AT&T Broadband last week abruptly killed a controversial $75 access fee that it planned to charge Seattle customers who sign up for premium cable high-definition TV services.
"The Seattle launch is still going ahead, but without the fee," AT&T Broadband spokeswoman Tracy Baumgartner said last Wednesday, after a reporter called for an explanation of the levy.
Since April, FCC chairman Michael Powell has been leaning on cable and other industries to expose consumers to HDTV in a financially friendly fashion.
When word of AT&T's HDTV access charge reached the agency, the reaction was decidedly negative. One FCC source called AT&T's access fee "outrageous" and "a stupid thing to do."
Another FCC source, who asked not to be identified, also expressed surprise at AT&T's move, given Powell's close attention to the digital transition and his emphasis on HDTV programming.
AT&T Broadband is the largest U.S. cable company, with 13.2 million subscribers. It has agreed to merge with Comcast Corp. to form a 22-million subscriber giant.
FCC approval of the merger is expected shortly. It was unclear whether merger politics factored into AT&T's decision.
In May, AT&T Broadband introduced HDTV for the first time in Chicago, providing local affiliates of CBS, Fox and NBC and high-definition versions of Home Box Office, Showtime and Discovery Channel. It did not charge an access fee.
Comcast has rolled out HDTV in a few markets, but with no access fee.
In an Oct. 22 announcement, AT&T Broadband said it would start offering HDTV to 850,000 Seattle homes in the following week, beginning with HBO and Showtime. Local TV stations would be added in a few months, the company said.
The novel HDTV access charge surfaced just four days after parent AT&T Corp. filed an FCC petition seeking relief from another kind of access charge. AT&T said it wanted an exemption from paying per-minute access charges to the Baby Bell phone companies for its Internet-protocol phone traffic. An agency decision is pending.
Under AT&T's HDTV plan, a Seattle customer would be required to subscribe to basic cable and digital cable, as well as HBO and Showtime, to qualify to receive the two premium networks in high-definition format.
Although AT&T isn't collecting a monthly HDTV programming fee, it is charging $4.80 a month for an additional sidecar converter. In a few weeks, digital subscribers can drop one of the boxes and rent an integrated DTV-HDTV box for $4.80 a month.
Early last Wednesday, AT&T spokesman Steve Kipp described the $75 charge as "a one-time fee for the provisioning for nonregulated services."
Later in the day, Baumgartner said the company had been struggling to come up with HDTV fee models that reflected the format's burden on channel capacity.
"We haven't figured out how to price this bandwidth-intensive and complex service," she said. "We are planning to take more time to think through the concept of access fees."
AT&T never planned to charge any access fee for local TV stations carried in HDTV. Nor will customers be required to purchase a digital tier or premium networks to receive local HDTV signals.
"When we get to the local channels, we would not charge this fee," said Kipp. "And you would not need to have digital cable."
When Powell unveiled his DTV plan in April, he was silent on HDTV subscriber charges. But the thrust of his plan was for cable operators, direct-broadcast satellite carriers, broadcast networks and local TV-station owners to deliver as much HDTV programming as possible to stimulate consumer demand for the technology's dazzling digital pictures.
The Seattle rollout is in keeping with a promise made by the 10 largest cable companies in May to carry up to five HDTV services — cable or broadcast — by Jan. 1, 2003 on their large-capacity systems, Kipp said.
Kipp added AT&T's initial decision to charge an HDTV access fee for HBO and Showtime, but waive it for local HDTV programming, was consistent with the Powell plan.
"We want to be consistent and we think it is consistent with his voluntary plan," Kipp said.