Light Reading
PayTV service is not the future for AT&T so there have to be other reasons for buying a satellite TV distribution network.

Is AT&T-DirecTV Really About Broadband?

Carol Wilson
5/5/2014
100%
0%

From the initial reports of AT&T's potential interest in buying DirecTV, I've been a bit puzzled. While a possible deal gives AT&T a broader reach for video offerings and more scale and market power in an industry segment where both are important, pay TV doesn't seem to be the business in which AT&T most wants to play going forward. (See AT&T Eyeing a Bid for DirecTV?.)

It is certainly not AT&T Inc. (NYSE: T)'s primary business, from what I can see, nor is it even all that profitable a part of the service bundle, according to most experts. The cost of content continues to rise, while the ability to pass those increasing costs on to consumers is reduced by growing availability of cheaper online content.

So what's the appeal of buying DirecTV Group Inc. (NYSE: DTV) that would prompt AT&T to pay an expected 20% premium for its stock, according to Amy Yong, a New York-based analyst for Macquarie Group Ltd., quoted in this Dallas News article?

My favorite explanation is this one: Using DirecTV's satellite service for TV frees up more bandwidth for broadband distribution. A separate nationwide video distribution network would let AT&T free up bandwidth and compete more effectively on broadband. Better broadband is ultimately the greatest competitive tool and the single most important service. This is especially true as AT&T moves to use broadband as the support for wireless voice inside the home, delivered via femtocells or other small cell technology, replacing wireline voice or supporting its wireless subscribers in places where cellular coverage is weak.

AT&T's determination to avoid the cost of fiber-to-the-home has left its U-verse service vulnerable to higher bandwidth options from cable. And while AT&T and its vendors have pushed DSL and compression technologies much farther than most of their critics initially thought possible, there are still limits to what copper can deliver versus a more fiber-rich solution. And there are places where U-verse won't be available, in areas covered by other competitors, that DirecTV can reach.

Of course, there are limits to the satellite distribution of TV signals, as anyone who has ever subscribed to Dish Network LLC (Nasdaq: DISH) or DirecTV knows all too well: Weather-related outages plague both services and aren't likely to go away any time soon, and interactivity is limited. Coupling a DirecTV option more tightly with broadband would make such outages less relevant in a video world in which time-shifting dominates the viewing environment and time-sensitive programming, such as live sports, can be made available via online options.

That's what makes the most sense to me; let me know what you think.

— Carol Wilson, Editor-at-Large, Light Reading

(10)  | 
Comment  | 
Print  | 
Newest First  |  Oldest First  |  Threaded View
VernonDozier
50%
50%
VernonDozier,
User Rank: Lightning
5/13/2014 | 7:32:00 PM
Re: Good theory
Yes,

 

Especially in Los Angeles.  Some of the copper is insulated with paper or cloth; and zoning prevents the ability to get in to replace it.  So, they actually maintain the city block's wiring with a 150-lb tank of nitrogen gas that blows water away.  The gas tank the same size as a Helium Tank and has to be refilled twice a week. 

In the event of an emergency, like an earthquake, my guess is that maintaining the gas tanks will be at the bottom of a list of priorities.

One thing I haven't seen in discussions is that most satellites are designed with a typical life of 20-15 years anyway.  My guess is that DirecTV's satellites need to be updated/replaced.  If they replace them all with LTE techonology (similar to ViaSat), DirecTV might be onto something great.
sam masud
50%
50%
sam masud,
User Rank: Light Sabre
5/7/2014 | 4:18:14 PM
Re: Good theory
Just wondering is some of the copper is so old/bad that it cannot be upgrade to support video--in which case having a satellite TV option would make sense as opposed to upgrading the old copper.
FakeMitchWagner
50%
50%
FakeMitchWagner,
User Rank: Lightning
5/6/2014 | 6:13:40 PM
Re: Good theory
seven - "I think this notion of replacing U-Verse video with Direct-TV is not viable.  Can you imagine trying to convince these video customers to change all their setup because the service they had marketed to them is now defunct?" 

I can imagine it but it would be dangerous for AT&T. As long as people are switching services, they might switch to another provider. 
brookseven
50%
50%
brookseven,
User Rank: Light Sabre
5/6/2014 | 10:43:10 AM
Re: Good theory
So Carol,

I think this notion of replacing U-Verse video with Direct-TV is not viable.  Can you imagine trying to convince these video customers to change all their setup because the service they had marketed to them is now defunct?

