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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ozip 12/5/2012 | 4:02:15 AM
re: Will AT&T Become Ma Video? Perhaps my note was too terse and I was combining themes. My reference was to the mindless net neutrality behaviour that Carriers are undertaking. In that context, they want providers of content (google) to pay for use of the network and collect money from us "working stiffs" But amazingly in the video world they understand that they have to pay for content....

A paradox of the 3-play world, perhaps the carriers should just stick to phones....

alcaseltzer 12/5/2012 | 4:02:22 AM
re: Will AT&T Become Ma Video? Um, the content providers charge license fees to the distributors. That's part of how content production is funded.
ozip 12/5/2012 | 4:02:26 AM
re: Will AT&T Become Ma Video? Phil,

Is their plan to charge the TV content companies for the use of their networks, just like they plan to charge the Internet Content providers.

To quote Jared Diamonds book Collapse. How Societies Choose to Fail or Succeed.

"What did the Easter Islander who cut down the last tree say while he was doing it"

rjmcmahon 12/5/2012 | 4:02:35 AM
re: Will AT&T Become Ma Video? Another possibility is that their interest in video allows them to maintain the illusion of facilities based competition which keeps the government off their backs. If there were an economic interest driving video they would be building it out like they did for cellular.
DCITDave 12/5/2012 | 4:02:36 AM
re: Will AT&T Become Ma Video? re: "The telcos seem interested in distributing video because they are running from the end of voice, not because they understand how to make money in video."

I'm not sure I agree with that. But I will admit there are few examples of phone companies making big profits on anything they don't control, or at least originate. So I wonder how innovative they can be in combining standard TV programming with the best of what's on the Net?
paolo.franzoi 12/5/2012 | 4:02:43 AM
re: Will AT&T Become Ma Video?
Transport in the Access for BellSouth's FTTC today is SONET and is headed to Ethernet. Lightspeed is not really being deployed today, but is planning to use Ethernet.

RTL Rules 12/5/2012 | 4:02:44 AM
re: Will AT&T Become Ma Video? What's the transport for today's SBC or BellSouth FTTx (non-PON) deployments? IP over ATM over SONET? IP over PPP over SONET? Both? Neither?

materialgirl 12/5/2012 | 4:02:45 AM
re: Will AT&T Become Ma Video? Dear Alcaseltzer,
My comment about making money in movies was broder than you took it. As a LA refugee, I got a smell of the production business. It really stinks, too, IMHO.

Whether you are producing content, or trying to make a buck distributing someone else's, this is no game for beginners. It looks attractive, but is really easy to lose your shirt.

The telcos seem interested in distributing video because they are running from the end of voice, not because they understand how to make money in video. This attempted hijacking of our bandwidth infrastructure for a fundamentally failed revenue model is the problem.
alcaseltzer 12/5/2012 | 4:02:46 AM
re: Will AT&T Become Ma Video? seven,

If anything, I think you re-inforce my point about it not all being bad for Tellabs. I think what you're saying is that FTTC offers better opportunity for more bandwidth to the sub.

But what I was really getting at is that FTTN (SBC) and FTTC (BS) are much more alike to each other than either is to FTTH (VZ) and much more alike philisophically than some LR journalist might think at first.
nwave 12/5/2012 | 4:02:50 AM
re: Will AT&T Become Ma Video? Cable companies not scared by this had better wake up and smell not just the coffee, but the cyanide. Outfits like Cox that acquired the right to buildout entire areas with cable only just lost the monopoly- WiMax will allow telcos to reach subscribers with a plug-in desktop box, no inside wire needed.

I think the cable companies are already smelling this "death to telcos" wireless technology.
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