AT & T Broadband took a major step toward fully embracing video-on-demand last week, when it signed a deployment deal with Diva Corp. for San Francisco, Los Angeles and Pittsburgh.
The rollout expands upon a Diva test in Atlanta that AT & T inherited from MediaOne Group Inc. It also signals the commitment of the industry's largest MSO to VOD.
"The Diva deployment marks another milestone in our efforts to respond to customers by making television viewing a more interactive, interesting and entertaining experience," AT & T Broadband CEO Daniel Somers said in a statement.
The MSO will take the entire Diva VOD hardware, software and content package. The contract also allows AT & T to take VOD content from In Demand for use on the Diva platform.
Both Diva and In Demand are trying to hammer out VOD contracts with the major Hollywood studios. Diva claims it has content deals with all players except for Paramount Pictures Corp.
"Moving forward, our affiliates are going to be announcing additional VOD arrangements with companies like Diva and Concurrent," said In Demand vice president of corporate communications Joe Boyle. "We are in the process of securing VOD rights for our affiliates for traditional movie offerings and for non-traditional programming, using a wide variety of sources, networks and outlets.
"Over time, it is contemplated, that the content now being provided by Diva and others to our owners will be provided by us," Boyle added.
The three AT & T markets comprise 600,000 homes passed. The company's digital penetration is about 15 percent for a potential VOD universe of about 90,000 digital boxes. But some of those set-tops are from the Motorola Broadband Communications Sector's "DCT-1000" and "DCT-1200" series, neither of which will carry VOD.
The Diva deployment is geared toward the Motorola DCT-2000, which AT & T will use for all new digital installations. The MSO is also switching out the older 1000 and 1200 boxes, and executives said that more than half of all deployed digital set-tops will be VOD capable by year-end.
AT & T is a relative latecomer to VOD, trailing deployments by Comcast Corp., Cox Communications Inc., Charter Communications Inc. and Time Warner Cable.
"We did a really sound job of business-case planning to determine, 'What is the business here?'" said AT & T Broadband vice president of new product strategy and marketing Theresa Conley.
"We know VOD is a very good business for us to go in," she said. "This has to do with adding value to the digital platform."
AT & T will install Diva's server and software system at the headend. Enabling VOD requires a simple software download to the DCT-2000, Conley said.
Subscribers will have full pause, rewind and fast-forward capabilities, she said.
Diva's server can store 2,000 movies and scales to deliver 20,000 simultaneous video streams. Movies flow from the server to Diva's "Digital Link," which converts the signal to RF for transmission to the set-top.
Pricing will be similar to AT & T's PPV movies, which sell for $3.99. But Conley hinted that the company would follow the value-added pricing models established in its digital tiers.
For instance, platinum subscribers may receive discounts on VOD titles. "We want to be creative with this," Conley said.
The Atlanta test has centered on the stability of the product and its full integration with Gemstar-TV Guide International Inc.'s electronic program guide, according to Conley.
Efforts in Atlanta will evolve into a commercial launch, Conley said, probably prior to launches in the East Bay San Francisco region; Westchester and Culver City, Calif., near Los Angeles; and Aliquippa, Baden, Carnegie and McKees Rock, Pa., near Pittsburgh.
Diva has also VOD deployments with Charter Communications Inc. in Los Angeles and Insight Communications Inc. in Atlanta.
"While deploying our technology commercially the past three years, we have seen the hardware and software costs come down significantly from the industry's earlier trials," Diva CEO Henk Hanselaar said. "Now we're seeing VOD help drive penetration of digital cable and generate incremental revenue."