& 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. 
Educational Resources
sponsor supplied content
Educational Resources Archive
More Blogs from Rewired
Level 3 finds enterprise security managers who believe firewalls can save them are getting some nasty surprises.
At one moment in Denver this week, the three largest US operators were very agreeable to the idea of open sourcing APIs to make business easier.
AT&T's former security guru is taking his expertise to a much broader audience – and this time he's giving it away.
Security is a looming issue as IoT devices prove to be easily invaded, but is the broadband industry prepared to act?
Internet giant's initiative rewrote the local broadband story for many cities in the US.
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 28, 1:00PM EDT
Gigabit 101
Will Barkis, Senior Technology Analyst, Orange
UPCOMING COURSE SCHEDULE
Friday, September 30, 1:00PM EDT
Gigabit & the Great Migration
Robert Howald, Vice President, Network Architecture, Comcast
Wednesday, October 5, 1:00PM EDT
Gigabit & Smart Cities
Joe Kochan, COO & Co-Founder, US Ignite
Friday, October 7, 1:00PM EDT
Gigabit & DOCSIS 3.1
Ty Pearman, Director, Access Architecture, Comcast
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.
LRTV Documentaries
MEC Congress: The Key Takeaways

9|22|16   |   03:25   |   (3) comments


Three key takeaways from the Mobile Edge Computing (MEC) Congress in Munich, Germany.
Wagner’s Ring
Time to Shut Up About 'Dumb Pipes'

9|22|16   |     |   (12) comments


Service providers can't compete with OTT players. It just isn't in their DNA. Instead, service providers need to embrace what they're good at -- providing reliable, secure connectivity.
Wagner’s Ring
Keeping Your Tech Career Going After 50

9|21|16   |     |   (13) comments


How do you keep your career moving forward when you're past the half-century mark?
LRTV Interviews
Peering Into the Digital Future

9|20|16   |   04:25   |   (0) comments


Nick Thomas, practice leader of digital media at Ovum, talks about how digital transformation in the technology, media and telecom sectors will enable the development of a new range of applications and services for enterprises and consumers and how the upcoming Digital Futures event in London will examine ...
LRTV Custom TV
Napatech Tackles NFV's Major Challenge

9|7|16   |   08:42   |   (0) comments


One of the main challenges for network operators introducing NFV is to combine performance and flexibility in a cost-effective way, but there is a solution, explains Napatech's Dan Joe Barry.
LRTV Custom TV
Huawei Optical Innovation 2016

9|6|16   |     |   (0) comments


Highlights of the 2016 Huawei Optical Innovation forum.
LRTV Huawei Video Resource Center
Are You Ready for Huawei Connect 2016?

8|31|16   |     |   (0) comments


Join us for an exclusive sneak peak of Huawei Connect, an integrated conference for the global ICT ecosystem taking place in Shanghai.
Between the CEOs
CEO Chat: UXP's 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.
Upcoming Live Events
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
Keeping Your Tech Career Going After 50
Mitch Wagner, West Coast Bureau Chief, Light Reading, 9/21/2016
Time to Shut Up About 'Dumb Pipes'
Mitch Wagner, West Coast Bureau Chief, Light Reading, 9/22/2016
Comcast Will Go Wireless in 2017
Mari Silbey, Senior Editor, Cable/Video, 9/20/2016
Sprint CEO: We'll Lease Spectrum as Soon as Possible
Dan Jones, Mobile Editor, 9/20/2016
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
You Thought Your Customer Service Was Unreliable... Click Here
Live Digital Audio

A vital part of increasing the number of women in comms is transforming the ways companies can support and empower women. While progressive company policies that support both men and women in achieving work-life balance are a step in the right direction, creating a company culture that supports those policies can at times be more challenging.

During this show, we'll talk to Lynn Comp, Senior Director of Industry and Sales Enabling (ISE) in the Network Platforms Group at Intel, about why those challenges exist and how companies can overcome them. She'll provide insight into how Intel has worked to create a culture that supports work-life balance, and provide steps and guidance for other companies wishing to do the same. We will also leave plenty of time to get your questions answered live on the air.