AT&T is “nearing” a deal to sell a “substantial” minority stake in its DirecTV satellite TV service, as well as its U-verse and AT&T TV Now platforms, to private equity firm TPG, CNBC reports. 

It was reported last month that AT&T was in serious talks with TPG, but the inclusion of the legacy U-verse platform, as well as the virtual MPVD AT&T TV Now, is somewhat of a new twist, although it had been previously bantered about in speculation.

The new report, based on the usual unnamed sources close to the negotiations, said the deal would value the assets at around $15 billion—also in line with previous leaks. 

AT&T didn't immediately respond to Next TV's inquiry for comment and confirmation.

AT&T would use the proceeds to pay down $150 billion in debt, partly accrued with the $49 billion purchase of DirecTV back in 2015.

In 2020, AT&T lost 3.261 million paid users across DirecTV, U-verse and AT&T TV Now, as well as its recently launched, IP-delivered AT&T TV platform. This came after the telecom shed nearly 4.1 million subscribers across its pay TV platforms in 2019.

AT&T finished 2020 with just 17.2 million pay TV subscribers across its platforms—a total that had surpassed 24 million as recently as 2018.

AT&T stopped selling new U-verse subscriptions over a year ago. And it ceased selling new AT&T TV Now vMPVD bundles last month. The telecom's video strategy is now centered around WarnerMedia and its HBO Max subscription steaming service, but the conglomerate is still actively selling AT&T TV as a bundled complement to services like fiber-based high-speed internet, as well as a means to get HBO Max into more homes. 

Updated: This story was updated to include details on AT&T's new pay TV strategy.

AT&T has simplified its rather confusing pay TV strategy, folding the virtual MVPD AT&T TV Now into AT&T TV, while orienting the latter into a vMVPD service that lacks contracts and proprietary leased equipment.

AT&T TV Now's remaining subscribers, which totaled 683,000 as of the end of September, will be rolled into AT&T TV, the company's more traditionally structured pay TV service.

AT&T TV, which also operates on the open internet, will move from annual to monthly contracts, and will no longer require customers to lease a proprietary Android TV set-tops. In addition to those AT&T's device, the service will now run on Roku, Amazon Fire TV, Apple TV players and Google Chromecast dongles and sticks; iOS and Android mobile devices; and Samsung smart TVs, the company said.

“We’re bringing more value and simplicity by merging these two streaming services into a single AT&T TV experience,” said Vince Torres, senior VP of marketing for AT&T. “Customers can stream the best collection of live and on-demand programming on devices they already have, or they can get our exclusive AT&T TV Stream device to enjoy enhanced features and functionality.”

The move effectively kills AT&T TV Now, which started life as the $35-a-month DirecTV Now back in November 2016, growing on promotional steroids to reach 1.8 million subscribers by the summer of 2018. 

AT&T TV Now becomes the second major competitor to bow out following the shuttering a year ago of Sony PlayStation Vue. 

AT&T TV Now’s base-tier service offered 45-plus channels for $55 a month. AT&T TV is base priced at $70 a month for 65-plus channels.

 AT&T TV monthly-contract packages come with 20-hours of cloud DVR storage included. For an additional $10 a month, customers can upgrade to 500 hours of storage.

So, if you signed up for DirecTV Now four years ago, your $35-a-month skinny bundle has doubled in price and girth.

It's the latest video move by AT&T, which has given up on its $49 billion purchase of DirecTV in 2015, and is now focused on its $85 billion acquisition of Time Warner Inc. and the resulting launch of SVOD service HBO Max. 

For AT&T, traditional pay TV is now being simplified down to AT&T TV, the IP-based service, launch last year and now largely serving to underpin the telecom's rollouts of fiber internet and fixed 5G services. 

AT&T was already in the process of sunsetting its legacy pay TV platform, U-verse. And it’s trying to sell its satellite TV platform, DirecTV.

Once considered the future of the video business, OTT-based live-channel bundles, otherwise known as virtual MVPDS, or vMVPDs, have been more recently written off by some analysts as failed businesses. 

But nearly six years after Dish Network ushered in the vMVPD model with the launch of Sling TV, the competitors seem to be holding the line in a low-margin gambit, where affordable pricing is undermined by ever-increasing program licensing demands. 