I think more likely that AT&T is doing their normal consolidation.  In this case, they get to expand their video footprint outside of U-Verse.  In particular, they can now offer video + DSL + phone triple play to rural properties.  This should increase their ability to hold onto lines in these areas with no network infrastructure buildout.

seven
loli.cyp
50%
50%
loli.cyp,
User Rank: Light Beer
5/5/2014 | 10:37:03 PM
Re: Good theory
Wouldn't they simply go for bundling the broadcast with their broadband services and offer HbbTV interactive content on top of the stream?
Carol Wilson
50%
50%
Carol Wilson,
User Rank: Blogger
5/5/2014 | 3:23:43 PM
Re: Good theory
Video services have not been a vein of gold at all - a company as large as AT&T can probably eke out profits on their video services but I don't think that's where their future lies unless consolidation puts more market power into the hands of distributors.

Just the cost of distributing sports programming alone is eating into video profits - the huge MLB contract which doubled to $1.5 billion this year from Fox, ESPN and TBS - guarantees prices will continue to rise. 
mendyk
50%
50%
mendyk,
User Rank: Light Sabre
5/5/2014 | 3:05:57 PM
Re: Good theory
From a corporate standpoint, decoupling video service from broadband data might make sense, although this seems to be a pretty expensive way to do it. Looks like video services haven't panned out to be the vein of gold initially expected.
FakeMitchWagner
50%
50%
FakeMitchWagner,
User Rank: Lightning
5/5/2014 | 1:42:41 PM
Re: Good theory
I meant to say "why would AT&T want to expand its investment in that business," rather than "get into that business." Of course, AT&T already distributes video.

It's still Monday morning here. Too early in the week to expect intelligence out of me. 
Carol Wilson
50%
50%
Carol Wilson,
User Rank: Blogger
5/5/2014 | 1:39:03 PM
Re: Good theory
This deal hasn't made much sense to me at all, to be honest. This is my conjecture, and I've seen pieces of it elsewhere, but not quite this perspective. I could be way off. 
FakeMitchWagner
50%
50%
FakeMitchWagner,
User Rank: Lightning
5/5/2014 | 1:37:27 PM
Good theory
It's a good theory. I like it. 

You've put your finger on something that I hadn't seen reported elsewhere. With cable TV subscriptions declining, why would AT&T want to get into that business? And you've advanced a credible explanation. 
More Blogs from Rewired
In the mid-80s, there were hot debates about how to power phones over non-copper lines. Guess what? Those debates are back.
One early indication of whether the tw telecom deal will bear the hoped-for fruit will be how its dynamic bandwidth capacity is handled.
Incumbents don't want cities and towns to build their own gigabit networks, but what's their alternative plan?
It's up to network operators to make sure "open" retains some meaning and doesn't go the way of "natural" foods.
The beauty of the early Internet was that it was distance-insensitive but as video takes over and the cloud grows, is that changing?
Flash Poll
Wagner’s Ring
Data Centers Drive Telcos Into the Future

8|28|14   |   2:20   |   (2) comments


Data centers are at the heart of key trends driving telecom -- network virtualization, the drive for increased agility, and the need to compete with OTT providers.
LRTV Custom TV
Why SPs Should Consider Cisco's EPN

8|27|14   |   5:40   |   (0) comments


Sultan Dawood from Cisco discusses Cisco's EPN, which enables SPs to build agile and programmable networks delivering new network virtualized services using Cisco's Evolved Services Platform (ESP).
LRTV Huawei Video Resource Center
Huawei’s Showcase @ Big Telecom Event 2014

8|26|14   |   2.56   |   (0) comments


SoftCOM is Huawei's framework for telecom business and network transformation. Haofei Liu, Solution Marketing Manager, Carrier Business Group, Huawei, showcases Huawei's SoftCOM architecture in this video.
LRTV Huawei Video Resource Center
Huawei @ BTE 2014: Director of Integrated Solutions on SoftCOM & NFV Monetization

