16-02-2016, 16:05 #1
[EN] AT&T Exiting the IPTV Business2/16/16
Ever since AT&T acquired DirecTV, the idea of AT&T exiting the IPTV business has been a subject of debate. AT&T has invested billions in their U-Verse platform, which powers their U-verse TV IPTV service. Will they walk away from it and focus all of their video efforts through DirecTV?
If you believe a Bloomberg Business report, the answer is yes. Bloomberg is reporting the decision has already been made and AT&T is actively in U-verse TV shut down mode.
“AT&T Inc. is phasing out the U-verse TV service as it pushes new customers to newly acquired DirecTV, a sign the company is giving up on once-heralded plans to compete head-on with cable through telephone lines,” reports Scott Moritz of Bloomberg Business.
[B]AT&T Exiting the IPTV Business[/B
According to the Bloomberg report, AT&T has stopped buying U-verse TV set-top-boxes and is pushing new TV customers to DirecTV. The report says existing U-verse TV customers will be able to retain the service, but there will be no new sign-ups.
If true, one has to wonder how long AT&T will continue to support U-verse TV. There has been no official word from AT&T on U-verse TV plans. A visit to AT&T’s website today still displayed U-verse TV options, although it’s clear that DirecTV is getting top billing.
The move makes business sense. It’s incredibly difficult to support one video platform at scale, much less two. AT&T stands to save billions annually by exiting IPTV. Bloomberg reports they will shift their focus to a home gateway that delivers a broadband and video bundle, with video delivered via satellite.
By removing video off their access network, they stand to have the capability to dramatically increase the broadband speeds they can offer and better compete with cable broadband. AT&T is also reportedly pursuing a mobile video strategy as well, using DirecTV and other video content. They also have been eyeing an OTT play. They intend to be a player in video, but perhaps not through their legacy U-verse IPTV network.
Assuming AT&T follows through as Bloomberg reports, it’s somewhat of a blow to the IPTV ecosystem. AT&T is one of the largest pure-play IPTV providers in the world, and the largest in North America. Losing a major player like that has implications for the entire ecosystem.
It will be interesting to see the impact of this on CentruryLink, who uses virtually the same IPTV platform as AT&T. As a result, CenturyLink was able to enjoy better economies of scale. Ericsson provides the middleware for both AT&T and CenturyLink and they are working with AT&T on a new video platform that will emphasize DirecTV. Perhaps that collaboration will allow Ericsson to continue to support both.
16-02-2016, 16:13 #2
AT&T Takes U-Turn on U-Verse as It Pushes Users Toward DirecTV
February 16, 2016
- Service lost 240,000 TV customers as more shifted to satellite
- Company develops hub plan to consolidate all video offerings
AT&T Inc. is phasing out the U-verse TV service as it pushes new customers to newly acquired DirecTV, a sign the company is giving up on once-heralded plans to compete head-on with cable through telephone lines.
The biggest U.S. pay TV provider has stopped building U-verse set-top boxes and is nudging prospective customers toward its satellite unit, which has lower hardware and programming costs. The shift is the first stage of a plan to create a “home gateway” within three years that will consolidate all AT&T services and act as a central hub to deliver video to any device.
“AT&T is going to actively get out of the U-verse business,” said Chris Ucko, an analyst with CreditSights Inc.
The de-emphasis of U-verse underscores AT&T’s promise to squeeze $2.5 billion in annual cost savings from its purchase of DirecTV last year. The provider is under pressure to improve profit margins amid a wireless price war. It also faces $22 billion in capital spending, an estimated $10.6 billion cost to acquire new airwaves, about $6.5 billion in debt maturities and an $11 billion dividend this year, all while working to improve its credit rating.
Current U-verse subscribers will be able to retain the service, and AT&T is even
offering new promotions to those who keep it. But new customers are being directed by its marketing department to choose the satellite package.
The shift to DirecTV was reflected in fourth-quarter results. U-verse subscribers fell 4 percent, the worst loss ever, as 240,000 customers canceled service, the company said. And while DirecTV gains of 214,000 customers almost offset the loss, U-verse defectors helped pump up cable TV growth. Comcast Corp. had its biggest user gain in eight years.
AT&T says that while it’s focusing on DirecTV, it isn’t shutting down U-verse.
“To realize the many benefits of our DirecTV acquisition, we are leading our video marketing approach with DirecTV,” said Brad Burns, an AT&T spokesman. “However, our first priority is to listen to our customers and meet their needs, and if we determine a customer will be better served with the U-verse product, we offer attractive and compelling options.”
At its start in 2005, U-verse was hailed as a breakthrough product that was shepherded through development by Chief Executive Officer Randall Stephenson before he took the top job. Designed as an improvement from the dial-up Internet era, it offered faster, souped-up DSL -- or digital subscriber line -- service that carried both TV programs and broadband access.
U-verse, along with Verizon Communications Inc.’s FiOS, gave the phone companies the ability to offer a bundle of TV, phone and Internet services to chip away at cable’s dominance. By 2007, AT&T was touting U-verse’s picture quality and the higher number of HD channels it had compared with cable.
Unlike FiOS, which connected homes with super-fast fiber-optic lines, U-verse took a lower-cost approach by taking fiber cables to a neighborhood and then connecting them to existing copper lines that reach into homes.
At its peak in 2014, U-verse had 6.1 million TV subscribers. AT&T lists 21 states where it’s available. U-verse was never sold nationally and steered clear of the Northeast, where Verizon maintains a FiOS stronghold.
“I don’t think it worked really well to deliver high-end broadband and video over copper lines,” Ucko of CrediSights said. “DirecTV gives them a better way to deliver video.”
With DirecTV, AT&T gets a national TV offering and lower programming costs. DirecTV’s 20 million subscribers give the parent company greater leverage in negotiations with media companies at a time of rising programming fees. Content costs are about $17 a month higher for U-verse customers than for DirecTV subscribers, Chief Financial Officer John Stephens said at an investor conference in November.
“The lower content costs makes DirecTV customers more profitable,” said Jennifer Fritzsche, an analyst with Wells Fargo Securities LLC. And if the TV feed can move to satellite, it takes the data traffic load off the U-verse broadband pipe, she said. “Then AT&T can sell faster broadband speeds for higher prices.”
AT&T is hoping to combine its services -- Internet, satellite TV and wireless -- into one home device. As a potential part of that plan, the company is investing in GigaPower, a direct fiber-to-the home connection targeting 38 cities in 20 states. Because not all homes will get fiber, AT&T is developing a single-layer multipurpose hub that will use various inputs to send Web-based streaming video, on-demand shows and live programs to home TVs and mobile devices.
U-verse, which is a vestige of the copper-wire era, may not fit that picture, says Wells Fargo’s Fritzsche.
“U-verse was a first step; it wasn’t a mistake,” she said. “It got broadband into the home, but the future is fiber.”