847-635-6550, send a fax to 847-635-6968, or write to The Permissions Group Inc., 1247 Milwaukee Ave., Suite 303, Glenview, IL 60025, USA.

T, CHTR,