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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

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....

OZIP
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"

OZIP
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.

seven
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?

RTL
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.
http://arstechnica.com/news.ar...
http://www.redherring.com/Arti...
Obewan 12/5/2012 | 4:02:52 AM
re: Will AT&T Become Ma Video? All,

BS FTTC placements were as small as 4 to 6 homes models, one reason was a rational because of drop distances for coax drop and the buried TWP drop wires routing issues.

Nodes (Distribution Areas) vary in average and peak lengths dramatically as one moves from studying urban, suburban and rural OSP densities.

Add to this the sizes vary from 200 pairs to 2400 pairs on the DA side of the SAI (SAC)
Such a challenge that any VDSL1 and VDSL2 will be operation in ADSL2+ mode often enough to limit the ubiquitous approach because G.bond only partially addresses this.

7330 has 7 gig-E back to the office

Next Level was a more intermediate to these two architectures like a Fiber to the Gutter FTTG (one step back from the curb).


Anyone care too expand on this some more?
paolo.franzoi 12/5/2012 | 4:02:53 AM
re: Will AT&T Become Ma Video?
Alcaseltzer,

You have some things right and some things wrong.

FTTC today does run RF video overlay in some properties in BellSouth. Tellabs was awarded the IPTV deployment of FTTC.

Now, then you compare FTTN and FTTC. In FTTC, by the FCC rules the maximum distance to a home is 500 feet. From the discussions on Lightspeed, the distance to the home will be 3 - 5 Kfeet. If you look at a distance chart, you will see that train up rates for VDSL2 are very different at 3Kft than they are at 500 feet. Additionally, you have an ONU size difference. In FTTC, there are 10 - 15 homes passed per ONU. In FTTN, its in the 100s (as I recall SBC wanted modular 100 - 400 lines for FTTN). So, uplinks to get to the same deployed bandwidth per subscriber are very different. At 10 homes passed a GigE gives 100Mb/s per subscriber. Divide that by 10 for FTTN.

Finally, Video over DSL at 3 - 5 Kfeet has been done before in the US in a major metro by an RBOC. Okay, Qwest (sort of an RBOC) using Next Level equipment did its Phoenix deployments and Denver trial using that equipment. AT&T will be deploying some additonal bandwidth, but it will be interesting to see if they learned anything from the US West experience.

seven
Grazer 12/5/2012 | 4:02:54 AM
re: Will AT&T Become Ma Video? AT&T had already run numerous tests of the WiMax protocol. Cingular has cell sites in a lot more than the 22 states that at&t will cover after the addition of BellSouth. Cingular is very well positioned with spectrum licensing; WiMax could be provisioned at existing cell sites with the Light Fiber Optic backhauls that already exist or will shortly exist due to SBC's Project LightSpeed initiative. Of course, the huge fiber assets of the original AT&T are available all over the planet to accomplish the same thing. The 802.16 fixed standard can support 150 mb/s; I'd say that qualifies as broadband, right? That's enough bandwidth to support hdtv, voice, and data at the same time- way beyond the needs of most customers. Intel rolls out the supporting laptop chipset later this year. Cell phones will natively support Wi-Fi voip shortly. Wi-Fi sites can use WiMax backhauls (some already do). It all comes together nicely. 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. Put the phones anyplace in the house, likewise the computer- all wireless. Telco technicians in data transport, installation and repair, cable maintenance and other wireline related jobs should brush up their interview skills or retire asap. WiMax has a 30 mile line-of-sight range; supposedly it does about 8 through hills and trees. By the way, anyone who thinks the price for BellSouth was too high should think again- getting complete control of Cingular's assets was the last element required for at&t's incipient reinvention of telecommunications. Video is the least of it.
rjmcmahon 12/5/2012 | 4:02:55 AM
re: Will AT&T Become Ma Video? The question is whether people at home consume it on their PC (Yahoo! Internet) or on their TV (Lightspeed.)

My TV is connected to cable which is in turn connected to Comcast's network. I don't think project lightspeed is offering TV service in the area. How many homes are connected to lightspeed?

I don't watch TV on the PC but notice that there are people downloading shows from itunes for $1.99 an episode. I guess many of these folks are watching these shows on their PC. Probably not enough revenue there to pay for SBC's outside plant upgrades though.
alcaseltzer 12/5/2012 | 4:02:55 AM
re: Will AT&T Become Ma Video? Ok, I'll confess, I haven't watched any exclusive Yahoo!/SBC DSL video content in the past _6 days._


But Yahoo producing content for delivery over the Internet is not necessarily the same as SBC producing content for delivery over Lightspeed or Yahoo producing content on behalf of SBC for delivery over Lightspeed. The question is whether people at home consume it on their PC (Yahoo! Internet) or on their TV (Lightspeed.)

