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U-verse Overtakes FiOS

Alan Breznick
10/28/2013
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Maintaining its strong momentum in the pay-TV business, AT&T Inc. has surpassed rival telco Verizon Communications on the video front and is picking up steam on the biggest US cable operators.

In its third-quarter earnings report last week, AT&T Inc. (NYSE: T) said it signed up an impressive 265,000 new U-verse TV customers in the latest three-month period, up from 198,000 in the year-ago period and its second-best quarterly gain ever. With that increase, it reached nearly 5.3 million U-verse TV customers, putting it a notch ahead of Verizon Communications Inc. (NYSE: VZ)'s nearly 5.2 million FiOS TV customers.

Thanks to these latest gains, both AT&T and Verizon easily have more video subscribers than all but the two biggest US MSOs, Comcast Corp. (Nasdaq: CMCSA, CMCSK) and Time Warner Cable Inc. (NYSE: TWC). Both telcos also continue to pick up video customers at a much faster clip than cable operators, who, while still dominating the US pay-TV market with nearly 60 million video subscribers, have been struggling to stem the steady erosion of their core video customers over the last few years.

On the broadband front, AT&T also notched one of its strongest gains yet with its U-verse Internet service, even though the telco still offers much lower maximum data speeds than Verizon's FiOS Internet service or most major MSOs. The company reported a whopping net increase of 655,000 U-verse Internet subscribers in the third quarter as it continued to convert as many DSL customers as possible to the new hybrid fiber-copper platform.

Overall, though, AT&T still shed 26,000 wireline broadband subscribers as some of its DSL customers went elsewhere. So U-verse is largely just stemming AT&T heavy broadband losses, not increasing its high-speed data customer base.

Thanks to its latest gains, AT&T now boasts 9.7 million U-verse Internet subscribers, up 37 percent from a year earlier and well above Verizon's total of 5.9 million FiOS Internet subs. Factoring in its rapidly dwindling DSL base, AT&T has 14.7 million high-speed residential data customers, more than all US broadband players except Comcast. U-verse accounts for 59 percent of that total, up from 43 percent a year ago.

Overall, AT&T reported that 10 million of its customers now subscribe to either one or both of its main U-verse products. More than 90 percent of its new U-verse TV customers are signing up for both services as the telco aggressively bundles the two together. In addition, the company said, about 70 percent of U-verse TV subscribers are taking three or more of its consumer products.

Due to these gains, AT&T reported that total U-verse revenues climbed to $3.1 billion in the third quarter, up 28 percent from a year ago, as U-verse enjoyed its first $1 billion month. U-verse's residential products now account for 54 percent of the company's consumer wireline revenue, up from 43 percent a year earlier.

U-verse is also starting to make an impact on the commercial services front. AT&T said it added a record 97,000 business U-verse Internet subscribers in the third quarter as more customers signed up for such advanced IP services as VPN, Ethernet, and web hosting. However, the company's total revenues from business services slipped 2.6 percent to $8.8 billion over the summer, as its legacy products continued to sag.

— Alan Breznick, Cable/Video Practice Leader, Light Reading

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albreznick
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albreznick,
User Rank: Blogger
11/4/2013 | 9:17:46 PM
Re: Video gains--increasingly a rarity
I think you're right, Liz. Lots of folks are going the same way you are. I know that in my home we're going to be looking at that too, even though we now take 3 services from our cable provider (Rogers). It would be interesting to see how many others have fled the big, expensive providers for the cheaper, smaller, more service-oriented ones. Maybe we'll make that the subject of one of our future polls. :)    
Liz Greenberg
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Liz Greenberg,
User Rank: Light Sabre
11/3/2013 | 11:43:06 PM
Re: Video gains--increasingly a rarity
Believe it or not, I have never liked AT&T DSL service so I use a smaller local provider, Sonic.net, that rocks.  I have bonded DSL for up to 20 Mbps down and up to I think 6 up and I come close to that often.  It includes 2 POTS lines with DSLAM power.  So maybe some folks are going that route and just saying bye-bye to these guys and going with smaller, more nimble, more service oriented providers - only if you cut the TV cord of course, otherwise you still have some sort of cable service. 
albreznick
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albreznick,
User Rank: Blogger
11/3/2013 | 11:18:12 AM
Re: Video gains--increasingly a rarity
Yeah, Liz. Thanks for the info. That seems pretty clear. What I wonder is where the DSL customers that  they're not converting to U-verse are going. Which cable operators, if any, are gaining at AT&T expense? Any thoughts there?
Liz Greenberg
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Liz Greenberg,
User Rank: Light Sabre
11/1/2013 | 3:35:27 PM
Re: Video gains--increasingly a rarity
I bet that many of their DSL customers went to their Uverse service.  AT&T makes it a point of going door-to-door in my neighborhood everytime they do a Uverse upgrade.  They know exactly who is already a customer of theirs, what services the customer has and what savings they want to promote.  So my guess is that their customer retention is pretty high.
albreznick
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albreznick,
User Rank: Blogger
10/30/2013 | 3:05:06 PM
Re: Video gains--increasingly a rarity
True, Ping. And the two telcos are doing very aggressive price discounting now too. That can't help but aid their cause. They key is whether those customers stick around once the discounts end. 
sam masud
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sam masud,
User Rank: Light Sabre
10/30/2013 | 2:53:45 PM
Re: Video gains--increasingly a rarity
Don't the satellite guys want customers to sign a 2-year contract? That could put off a few people.
albreznick
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albreznick,
User Rank: Blogger
10/29/2013 | 6:12:02 PM
Re: Video gains--increasingly a rarity
You're right. They don't break down their DSL defections or say where they went. Would be fascinating to learn. 
albreznick
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albreznick,
User Rank: Blogger
10/29/2013 | 6:10:52 PM
Re: Real growth?
I agree that number seems high. Wish they broke it out further. Would be pretty revealing.
KBode
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KBode,
User Rank: Light Sabre
10/29/2013 | 8:35:20 AM
Re: Video gains--increasingly a rarity
"Good points. It's true that AT&T is largely trading DSL subs for U-verse subs. But it is making more money on those Uverse subs. So ARPU is definitely going up. Plus, it's gaining all these lucrative video subs. And it would have lost all those DSL subs eventually anyway. So I don't see a real downside for AT&T."

Yes, most of these DSL losses for AT&T and Verizon are quite intentional. For the most part they're users they really don't want as they work to gut regulations and try to exit markets they don't want to upgrade.

To my knowledge they don't break out the numbers detailing precisely how many DSL defectors upgraded to U-Verse?
KBode
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KBode,
User Rank: Light Sabre
10/29/2013 | 8:31:57 AM
Re: Video gains--increasingly a rarity
"So wherefore incumbent telco success? Is this a product of people wanting the Next Big Thing? Brilliant marketing? true differentiators that I've missed? Regardless, in a mature, saturated market it's always hard to take market share so hats off--they're doing something right."

I really think it's two things:

They really have done some innovative things on the set top box side that companies like Comcast are only just now starting to catch up with via the launch of the X1 and X2. FiOS's 1.9 IMG Set top upgrade was honestly the first time I saw users get excited about a set top software upgrade in my entire time watching the sector.

I also think, as somebody else notes, that people are so annoyed with years of poor customer service from cable companies that they're just willing to jump to ANYTHING, no matter what. I imagine you'll see some of that balance out as telcoTV grows and people realize it's all going to essentially be the same from a price and customer support perspective under duopoly.
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