Summary
The new offer of AT&T Entertainment will engage TV viewers, but cable MSOs still own the customer for home TV and the Internet connection.
Analysis
The launch of AT&T Entertainment delivers TV to computers and mobile devices to bolster AT&T’s “three-screen” strategy. And like free Hulu video, AT&T Entertainment is open to everyone and not just its customers. AT&T might engage TV viewers at the Web site, but how is the engagement monetized into retaining home connections and selling mobile broadband. AT&T has been emphasizing its total broadband customer count instead of just DSL connections. For the recent second quarter, AT&T reported adding broadband connection of wireline and wireless laptop cards to be 209,000 customers. The total of second quarter broadband connections was 16.9 million at half year compared to 16.3 million at the 2008 year end. Laptop air cards have been disconnected with job losses, and cable triple-plays have disrupted AT&T’s 2007 pace of adding a half million DSL in a quarter.
The net adds for Comcast and Time Warner Cable weakened in the second year from a year ago, but both increased revenue and profit increases with a focus on premium video. And Comcast just successfully appealed the 30% cap per market. The rumors of AT&T buying DirecTV seem groundless as the satellite TV results are mixed. For the last quarter, DTV’s 17% increase of net adds were contributed to AT&T co-branding and wireline bundling in the call centers. Meanwhile, DISH’s gross subs only fell 3% to 731,000 from a year ago when 17% were from AT&T. Before buying DTV, AT&T has to wait about a year to test the churn of the new DTV customers. The risk is AT&T takes ownership of DirecTV, and does not own the customers long enough for “three-screen” services. And AT&T is fighting the CapEx constraints of building U-Verse and overlaying the 850 MHz spectrum to satisfy Apple customers of the iPhone. Additionally, fewer cities are approving the neighborhood nodes for U-verse and demanding compliance with codes for underground utilities. Verizon’s FiOS of fiber to the home (FTTH) appears to be the roadmap for a telco to own TV customers.
Gregg Kail consults with leading institutions through GLG
Analyses are solely the work of the authors and have not been edited or endorsed by GLG.
