x
DSL/vectoring/G.fast

U-verse Expands But Can't Outgrow Its Critics

What does AT&T Inc. (NYSE: T) U-verse have to do to get a little respect?

Apparently growing much faster than cable doesn't cut it, because even as AT&T is blowing its horn as the fastest-growing TV service in the U.S. for 2010, industry analysts are still seeing speed bumps ahead for U-verse. Their criticism is familiar: It's all based on AT&T's fiber-to-the-node technology that ultimately depends on twisted pair phones lines to deliver video.

According to AT&T, U-verse added 1 million customers last year, even as major cable companies were losing about the same number of customers. AT&T now has 3 million total U-verse households, and claims its market penetration rates continue to rise.

"We are seeing penetration rates in existing markets rise," says G.W. Shaw, executive director of U-verse product management for AT&T. "Obviously that happens the longer we are in a market and awareness grows, but we also see the penetration happen faster and earlier in the life of new markets."

To date, those customers are largely disgruntled cable users, says Adi Kishore, Heavy Reading analyst, "and they are running out of that pool of unhappy customers."

Generally speaking, the North American market for pay TV is saturated, Kishore adds, which means cable, telco and satellite companies are largely swapping customers back and forth.

AT&T has some advantage over cable and satellite today because of features it offers, namely a multi-room DVR, but that advantage will disappear later this year, says Stephen Froelich, senior analyst in IMS Research 's Consumer Electronics Group.

"They can't continue at the current pace," Froelich says. "They have a fundamentally limited platform compared to anything that is cable based -- whether it is fiber-to-the-home like Verizon Communications Inc. (NYSE: VZ) or HFC. More fundamentally, the cable guys are ready to respond -- the boxes are ready, the software is in final approval. Most cable guys they are up against are going to have real responses."

That cable response will include multi-room DVR capability that will outstrip the limits of what AT&T can offer over U-verse, because of the limits of copper, particularly to houses with multiple HDTVs.

"U-verse can only do three simultaneous streams for the DVR, one being DVR itself, and it maxes out at seven programs -- four live and three recorded," Froelich says. "Compared to Verizon and where Comcast Corp. (Nasdaq: CMCSA, CMCSK) will be later this year and compared to where DirecTV Group Inc. (NYSE: DTV) should be able to be, it is limited."

AT&T has more HD programming that its rivals, at least according to Shaw, with 155 HD channels. It can deliver up to three HD streams at one time, depending on the customer's distance from the fiber node or VRAD, with some customers only getting two HD channels at once.

That might not cut it in multi-TV homes, Froelich says. Verizon has reported serving some homes with as many as 12 TV sets over FiOS. That's not something AT&T could do.

AT&T has faced this kind of criticism since U-verse's inception, Kishore concedes.

"There's always been a little cloud that is following them, wondering when they are going to run out of capacity," he says. "In their defense, at every step, they've done it, even when it's been a bit of a balancing act. They have been able to find ways to expand access bandwidth without going to FTTH."

Kishore credits both AT&T and Verizon with developing advanced features for their video services, but, like Froelich, he sees cable responding. (See AT&T U-verse Mobile Wins at TelcoTV and AT&T U-verse Launches 'My Multiview' App)

AT&T won't release the current throughput on its FTTN system, Shaw says, nor will it talk about churn of new customers once its aggressive introductory pricing plans expire, other than to say there is no large spike of disconnects. That's often because customers who buy IPTV also buy phone service, wireless service or broadband service and are less likely to churn easily.

And that is the true future for all paid TV operators, Froelich says.

"Paid TV becomes the loss leader," he says. "Your operator will sell you TV at a reasonable loss as a customer retention plan for Internet and telephony."

So if U-verse can't continue growing, the losses to AT&T will be felt in its broadband, wireless and home phone service sales, according to Froelich.

— Carol Wilson, Chief Editor, Events, Light Reading

Page 1 / 3   >   >>
cnwedit 12/5/2012 | 5:10:10 PM
re: U-verse Expands But Can't Outgrow Its Critics

Normally I'd agree, but right now each of the 12 TVs in my house is tuned into a different college basketball game.

Pete Baldwin 12/5/2012 | 5:10:10 PM
re: U-verse Expands But Can't Outgrow Its Critics

Even if there are 12 people living in the house, that seems like a bit much.

OldPOTS 12/5/2012 | 5:10:08 PM
re: U-verse Expands But Can't Outgrow Its Critics

All my 8 tvs are tuned to basketball except one. TWC hasen't been able to deliver 'truTV' for days on any TV.


But TWC has to check my home wiring first even though 'truTV' isn't available at the home entry point.


But who do you turn to??? Next week is too late.


OP


 


Replays only?

DCITDave 12/5/2012 | 5:10:07 PM
re: U-verse Expands But Can't Outgrow Its Critics

Two things could change the face of a service like U-verse...


1) A networked DVR service


2) The ability to watch network DVR-recorded shows via any device on the home network


If those two services launched tomorrow I'd pay extra. Also, AT&T wouldn't have to worry about having as much hardware in my house, nor would the streams per TV be as much of an issue.


