AT&T has responded to last week’s Verizon announcement where its rival began at last to offer some integration between wireless services and its IPTV system. AT&Ts approach is much more like a new bundle, specifically aimed TV households, with a ‘buy 2 get one free’ approach to cellular, fixed broadband, home TV services via U-Verse IPTV and fixed voice. The bundle gives at least a $30 discount to people taking TV and a total of three of the four services. We still expect AT&T to copy the Verizon move to use the phone with the TV service, for instance as a remote control. The new bundle can be seen as way to recoup lost VoIP lines and cable lines as much as a way of ensuring all U-Verse clients also use AT&T Mobility wireless.
The new bundle is available now in Illinois, Indiana, Wisconsin, Michigan and Ohio and will be made available to all U-verse markets in the coming weeks. AT&T has already been even more aggressive at eliminating fixed lines that its cable competition, and wireless fixed phone line substitution is responsible for more retired voice lines than even cable replacement with VoIP. So we suspect that AT&T would be delighted if the particular combination it sold most was TV plus wireless, plus broadband.
“With the choice to bundle wireless voice, this is an offer that cable can’t match,” said Joey Schultz, AT&T’s vice president of wireline consumer marketing, in a statement.
Of course in a year this is exactly the sort of offer that cable will not only match, but will use to begin attacking AT&T’s hegemony of wireless. AT&T is just hotting up the quad play war before cable can get started. Once cable operators such as Comcast, Time Warner Cable and Cablevision get to grips with bundling Clearwire’s Clear WiMAX service with their existing voice, broadband, TV triple play bundles, there will be little to choose between the two types of operators, and price will become one of the key ways to differentiate. Cox Communications is also moving ahead with plans for CDMA2000 and LTE networks of its own, and will use this to compete in wireless starting this year. Investors have been worried for year about a price war between the two types of operators.
cable operators have already proved themselves more flexible in being able to go up against telcos with clever bundles, and have been growing ARPU among existing subscribers, based on the addition of services ‘ VoD, HD, online gaming, multi-room DVRs, as well as the core offerings, rather than by raw customer acquisition.
Meanwhile the figures of the cellular operators have been held up by their successes in cellular, and if cable comes to market with a ‘giveaway’ deal for mobile, and if cable converts a significant group of its customers to wireless, that may all come crashing down.
This AT&T offer is really only for new U-verse customers, and only lasts (at this stage) for six months and will knock around $30 a month off charges. It says the promotion will be available until March 20, 2010, but our guess is that AT&T will be forced to turn this into one of those semi-permanent promotions and extend it way beyond 6 months to prevent churn. We still expect to see announcements turning the iPhone into a remote control for the U-Verse TV service, but for that to happen the encrypted EPG data will have to be decoded on the iPhone, and that is only a decision that AT&T can take.
AT&T currently has 1.6 million U-verse TV customers across 19 states and most new U-verse customers take fixed voice and broadband, as well, so in the short term this should simply boost cellular subscriber numbers.