U-verse TV Counts To A Million

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AT&T announced it has signed up its 1 millionth U-verse TV customer this week—reaching a goal the company set a year ago—although the IPTV service’s penetration rates have lagged those of its major telco peer, Verizon Communications.

U-verse TV, first launched in San Antonio in June 2006, has been deployed in 79 major markets in 16 states. The company forecast a year ago that it would top 1 million subscribers by year-end 2008.

However, using Verizon’s FiOS TV as a benchmark for comparison, U-verse TV has been slower to take off even accounting for the fact that AT&T was later in coming to market.

U-verse TV service was available to approximately 9.4 million homes as of the end of the third quarter, yielding an overall penetration rate of about 8%. Verizon’s FiOS TV had a penetration rate of 19.7% in the third quarter of 2008, with 1.6 million subscribers, up from 15.2% a year earlier.

In a statement, AT&T said, “As a new service, any calculation of penetration should take into account the length of time that service has been available.” The company said that in “established” market areas, it has achieved more than 10% penetration in less than 12 months.

By comparison, FiOS TV on average has achieved 17% penetration in 12 months and more than 26% penetration within two years, Verizon president and chief operating officer Denny Strigl said on the company’s third-quarter earnings call in October. Strigl noted that “these numbers are better than we had anticipated.”

U-verse has hit some setbacks along the way. Last year, AT&T said it would spend $500 million more than it previously expected in 2007-08 to build out the fiber-to-the-node network underlying U-verse TV while at the same time it scaled back the number of homes it expected to pass to 17 million (down from a previous estimate of 19 million).

At the end of the third quarter of 2008, AT&T’s Very High Bit-rate Digital Subscriber Line (VDSL) network, code-named Project Lightspeed, passed 14 million living units, about 67% of which are eligible to receive U-verse TV.

Early on, the telco blamed a slower-than-expected U-verse TV rollout in part on the need to “make enhancements” to the Internet-protocol-TV software provided by Microsoft. The service also suffered a nationwide outage as it was upgrading its back-end operations support system in October 2007.

Still, AT&T touts its industry awards for U-verse TV, noting it was ranked highest in customer satisfaction in three out of four regions on the J.D. Power and Associates 2008 Residential Television Service Provider Satisfaction Study.

AT&T now is focusing on “quadruple-play integration” with U-verse. For example, it now offers free access to its nationwide network of Wi-Fi hot spots to its high-speed Internet subscribers.

The telco has put wireless chief Ralph de la Vega in charge of consumer marketing initiatives for the consolidated Mobility and Consumer Markets group.

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