It's stunning that AT&T hasn't been more aggressive here given the bandwidth constraints of the U-verse network. Seems like putting those two things together would have AT&T rocketing ahead of the competition in most markets.

AnkurChadda 12/5/2012 | 5:10:07 PM
re: U-verse Expands But Can't Outgrow Its Critics

A few months ago they randomly increased service charges for both TV and internet for the same channel lineup and internet speed. Maybe we are seeing the end of unlimited data usage given the Over-The-Top options consumers get. But if there is some provider who is ready to do it, it can hurt AT&T.

cnwedit 12/5/2012 | 5:10:06 PM
re: U-verse Expands But Can't Outgrow Its Critics

Wouldn't a networked DVR service still be limited in what it could deliver by the available bandwidth? Locally stored content seems to favor AT&T's approach, especially as the cost of storage drops.

paolo.franzoi 12/5/2012 | 5:10:03 PM
re: U-verse Expands But Can't Outgrow Its Critics

Carol,


Yes a very active DVR with a better pre-download would be much better for U-Verse.  Since the shows are actually completed well before they are broadcast, they could be slow downloaded to the boxes that subscribe to that show with an unlock that at a later date.  If the DVR was smart, you could use a Hulu style playback that required you to listen to the commercials.  That would overcome the ad problem with DVRs.


 


seven

Duh! 12/5/2012 | 5:10:03 PM
re: U-verse Expands But Can't Outgrow Its Critics

Why would you be surprised that there might be outliers at a few St.D from the median (which I think was 3.something)?  A 15,000 sq.ft (that's right, 15 thousand sq. ft, or 1394 sq. M) home is being built in my town for a wealthy money manager.  I've forgotten how many rooms, other than to note wretched excess.  It would be surprising if there were only 12 TVs in the place.   This was one of the earlier FiOS towns, and the owner's choice is FiOS or Comcast.


 

cnwedit 12/5/2012 | 5:10:01 PM
re: U-verse Expands But Can't Outgrow Its Critics

AT&T disagrees  with this article. Here is their response:

We saw your story and wanted to clarify a few things and also respectfully disagree with some of the analysis especially from Mr. Froelich. 






 

First, you quoted him saying:

“U-verse can only do three simultaneous streams for the DVR, one being DVR itself, and it maxes out at seven programs -- four live and three recorded," Froelich says. "Compared to Verizon and where Comcast Corp. (Nasdaq: CMCSA, CMCSK) will be later this year and compared to where DirecTV Group Inc. (NYSE: DTV) should be able to be, it is limited."





 

Clarification: U-verse Total Home DVR can record up for four shows at once. Most DVRs today can only record up to two. That’s more than our competitors’ DVRs, not limited.

 

He also said: "They can't continue at the current pace," Froelich says. "They have a fundamentally limited platform compared to anything that is cable based -- whether it is fiber-to-the-home like Verizon Communications Inc. (NYSE: VZ) or HFC. More fundamentally, the cable guys are ready to respond -- the boxes are ready, the software is in final approval. Most cable guys they are up against are going to have real responses."

 

We wanted to add that this assumes that we’re going to stand still while the cable guys play catch up. We launched Total Home DVR more than two years ago and, as you note, some of our competitors are still readying their answer. In the meantime, we’re constantly adding new features and capabilities to stay far ahead of our competitors. Our IP platform allows us to roll out new capabilities to customers seamlessly, overnight, as we’ve shown with the more than 25 apps we’ve made available on U-verse. They’ll always have a higher bar to try and meet.

 


Lastly, “So if U-verse can't continue growing, the losses to AT&T will be felt in its broadband, wireless and home phone service sales, according to Froelich.”


 

We disagree.  The article and analysts quoted fail to mention reasons that U-verse wouldn’t continue to grow and more important ignored the facts about our track record of growth, which happens to be the strongest in the industry. U-verse is transforming AT&T’s consumer wireline business. Consider  that as of 4Q:

·         IP revenues now represent 45 percent of AT&T's consumer wireline revenues, up from 35.3 percent in 4Q09.

·         Increased U-verse penetration drove 28.5 percent year-over-year growth in IP revenues from residential customers.

·         ARPU for U-verse triple-play customers continues to increase and was more than $160 (4Q).

·         We have high attach rates, with more than 90 percent of U-verse TV customers bundling U-verse Internet and more than 75 percent of U-verse TV customers with a triple- or quad-play.

·         AT&T U-verse services are now approximately an annual $5 billion run-rate business.

DCITDave 12/5/2012 | 5:10:00 PM
re: U-verse Expands But Can't Outgrow Its Critics

AT&T does a great job arguing that its service isn't limited by its physical plant, but what are its plans for offering greater upstream bandwidth?


Camera sensors, megapixel counts, HD recording devices, video-enabled social networks, etc. all demand that service providers provide a robust two-way connection to homes. Hardly any of them do and the ones on the old copper network simply can't.

Page 1 / 3   >   >>
HOME
Sign In
SEARCH
CLOSE
MORE
CLOSE