Video services

Will AT&T Become Ma Video?

With cable franchises, content buying power, and a wireless powerhouse, AT&T Inc. (NYSE: T) will significantly add to its video services potential with its $67 billion bid to buy BellSouth Corp. (NYSE: BLS). (See Ma Bell Is Back!.)

First, consider a pile of local video franchises. For years, BellSouth has been installing fiber to the curb, and, in a limited way, it became a residential TV provider in the late 90s for certain areas of metropolitan Atlanta and Miami.

According to Federal Communications Commission (FCC) data, "BellSouth holds 20 cable franchises with the potential to pass 1.4 million homes and provides cable service to approximately 40,000 customers in 14 of its franchise areas."

The only video franchise AT&T has acquired of late is its state-issued franchise from Texas, which covers 21 municipalities that make up the Greater San Antonio area. (See SBC Eyes Alamo City for Video.)

So, if it wants to, AT&T has at least pre-existing permission from local authorities to offer video services in several spots within Georgia and Florida, which could come in handy if it wants to accelerate Lightspeed's deployment. (See Give or Take a Million.)

AT&T has been very vocal about local video franchises, those documents that give it permission to offer video services to a given municipality. It has so far maintained publicly that the agreements are unnecessary, given that AT&T itself is not intending to offer a cable TV-like service. (See FCC Brings Video Debate to Texas.)

Still, the carrier says it sees BellSouth's current fiber-to-the-curb efforts as complementary. "They have been very aggressive in the past at pushing fiber deeper into their network. They are on a path within the next couple of years to have 12 to 24 megabits through a substantial portion of their footprint," said AT&T's COO, Randall Stephenson in a conference call on Monday. (See Full Transcript of LRTV's Interview With Bill Smith, BellSouth CTO and BellSouth's Smith Details IPTV Plans.)

"So it gives us a lot of flexibility in terms of [ramping] Lightspeed in the legacy SBC territory or AT&T territory. If we want to push that into BellSouth region it’s just a perfect opportunity to do that," he added.

On that note, AT&T's addressable consumer market will swell considerably when it adds BellSouth to its fold. The acquisition will give AT&T 21.5 million access lines, about 14 million of which will be residential. All told, the new carrier will have control of 71 million total lines, about half the access lines in the U.S.. "With 9.8M combined DSL lines, the new company will be the largest provider of broadband in the U.S., ahead of Comcast's 8.5M subscribers," write the analysts at UBS Research . (See AT&T Deal Could Spur Cable Buys.)

The combined company, too, will generate some $120 billion in revenues during 2007, analysts say.

And, in addition to some local video franchises, BellSouth gives AT&T another weapon in its video arsenal -- the ability to bring a bigger potential audience to content providers. With its IPTV service and any mobile TV services offered to Cingular Wireless 's 54 million customers, the combined carrier can make a true mass market pitch. (See Cingular's Converged Future.)

"As we go out to, for example, buy content, that's a huge benefit to us going forward," says AT&T's CFO, Richard Linder. "By working closer together we're going to leverage those benefits in a more efficient fashion."

And don't think that AT&T will stop at its own boundaries -- or limit its video offerings to consumers. (See Source: SBC Plans IPTV for Businesses.) Without stating specifics, the company's executives this week have dropped hints that they'll eventually go well beyond their access lines. All they need to do is figure out how to offer a DSL-like connection cheaply enough, and without a wire.

"We have the CallVantage product. We have a great wireless asset, and then there is probably something here," said COO Stephenson. "We are trying to evaluate how do you get a broadband product when you’re outside of your footprint. We think there is opportunity here, and we continue to look at it."

— Phil Harvey, News Editor, Light Reading

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