AT&T to Launch Mobile OTT Service in 2018

AT&T plans to launch its own mobile-centric, over-the-top streaming solution that is access provider agnostic, with a planned commercial launch in 2018.

AT&T is going to build on its DirecTV Now service and then have it available as “the primary service” in a home.

Operationally, customer acquisition costs could be lower than linear services. Provisioning costs will absolutely be lower. There will be no need for truck rolls, drop cable installation, decoders and outlet installation. There will be virtually nil trouble tickets created because customers have decoder problems.

Also, in the same way that DirecTV allowed AT&T to sell linear video virtually nationwide, for the first time, so mobile streaming service will be available nationwide, without the specific need to add new facilities, as the service will use a “bring your own broadband” approach.

At least initially, the mobile OTT offer will aim to please potential customers who do not wish to buy a traditional linear video service. That target audience is about 20 million U.S. households. One virtually-certain feature is a skinnier bundle, with a lower price, possibly between $30 a month and $60 a month. Linear “big bundle” packages tend to cost between $80 and $100 a month.

There will be other upside as AT&T deepens its media activities.

For many participants in the media business, advertising is the sole or primary revenue source. For others it is a key revenue source, even if direct end user subscriptions are the major revenue driver. Both Verizon and AT&T now believe advertising will be a significant revenue contributor.

AT&T believes a key advantage of its content plus distribution strategy is the ability to create a new targeted advertising capability, according to Randall Stephenson, AT&T chairman and CEO.

“Within AT&T and DirecTV, we have an inventory of advertising that we sell every year, about 200 billion impressions that we sell every year,” said Stephenson. “Time Warner has 750 billion impressions that they sell every year predominantly through Turner networks.”

In other words, AT&T soon will have about a trillion impressions per year to sell. Just as important are the new targeting possibilities. AT&T says it is able to sell about two to three times the targeted advertising that Time Warner is able to sell. So simply creating a targeted ad capability for Time Warner inventory could yield big returns.

Comcast's distribution business (cable TV operations) generates about two percent of total revenue from advertising. On the other hand, its NBCUniversal unit (which contains the programming networks) generates more than 31 percent of total revenue from advertising.