8|26|14   |   4.43   |   (0) comments


Libin Dai, Director of Integrated Solutions, Carrier Business Group, discusses Huawei's SoftCOM and NFV monetization. Huawei believes that NFV monetization should be service-driven rather than network-driven, and that operators should have network transformation, service transformation and a compatible and collaborative ecosystem in place in order to deploy NFV.
LRTV Huawei Video Resource Center
Huawei @ BTE 2014: Director of US NFV Lab on CloudEdge & the Future of NFV

8|26|14   |   4.06   |   (0) comments


Sean Chen, Director of US NFV Lab at Huawei, discusses Huawei's new approach to NFV in open collaboration. Huawei believes that through Proof of Concept tests, it could help operators learn and communicate with the industry more effectively. Sean believes that successful implementation of NFV should have its values reaching to end users and discusses how Huawei's ...
LRTV Huawei Video Resource Center
Huawei's Highlights @ Big Telecom Event 2014

8|26|14   |   3.34   |   (0) comments


At the Big Telecom Event in Chicago Huawei showcases its high-level strategy, the SoftCOM architecture, which helps operators reduce the cost of ownership of their network infrastructure and generate additional revenue in the ICT service environment. Huawei showcases over 30 pilot programs from across the globe, focusing on the industry-leading commercial ...
LRTV Custom TV
VeEX – Live from the Show

8|21|14   |   5:58   |   (0) comments


An overview of VeEX Test and Measurement solutions including TX300S multi-service test set with VeExpress cloud-based management system, UX400 universal modular platform supporting 100G testing, and the redesigned RXT modular platform.
LRTV Custom TV
Transitioning CE 2.0 Networks Into the SDN & NFV Era With Telco Systems

8|19|14   |   5:19   |   (0) comments


Telco Systems' Ariel Efrati (CEO) and Moshe Shimon (VP of Product Management) discuss virtualization and how the company's new Open Metro Edge solution utilizes the SDN and NFV concepts to accelerate and orchestrate service delivery through its innovative product portfolio and software applications.
LRTV Custom TV
NFV Myths: Is NFV Still Several Years Away?

8|11|14   |   1:13   |   (0) comments


Some say that NFV (network functions virtualization) is still several years away from being implemented on mobile operator networks. This isn't the case. Operators can get started on their paths to NFV now, as this short video from Skyfire shows.
LRTV Custom TV
A New Security Paradigm in SDN/NFV

7|28|14   |   02:54   |   (0) comments


Paul Shaneck, Global Director Network Solutions for Symantec, discusses the evolving virtualized network, explaining how Symantec is leading the security discussion as it relates to SDN and NFV, and helping to ensure the network is protected and compliant.
LRTV Documentaries
Sprint's Network Evolution

7|24|14   |   14:59   |   (0) comments


Sprint's Jay Bluhm gives a keynote speech at the Big Telecom Event (BTE) about Sprint's network and services evolution strategy, including Spark.
LRTV Documentaries
BTE Keynote: The Software-Defined Operator

7|24|14   |   18:43   |   (1) comment


Deutsche Telekom's Axel Clauberg explains the concept of the software-defined operator to the Big Telecom Event (BTE) crowd.
Upcoming Live Events!!
September 16, 2014, Santa Clara, CA
September 16, 2014, Santa Clara, CA
September 23, 2014, Denver, CO
October 29, 2014, New York City
November 6, 2014, Santa Clara
November 11, 2014, Atlanta, GA
December 9-10, 2014, Reykjavik, Iceland
June 9-10, 2015, Chicago, IL
Infographics
A survey conducted by Vasona Networks suggests that 72% of mobile users expect good performance all the time, and they'll blame the network operator when it's not up to par.
Hot Topics
Rogers, Shaw Take Aim at Netflix
Mari Silbey, Independent Technology Editor, 8/26/2014
Utilities to Pump $11.2B Into Smart Grid – Study
Jason Meyers, Senior Editor, Utility Communications/IoT, 8/26/2014
Verizon Launches QR Code Security Solution
Carol Wilson, Editor-at-large, 8/26/2014
Fiber Revival at Deutsche Telekom
Iain Morris, 8/25/2014
M2M's In Fashion: Wearables Play the US Open
Sarah Reedy, Senior Editor, 8/25/2014
Like Us on Facebook
Twitter Feed