But that being said, it's well-known that producing content (either for television or for the big screen) is a game for deep pockets. But the original question as I recall was about exclusive licensing of original content, not producing it.

rjmcmahon 12/5/2012 | 4:02:56 AM
re: Will AT&T Become Ma Video? I thought Yahoo was scrapping the idea of producing original programming.

New York Times
March 2, 2006
Yahoo Says It Is Backing Away From TV-Style Web Shows
By SAUL HANSELL

After proclaiming grand plans to bring elaborately produced sitcoms, talk shows and other television-style programs to the Internet, the head of Yahoo's Media Group said yesterday that he was sharply scaling back those efforts. He said the group would shift its focus to content acquired from other media companies or submitted by users.


Also, Intertainer ended up as a company without any content. http://www.intertainer.com

Sept 2002
Intertainer files Anti trust action against Sony, Time Warner, Universal and Movielink. The company shuts down its VOD service.
rjmcmahon 12/5/2012 | 4:02:56 AM
re: Will AT&T Become Ma Video? I thought Yahoo was scrapping the idea of producing original programming.

New York Times
March 2, 2006
Yahoo Says It Is Backing Away From TV-Style Web Shows
By SAUL HANSELL

After proclaiming grand plans to bring elaborately produced sitcoms, talk shows and other television-style programs to the Internet, the head of Yahoo's Media Group said yesterday that he was sharply scaling back those efforts. He said the group would shift its focus to content acquired from other media companies or submitted by users.


Also, Intertainer's fate ended up with a dead company and a law suit. www.intertainer.com

Sept 2002


alcaseltzer 12/5/2012 | 4:02:57 AM
re: Will AT&T Become Ma Video? material girl jumps way ahead....producing content is a different game from signing license agreements for it. Although I would argue that ongoing Yahoo!/SBC DSL exclusive video events are trial balloons for producing exclusive video content.

As for licensing, that strategy seems to be hinging on Ms. Friedlander. Her bio:

Amy Friedlander is a specialist in new media with years of experience in IP, video-on-demand, broadband content and technology ventures. Today, Ms. Friedlander is SVP, Programming for SBC Communications. As SBC enters the video market to compete with cable and satellite, Amy will oversee interactive programming, convergence with other SBC platforms, games and music on the new IPTV service.

Most recently, Ms. Friedlander headed a strategic consulting practice, Xanthum Partners, to help clients bridge the gap between content and technology. Working with telecoms, technology and entertainment companies, Xanthum Partners helped clients from around the globe with content strategy, negotiation and acquisition, and programming and packaging development.

Ms. Friedlander was previously General Counsel and SVP of Business Development for Intertainer, the first VOD service delivered over both broadband and cable. She was responsible for negotiating content agreements with the major studios and programmers, distribution agreements with cable companies and telcos, and general technology ventures. In the Business Development role, Ms. Friedlander was responsible for international development and led her team to implement Intertainer's strategy related to content distribution and software services. In addition, she counseled the Company on new media issues and helped the company raise over $100 Million from companies such as Microsoft, Comcast, Intel, Qwest, Sony, NBC and Thomson Consumer Electronics.

Prior to her tenure with Intertainer, Ms. Friedlander practiced corporate law at Gibson, Dunn & Crutcher in Los Angeles. Ms. Friedlander holds a JD from the University of Chicago and a BA with honors from the University of Michigan.
materialgirl 12/5/2012 | 4:03:03 AM
re: Will AT&T Become Ma Video? As the saying goes: "The best way to make a small fortune in movies is to start with a large one."


These guys may have scale, but they have no idea how to program, and they are not about to learn while consolidating all these acquisitions. Any deals they make at the oustet will probably be bad for them.
alcaseltzer 12/5/2012 | 4:03:04 AM
re: Will AT&T Become Ma Video? Note that Bell South's video offering via FTTC is closer to Verizon's FIOS than SBC's Lightspeed. That is, it uses the overlay wavelength on Tellabs's, er, AFC's, er, Marconi's, er, Reltec's FTTC product.

Also note that the "N" in FTTN really means the SAI which is typically found at...the curb. So FTTN and FTTC are really not all that dissimilar. It might not be all bad news for Tellabs.

As for content, do providers really want to offer exclusives? Maybe small content providers can be muscled into exclusives, but the big gorillas won't be. Not to mention the content providers integrated vertically with the MSOs.
DCITDave 12/5/2012 | 4:03:05 AM
re: Will AT&T Become Ma Video? Does anyone else feel that AT&T is now in a much better position to make exclusive content deals for its IPTV, wireless, and broadband customers?

I guess one advantage of all this consolidation is it can bring a broader audience to content makers under one contract -- making deals sweeter and, maybe, driving adoption of new services.

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