& cplSiteName &

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        ADD A COMMENT
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.
Mitch Wagner
50%
50%
Mitch Wagner,
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.
Mitch Wagner
50%
50%
Mitch Wagner,
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. 
Mitch Wagner
50%
50%
Mitch Wagner,
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
Internet giant's initiative rewrote the local broadband story for many cities in the US.
FCC Chairman has been among the most aggressive ever in pushing his competition agenda, but is he running out of time to finish the job?
AT&T and Verizon are vying for the status of biggest OpenStack champion, a stunning reversal for the open source software and a sign of things to come.
FCC proposes forcing broadband ISPs to get explicit consent from customers before using browsing data, ignoring the real online privacy threats.
Forget the 'Thrilla in Manila'; the competitive battle among open MANO groups will more likely be fought with Manila folders than fisticuffs.
Light Reading’s Upskill U is a FREE, interactive, online educational resource that delivers must-have education on themes that relate to the overall business transformation taking place in the communications industry.
NEXT COURSE
Wednesday, September 14, 1:00PM EDT
What Is Agile?
Kent J. McDonald, Product Owner, Agile Alliance
UPCOMING COURSE SCHEDULE
Friday, September 16, 1:00PM EDT
How to Implement Agile
Alan Bateman, Director, Agile Transformation
Wednesday, September 21, 1:00PM EDT
What Is DevOps?
Colin Kincaid, CTO, Service Provider, Cisco
Friday, September 23, 1:00PM EDT
How to Implement DevOps
,
in association with:
From The Founder
Light Reading today starts a new voyage as part of a larger Enterprise.
Flash Poll
Live Streaming Video
Charting the CSP's Future
Six different communications service providers join to debate their visions of the future CSP, following a landmark presentation from AT&T on its massive virtualization efforts and a look back on where the telecom industry has been and where it's going from two industry veterans.
Between the CEOs
CEO Chat: UXP Systems' Gemini Waghmare

8|26|16   |     |   (0) comments


Light Reading CEO Steve Saunders and UXP Systems CEO Gemini Waghmare discuss the strategic importance of digital identity for operators in the midst of transformation.
LRTV Custom TV
F5 Virtual Network Function Integrations With Partner Orchestration Platform

8|24|16   |   6:38   |   (0) comments


F5's Kishore Patnam, product manager for F5's service provider solutions, discusses why service providers are moving towards virtualization and how his clients are utilizing F5's solutions.
Between the CEOs
CEO Chat: Intel's Alexis Black Bjorlin

8|17|16   |   06:23   |   (0) comments


Join us for an in-depth interview between Steve Saunders of Light Reading and Alexis Black Bjorlin of Intel as they discuss the release of the company's Silicon Photonics platform, its performance, long-term prospects, customer expectations and much more.
Telecom Innovators Video Showcase
Accelerating Telecom Digital Transformation With Nominum DNS

8|1|16   |   12:04   |   (0) comments


Light Reading's Steve Saunders gets an update from Nominum CEO Gary Messiana on how his company is helping carriers on the digital transformation journey.
LRTV Custom TV
Reinventing Operations for a Virtual, Software-Defined World

7|28|16   |   5:23   |   (0) comments


Heavy Reading Senior Analyst Jim Hodges speaks with Accenture's Larry Socher and Matt Anderson about what service providers must do to transform their business to get the benefits of SDN and NFV including: leveraging DevOps, introducing real-time OSS and implementing analytics.
Women in Comms Introduction Videos
Fujitsu Sales Leader Shares Lessons Learned

7|27|16   |   5:12   |   (1) comment


As Fujitsu's only female sales leader, Annie Bogue knows the importance of asking for what you want, being flexible (she's been relocated five times), keeping a meticulous calendar, 'leaning in,' working harder than everyone else around you, being aware and more.
Telecom Innovators Video Showcase
VeEX Test & Measurement Solutions

