AT&T Inc. (NYSE: T) said Tuesday it has begun delivering high-definition (HD) TV services as part of its U-verse IPTV offering. (See AT&T Launches HD.)

AT&T says its San Antonio customers can now buy a package of 25 HD channels for an extra $10 a month. Local rival Time Warner Cable Inc. (NYSE: TWC) says it's offering 24 HD channels.

Sources say the rollout of HD has been delayed because of a scarcity of MPEG-4 HD chipsets needed for the U-verse set-top boxes. (See IPTV's High-Def Holdup.)

Now that bottleneck has been cleared: Just last month set-top box makers Cisco Systems Inc. (Nasdaq: CSCO), Motorola Inc. (NYSE: MOT), Royal Philips Electronics NV (NYSE: PHG; Amsterdam: PHI), and Tatung announced the availability of HD-ready products compatible with Microsoft Corp. (Nasdaq: MSFT)'s IPTV middleware, which AT&T is using. (See STB Makers Support MSFT and SBC Awards Microsoft $400M IPTV Deal .)

"We're pleased with the progress we’re seeing from our customers in the field," says Microsoft TV spokesman Jim Brady. "Right now AT&T and [Deutsche Telekom] are offering commercial HD services with the platform. IPTV is a better TV experience that will get increasingly better and more differentiated over time."

AT&T told Light Reading it will replace the Tatung boxes it's been using with new Motorola Inc. (NYSE: MOT) HD-compatible boxes. (See Microsoft Says Middleware Not a Problem.)

Cisco's set-top box business Scientific Atlanta will supply its products as the U-verse service expands into new markets, AT&T says. (See Cisco to Acquire Scientific-Atlanta.)

U-verse video and data bundles start at $74 per month, depending on the channel package and Internet service selected by the customer. (See AT&T Waits on Lightspeed VOIP and Selling Telco TV: You Got $99?.)

A Time Warner Cable customer service rep in San Antonio quoted Light Reading a $90 per-month price for a voice, video, and data bundle that includes HD and on-screen caller ID.

The speed of Time Warner's data offering has a slight edge on AT&T's. The Roadrunner connection in Time Warner's triple-play bundle is 7-Mbit/s downstream, while the fastest of AT&T's three tiers of data service is 6-Mbit/s downstream. The U-verse bundle with 6-Mbit/s downstream costs $119 per month, according to the company's Website.

The Time Warner rep we talked to pointed out that all TVs in the U-verse household rely on the 2Wire Inc. home gateway for their service. "It runs on a little box that controls all the TVs in the house. The downside of that is that if one TV goes out they all go out," the rep says. "With us they work individually."

The rep believes the U-verse service remains unavailable to residents in many San Antonio zip codes.

AT&T says that, as of Tuesday, U-verse is available in more San Antonio neighborhoods, but declined to say how many new zip codes have been added. Nor will it say how many households have already signed up for the service citywide. (See It's a Small U-Verse for AT&T.)

U-verse is available only in San Antonio, but AT&T says the service will launch in up to 20 more markets by the end of this year. Houston -- where AT&T has held a limited HDTV trial -- will be the next market to go live with a commercial service, the carrier says. (See AT&T Set to Expand Its U-verse and Lightspeed Unauthorized.)

Asked if AT&T expects any uptick in service problems and support calls related to the new HD service, spokesman Wes Warnock replied: "Absolutely not. In fact it's just the opposite. The feedback we've gotten from customers -- and I've seen public postings on this -- is that our HD exceeds what our competitors offer."

— Mark Sullivan, Reporter, Light Reading