With the recent launch of T-Mobile’s TVision service, there are more than a dozen vMVPDs on the market. But the third quarter was the first time that all of the biggest virtual operators actually reported their subscriber counts. In fact, the top six services tallied more than 11.5 million users between them. 

By our rough estimate, about 15% of the remaining pay TV business in the U.S. is accounted for by these no-contract, immediate sign-up, skinny-bundled OTT services. 

Below is a low-resolution look at how the top six vMVPDs stack up in terms of stated subscriber count.

AT&T reportedly wants to divest more than just DirecTV.

According to a CNBC, the telecom is also looking at possibly also selling minority stakes in two of its other pay TV platforms, virtual MVPD AT&T TV Now, and its legacy U-verse TV service. 

The telecom’s AT&T TV service, launched earlier this year, isn’t mentioned in the report. 

Also read: AT&T Presses on with 'Fire Sale' DirecTV Auction (Report)

The questionably credible New York Post reported last month that AT&T was talking Apollo Management and other private equity firms about a “fire sale” deal that would unload the DirecTV satellite TV business for around $15.75 billion. (AT&T paid nearly $67 billion for it back in 2015, factoring in debt.)

On Tuesday, CNBC reported that AT&T is talking to the same private equity companies about taking stakes ranging from 30% - 49% in AT&T TV Now and U-verse TV. For the latter, AT&T would keep the wireline infrastructure and technology that backs the U-verse brand, as well as the U-verse broadband component. Notably, AT&T stopped selling U-verse TV to new customers earlier this year. 

The rollup would effectively take the declining portion of AT&T’s pay TV businesses off its balance sheets. 

Final bids are reportedly due in December. 

Also read: AT&T Pay TV Losses ‘Slow’ to 627K in Q3

AT&T reported the loss of 590,000 customers in the third quarter across its “premium” pay TV brands, DirecTV, U-verse TV and AT&T TV. The telecom said the latter service, an IP-based linear service that launched earlier this year, is fueling its wireline fiber growth. So, ostensibly, it’s growing. But AT&T hasn’t said by how much. 

AT&T TV Now saw declining blood loss of 37,000 customers in Q3. But AT&T has long since stopped aggressive promotions that drove the live streaming service to a peak of around 2 million customers in the summer of 2018. AT&T TV Now had only 683,000 remaining customers as of the end of September. 

As analysts explain it, AT&T has a narrow path to walk with its declining pay TV assets. It needs to find a way to cut costs, without further accelerating cord cutting and the cash-generating potential of the platforms. AT&T also has to maintain shareholder dividends while paying down enough debt to meet the demands of credit rating agencies. All the while, the telecom has to find money to invest in growth business, such as HBO Max and the fiber deployment which AT&T TV is part of.  

AT&T reported third-quarter customer losses of 627,000 across its four pay TV services, an improvement over the 1.35 million subscribers shed in Q3 of 2019.

Breaking down the losses, the telecom lost another 37,000 users from its virtual pay TV service, AT&T TV Now, which now has around 683,000 subscribers after peaking in the summer of 2018 at nearly 2 million.

Also read: AT&T Reports Lower Third-Quarter Earnings

AT&T also shed 590,000 from the ranks of its “premium video” services, which includes satellite TV operation DirecTV, U-verse (which AT&T has stopped marketing altother) and recently launched IP-based service AT&T TV. 

AT&T did not break out the specific performance of DirecTV, which it’s trying to sell. It was believed that DirecTV had around 14.3 million remaining subscribers going into the third quarter. 

Launched just over five years ago with the introduction of Dish network’s Sling TV, the virtual MVPD business has matured quickly, evidenced last week by Google’s decision to up YouTube TV’s price point to the very traditional pay TV-like level of $65 a month.

Also read: YouTube TV Raises Price $15 After Adding ViacomCBS Channels

In a blog post to its investor clients, research company LightShed Partners took a deep dive into the state of the vMVPD business, which it said now accounts for around 9.3 million U.S. subscribers, or about 11% of the overall U.S. pay TV base of 82 million customers. 

