Residents of more than 14 Southern California locales will now have a third option, besides satellite and cable, for subscribing to pay TV. AT T Inc. said it would offer pay television service, with bells and whistles not provided by its rivals, beginning today, in Anaheim, Burbank, Glendale, Riverside and other parts of Southern California.
Its first foray into the area, however, will not include the city of Los Angeles, where AT T has been working with officials to install a high-speed fiber-optic network needed to deliver pay TV. "It is a critical market for us," AT T spokesman H. Gordon Diamond said.
"We're working on getting power to the network, and we're moving as aggressively as we can." Under a new law, AT T must make the U-verse service available to half its phone customers within five years. AT T is California's dominant local phone company, providing service to about 79% of the state.
"It'll be a challenge for them to meet 50% of the households in California in five years," said analyst Bruce McGregor at Current Analysis Inc., a research firm. "This is a big initiative for them.
" AT T is packaging pay TV with Internet and phone services to give customers a so-called triple play, which typically includes discounts that make the pay TV packages less expensive than those offered by cable and satellite providers. Studies have shown that the price of pay television typically drops after a phone company enters a market. Today, residents in parts of four Los Angeles suburbs, six Orange County cities, three Riverside County cities and Simi Valley can order the service.
The packages compete with those offered by cable TV companies but go one step further by offering cellphone service. Cable companies, which now offer TV, high-speed Internet and phone service, are testing similar wireless service in a venture with Sprint Nextel Corp. "It's going to be a big year for these companies to get their services out there and to sway customers with the right package," McGregor said.
Such bundles, with all services on one bill, are key to marketing plans because they attract customers and keep them longer, reducing the rate at which customers quit. Carriers also are getting the products in the bundles to work together better. Caller ID numbers, for instance, pop up on television screens, allowing customers to decide whether to answer the phone or let the call go to voicemail while they are watching their favorite show.
"Customers are demanding more high-definition TV and more interactive TV, and that's what AT T's U-verse is doing," said Kieran Nolan, general manager of AT T's Los Angeles market. Customers can use their cellphones, for instance, to program their digital video recorders when they're on the road, he said. And they can take a picture or a video clip with the handset's camera, send it to the home computer and watch it on TV when they get home later.
But AT T must continue upgrading its network to meet future demand, McGregor said. "Down the road, AT T is going to have to offer as many high-definition channels as possible," he said. "Satellite already is going to 100 HD channels, and cable is getting there too.
" AT T is seeing "a very nice demand" in other metropolitan markets it serves, including four cities in the Bay Area, Nolan said. The three metro markets in Southern California bring the total served by AT T in the country to 18. The San Antonio-based company had a number of technical problems last year as it readied its pay TV for the mass market.
It had only 3,000 customers at the end of December and now has nearly 20,000. By the end of 2008, it plans to spend $4.6 billion to make U-verse TV available to 19 million customers in the 13-state territory it controlled before it acquired BellSouth Corp.
at the end of December. The new California law, adopted last year at the behest of AT T and Verizon Communications Inc., made it easier for the phone companies to offer pay TV service by simplifying the regulatory process.
Verizon said Monday that it had 348,000 pay TV customers in its 29-state territory. Its fiber network in California reaches 350,000 homes in 29 cities and will cover 500,000 by the end of the year. AT T's initial Southern California offering is for residents in parts of Altadena, Anaheim, Burbank, Corona, Fullerton, Garden Grove, Glendale, Laguna Niguel, Norco, Santa Ana, Santa Clarita, Riverside, Simi Valley, Tustin and parts of Orange and Riverside counties.
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