AT&T Picks Best Buy for Retail Test

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AT&T Broadband & Internet Services is testing sales
of its "AT&T Digital Cable" service through four Pittsburgh-area Best Buy
stores, the companies said last week.

Best Buy is not yet stocking digital-cable boxes, but is
offering a $19.95 "Digital Cable Starter Kit," which includes free installation,
one free month of AT&T Digital Cable and a $50 Best Buy gift card for subscribers who
keep the service for three months.

AT&T Broadband senior vice president of marketing Doug
Seserman would not disclose details of the business agreement with Best Buy, but said the
retailer would receive a margin from the sale of the starter kit, plus repeat business
from customers who return to the stores with their gift cards.

The retail-business model is still in the test phase,
Seserman added.

Programming packages for the service start at $56.95 per
month, including rental of the remote control and digital receiver. AT&T Broadband
still handles installation for the service, but consumers can choose their own
installation date while at Best Buy, as long as it's at least three days away.

"We're right there next to DirecTV [Inc.],"
AT&T Cable Services Pittsburgh metro marketing manager Beth Patterson said. "Now
consumers see that we're an option."

Through the test with Best Buy, AT&T Broadband hopes to
learn whether customers who sign up for the digital-cable service came into the store with
the intent to buy, or whether they made the decision while looking for a television, VCR
or direct-broadcast satellite system.

Cable & Telecommunications Association for Marketing
president Char Beales said it makes sense for operators to be visible in locations where
their subscribers are making decisions "to stay with you or go to the competition. If
you're not there, then [retail sales associates] will have every incentive to sell the
customer something else."

In its move to retail, AT&T Broadband is
"essentially piggybacking on DirecTV's promotions," Tellus Venture Associates
president Steve Blum said. "They're convincing an awful lot of people to go down to
retail to shop for digital television."

DBS providers DirecTV and EchoStar Communications Corp.
expressed no immediate concern over cable's head-to-head competition.

"We think our product stands up very well against any
digital-cable product available," DirecTV spokesman Bob Marsocci said. "We're
100 percent digital, and we offer more pay-per-view channels and exclusive sports
programming."

Even though EchoStar's Dish Network products are not sold
through Best Buy, EchoStar spokesman Marc Lumpkin said cable's move to retail will help
encourage cable customers who hear about digital television to look at all of the
alternatives.

"We know consumers shop around," Lumpkin said.
"They'll see that our prices are so much less expensive that they'll choose us."

"We feel very confident that when consumers compare
digital cable with satellite, they'll see that cable is a tremendous value," Seserman
said. "Getting into retail is all about consumer choice."

Dove Associates managing director Bob Davis said cable
operators must learn to "play the retail game" in order to compete against DBS.
Cable's competitors have already learned to pay for retail shelf space, end caps, in-store
merchandising and sales training, he added.

AT&T Broadband's first newspaper ads for the Best Buy
digital-cable trial ran over the weekend in the TV Weekly guide in the Sunday Pittsburgh
Post-Gazette. Early next month, Best Buy will promote the trial in its weekly advertising
circular.

Yesterday (Oct. 31), AT&T was scheduled to send
representatives to each of the four Pittsburgh test stores for the first of the monthly
"Live Demo Days" suggested by Best Buy.

The retailer demonstrates AT&T Digital Cable in Best
Buy's "high-touch" section, which also includes products that require a thorough
sales pitch, like DirecTV and WebTV Networks.

Two of the Best Buy stores have live demonstrations wired
to cable, and the other two use DVDs with clips of available programming.

Pittsburgh was chosen for the tests because 75 percent of
AT&T Broadband's local operations have deployed digital, and the MSO controls a large
majority of the market, Patterson said.

Retail is not an entirely new concept for cable operators,
but it's likely to represent a growing trend, especially as the industry prepares to meet
government mandates that set-tops be distributed at retail next summer.

AT&T Broadband is already selling digital-cable service
through seven AT&T Wireless Phone stores in Salt Lake City. Comcast Corp. demonstrated
its cable services at a Philadelphia-area wireless phone store before selling off its
cellular-phone business. And a number of operators are selling cable-modem service - and
hardware, in some cases - through retail.

Best Buy is not marketing the AT&T@Home cable-modem
service in Pittsburgh. Patterson said local CompUSA stores display AT&T@Home, but no
sales associates are involved. Customers who are interested in the service pick up a phone
at the display that connects them with an AT&T call center.

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