7|25|16   |   08:57   |   (0) comments


Cyrille Morelle, president and CEO of VeEX Inc., talks test and measurement with Light Reading's Steve Saunders at BCE 2016. This includes innovative products such as VeSion Cloud-Based platform for network monitoring; MTTplus Modular Test platform for Access, Business, Carrier Ethernet, Transport and Core services; and OPX-BOX+ for Fiber Optics.
LRTV Custom TV
VeEX: Live From BCE 2016

7|25|16   |   03:20   |   (0) comments


VeEX's Senior Director of Business Development, Perry Romano, explains how VeEX provides tools to help install, maintain, monitor and manage network infrastructure efficiently and effectively. The portfolio of products on display include the RXT-6000, MTTplus and TX300s.
LRTV Custom TV
Real-Time Telemetry & Analytics for Intelligent SDN Orchestration

7|25|16   |   03:09   |   (0) comments


Packet Design CEO Scott Sherwood discusses how real-time network telemetry and analytics are enabling a new breed of SDN orchestration applications.
From the Founder
The Russo Report: Driving Disruption

7|25|16   |   07:44   |   (2) comments


In the first episode of a four-part series, Light Reading Founder and CEO Steve Saunders and Calix President and CEO Carl Russo drive around town discussing the disruptive mega-changes in the communications industry and where hope lies for service providers to meet the escalating demands of the cloud.
LRTV Custom TV
NetScout: Maximizing Enterprise Cloud for Digital Transformation

7|20|16   |   04:53   |   (0) comments


Light Reading Editor Mitch Wagner talks to NetScout CMO Jim McNiel about maximizing the benefits of enterprise cloud and digital transformation while minimizing potential pitfalls with a proper monitoring and instrumentation strategy.
Women in Comms Introduction Videos
Ciena's VP Offers a Career Crash Course

7|20|16   |   4:14   |   (2) comments


How did Ciena's Vice President of Sales, Angela Finn, carve out her career path? Simple, she tells WiC. She stayed true to her company, customers and principles. She shares her advice for women on how to be authentic and credible, as well as for companies that want to make a real change to their culture and practices.
Upcoming Live Events
September 13-14, 2016, The Curtis Hotel, Denver, CO
November 3, 2016, The Montcalm Marble Arch, London
November 30, 2016, The Westin Times Square, New York City
December 1, 2016, The Westin Times Square, New York, NY
December 6-8, 2016, The Westin Excelsior, Rome
May 16-17, 2017, Austin Convention Center, Austin, TX
All Upcoming Live Events
Infographics
Hot Topics
Google Fiber Can't Be Called a Failure
Carol Wilson, Editor-at-large, 8/26/2016
FirstNet: A Billion-Dollar Boondoggle?
Dan Jones, Mobile Editor, 8/26/2016
WiCipedia: Should Men Be Included? & Olympians Face Discrimination
Eryn Leavens, Special Features & Copy Editor, 8/26/2016
How the Padres Hit an IoT Home Run
Mitch Wagner, West Coast Bureau Chief, Light Reading, 8/25/2016
Google Fiber Downsizing Not Confirmed
Mari Silbey, Senior Editor, Cable/Video, 8/25/2016
Like Us on Facebook
Twitter Feed
BETWEEN THE CEOs - Executive Interviews
Light Reading CEO Steve Saunders and UXP Systems CEO Gemini Waghmare discuss the strategic importance of digital identity for operators in the midst of transformation.
Join us for an in-depth interview between Steve Saunders of Light Reading and Alexis Black Bjorlin of Intel as they discuss the release of the company's Silicon Photonics platform, its performance, long-term prospects, customer expectations and much more.
Animals with Phones
Live Digital Audio

Bridging the tech skills gap is a major challenge for service providers and suppliers alike today – and the challenge is two-fold when it comes to increasing the number of women in the comms space. Level 3 Communications has made it a priority to overcome both challenges by implementing several unique programs focused on building the right candidates from within – in addition to filling the funnel by supporting STEM and other education programs. During this radio show, you’ll learn about these programs from Mary Beth McGrath, SVP of Global Talent Management at Level 3, and the best ways to bridge your own skills gap so that you are motivated and equipped for change. Plus you’ll have the chance to ask Mary Beth your questions live on the air.