at&t launches VoIP in Detroit

At&t says it will soon launch VoIP for U-verse customers. The service has been launched in the Detroit market. The service is a replacement for traditional landline service and is priced accordingly.

A $40 monthly fee provides unlimited domestic calling while a $20 a month plan provides 1,000 long distance minutes. The service includes an online call manager portal, unified messaging, click to call from the TV, and simultaneous ring of up to four separate telephone numbers.

So the long march towards VoIP by dominant telcos begins. As just about everybody now recognizes, VoIP will in some cases represent an incremental change in user behavior, in some cases a replacement for traditional calling and in some cases a better way to do traditional calling with a better user experience.

Pretty soon we'll start to get some insight into the ways VoIP helps traditional telcos, in addition to representing a threat to established revenue streams. Without widespread fiber-to-customer networks and a complete shut-off of traditional time division multiplex infrastructure, it will be hard to say for certain.

But Verizon executives think they will save operating expense when they are able to shut off the TDM voice network and shift everything over to IP.

EchoStar, Dish Now Separated

EchoStar has completed the spin-off of its set-top box business into a new a company called EchoStar Holding Corp. The parent company, which now consists primarily of its satellite TV broadcasting business, will change its name to DISH Network Corp., and keep DISH as it stock symbol.

The transaction makes Dish a pure-play video entertainment provider, and arguably a cleaner asset for an acquirer or merger partner. There has been much speculation about an at&t purchase, but that seems unlikely given at&t's recent decisions about its stock buybacks, acceleration of its U-verse deployment and dividend increases.

The earlier proposed merger of Dish with DirecTV didn't pass regulatory muster, in part because the market was defined as "satellite TV" rather than multichannel video entertainment. At some point, as telcos gain more video market share, that argument might not be so compelling, and Dish and DirecTV might be allowed to merge.

Given that the consumer market increasingly is dominated by triple play, dual play and quadruple play providers, and where each of the services markets increasingly are saturated, regulators might take a fresh look at allowing the two satellite providers to merge.

The Dish Networks separation from the the EchoStar set-top manufacturing operations will help.

Video Penetration Higher than We Think?

By some estimates U.S. cable video penetration is in the mid-60s, at the upper level at 70 percent. Satellite video is said to be between 25 percent and possibly 28 percent. And yet at the same time some estimates show "no provider" other than over-the-air transmissions for as many as 26 million homes, something on the order of 23 percent of U.S. households.

The numbers don't square, and there are few explanations other than false reporting by cable and satellite operators; incorrect housing statistics or much-higher-than-expected numbers of homes where consumers are buying multiple subscriptions. False reporting of those sorts of numbers is so unlikely as to be implausible. One has the impression that consumers tend not to buy both satellite and cable video service. Try and think of someone you know who does this.

One can make the argument that multichannel video subscriptions are nearly 100 percent, or as low as 75 percent. So things are better or worse than we might think. It is hard to tell which is the case.

at&t FTTH, FTTN Marketing Issues

Marketing operations, as much as anything else, will mean at&t customers who actually have fiber-to-the-home will get the same bandwidth and services as customers served by the U-Verse networks, which use very-high-speed Digital Subscriber Line as the drop wire. That means 6 Mbps data access and one high-definition TV stream at a time, even though FTTH networks are capable of more.

About a million at&t customers actually will have fiber drops by the end of 2008.

The marketing issue is analogous to what happens when a citywide broadband network has to be build and marketed. In the early stages, it isn't really possible to use mass media such as radio or television because the service provider simply generates lots of calls for service which it cannot meet. Early on, door hangers and direct mail work better.

To market U-Verse with scale economies, at&t wants to avoid confusing the market by touting offers that one out of 18 customers actually can get. So at&t has to "dumb down" the fiber access pipe. It makes total operational sense, even if some users who know the difference will be disappointed they can't take advantage of the optics.

Qwest Really Isn't Interested in IPTV

Qwest Communications International Inc. no longer will pursue cable franchise agreements with Colorado cities or build community-wide TV service in areas where it's recently won franchise approval. That's more confirmation of Qwest's strategic direction in video, which is to rely on its partner DirecTV for linear TV services.

Though Qwest plans to upgrade its broadband capacity in 10 major markets and 10 smallers ones in the company's 14-state service area, that is solely for the purpose of broadband-based services other than entertainment video.

Qwest still supports the idea of statewide television franchises. But it won't seek such a franchise.

Digital TV Transition: Not Y2K

In February 2009, all over-the-air analog TV broadcasting will be shut off. Some observers are concerned that consumers aren't acutely aware of the coming changes, resulting in massive disruption of the TV experience on the day of the analog broadcasting shut off.

Maybe not. The only potentially-affected customers are those who rely solely on over-the-air signal reception. Customers of cable, satellite or telco TV services won't have to do anything. To be sure, cable, satellite or telco TV providers will have to supply a new digital decoder if one is not already in place. But the point is that the providers will take care of their own customers, and that's 85 percent to 90 percent of all TV viewers.

Of those customers who have over-the-air connections, those who have bought TVs with digital tuners will not notice anything other than universally-better pictures. So the real issue lies with a single-digits number of viewers who have analog-only tuners.

By the time the transition nears, every mass market electronics retailer will have taken steps to push the sale of digital decoders. So this will not be anything like a feared "Y2K" event.

at&t U-Verse: 30 Million Homes Passed by 2010

at&t says it expects its U-Verse fiber-to-customer-driven video service to be available in 30 million homes by the end of 2010, compared to 5.5 million as of its last quarter. The company has said it hopes to pass 17 million homes by the end of 2008.

For users not interested in at&t's IPTV offering, the extension of the fiber-to-customer network means higher broadband access speeds will be available as well. For many of us, if not for at&t, that is the more important part of the story.

Duh! at&t Should Have Talked to Some Cable Guys

at&t is promoting U-Verse IPTV services in Connecticut from an Ice Cream truck outfitted with a flat panel HDTV showing off the service. at&t also is holding U-Verse block parties and free concert or movie nights. It sounds as though the new tack is being taken because mass media advertising is a mixed blessing when a company is in the middle of a network build. Apparently at&t has finally discovered that it creates problems for itself when it advertises new services that only are available in a portion of a service territory reached by the mass media where the ads run.

Potential customers call in to get it and then have to be told service isn't available in their neighborhood. That's why cablers used to send out people with door hangers block by block as networks were built out. They tended to use the same "micro" targeting as their networks successively were upgraded. at&t couldn't ask anybody who had ever done this before what the pitfalls would be? It's not like it would have cost any money to get the insight. It's a one-sentence question and a one-sentence answer.