The New AT&T is No Cable Killer

Five years ago AT&T was America's largest cable TV provider following Ma Bell's purchase of TCI and MediaOne. That effort crashed and burned, of course, and Comcast snatched up AT&T Broadband to become cable's top dog. Funny how what goes around comes around. Now, the conventional wisdom is that the new AT&T -- the mongo telco forged through the teaming of SBC, Bell South and Ma Bell -- is poised to become a 'cable killer.' The combined company will count over 69 million local telephone lines, 30 million long distance customers, 54 million wireless customers, and a market cap larger than the entire U.S. cable industry. That's a gazillion ton gorilla, alright. One that is poised to squash the cable bananas, right? Well, not exactly. Comcast COO Steve Burke was dead on when he told the Wall Street Journal yesterday 'There's not a thing that they can offer that we can't offer to our customers as well." Unfortunately for AT&T, they cannot say the same. You see, AT&T's much famed Project Lightspeed, which aims to bring IPTV to millions of homes in the coming years, has an Achilles heel: bandwidth. Rather than invest in fiber to the home, AT&T is trying to deliver broadband on the cheap by squeezing TV, Internet and telephone service over a skinny 20 Mbps pipe. Before Lightspeed is fully deployed, MSOs will be selling Internet services alone that exceed 20 Mbps and can easily match the features of any IPTV offering. And while that game plays out over the next few years, MSOs will continue to add more than 8,000 IP phone customers per day, cutting into Ma Bell's core business. Where cable is most vulnerable; however, is in wireless. Through its acquisition of BellSouth, AT&T will assume complete control of Cingular, the largest U.S. mobile provider. Time will tell whether MSOs will be able to match AT&T's 'quad-play' capabilities through their Sprint Nextel joint venture. Whatever the outcome, AT&T's broadband assault is great news for cable industry vendors, the arms merchants for this massive battle.