Here are five notable takeaways:

> Rather than becoming a niche product marketed to customers that don’t want two-year contracts or other traditional pay TV trappings, LightShed thinks AT&T will simply get rid of AT&T TV Now. 
“As programming prices have gone up, Sony Vue exited the business in early 2020 and AT&T TV Now appears on its way toward exiting as their sub base dwindles,” a triumvirate of LightShed analysts—Richard Greenfield, Brandon Ross and Mark Kelley—write. 

> Even after its $15 price spike, YouTube TV is still a bargain relative to traditional pay TV. 
“Even $65 for YouTube is far cheaper than off-promo pricing from any MVPD (cable or satellite), when you factor in no box fees, unlimited cloud DVR, no broadcast TV or regional sports network surcharges, taxes, etc, not to mention superior user interfaces’ however, the price differential has been cut in half as more and more channels have been stuffed in,” LightShed said.

> Expect Hulu to raise its vMVPD prices soon.
“While Hulu Live has yet to raise price in 2020 (expect it soon), its pricing is up 37% since launch, having started $5 more expensive than YouTube TV (if Hulu Live goes to $65, its pricing would be up 63% since launch),” the firm noted.

> Hulu with Live TV was created with the intention of bolstering the program licensing market, not so much becoming a directly profitable business.
“Broadcast and cable network executives loved the idea of vMPVDs, as they offered new competitors to cable and satellite that would pay premium rates for broadcast networks and cable networks…, LightShed writes. “In fact, Hulu’s former joint owners Disney/Fox/NBC forced Hulu to launch a vMVPD so that they could drive subscribers and subscription revenues in their wholly-owned businesses, while Hulu booked off-balance sheet losses…”

> The vMVPD business has stopped growing.
“After four years of amazing growth, the vMVPD category lost subscribers for the first time in Q1 2020 and will likely lose subscribers again in Q2 2020, primarily due to the lack of sports programming,” the report added. 

Investor class action suits filed against AT&T last year over alleged sales fraud surrounding virtual MVPD AT&T TV Now (formerly DirecTV Now) continue to wind their way through the federal court system.

But Forbes this week published a pretty compelling deep-dive into the scandal’s seedy core, examining how top-down corporate pressure on low-ranking AT&T retail store sales employees ended up ripping off consumers and shareholders, and undermining AT&T’s broader video strategy following its $50 billion purchase of satellite TV operation DirecTV in 2015.

The article details how AT&T retail employees, under pressure from management at AT&T’s nearly 16,000 company-owned and authorized franchise locations, created thousands of bogus DirecTV Now accounts. 

Also read: AT&T Ends New Sign-ups for $15-a-Month Streaming Service AT&T WatchTV

“It was sell at all cost—that was how it was presented to us. It was a threat,” Justin Keller, a former San Francisco AT&T store manager, told Forbes. He said he was encouraged by his regional manager to offer unofficial discounts and other inappropriate enticements to goose DirecTV Now signups. 

First, a Little Background

Prior to its subsequent $85 billion purchase of Time Warner Inc., AT&T launched virtual MVPD DirecTV Now in November 2016. The service rocketed to more than 1.8 million signups by the summer of 2018, and was poised to take over leadership of the nascent vMVPD category from DirecTV rival Dish Network and its Sling TV service. 

It was around that time that AT&T revealed that most of the erstwhile DirecTV Now users base was paying very little—or nothing at all—for the service. AT&T announced that it was cutting back on the service’s promotional fuel. 

AT&T revealed in October 2018 that third-quarter DirecTV Now customer additions were off 86%, shocking its shareholder community. The subsequent 8% stock cratering represented the telecom’s worst Wall Street dive since the 2008 Great Recession. 

DirecTV Now was rebranded last year as AT&T TV Now. Its user base has whittled to around 788,000 customers as of the end of the first quarter of 2020. The vMVPD is now a niche component of AT&T’s larger video strategy, a discounted OTT service for consumers who don’t want the trappings of the more traditionally oriented AT&T TV pay TV service. 

Also read: AT&T TV: Everything You Need to Know About the Streaming Version of AT&T’s Premium Pay TV Service

As Forbes notes, back in the days following the DirecTV purchase, AT&T was determined to show shareholders that it had a viable video strategy tied to paying top dollar for an El Segundo, Calif. company tied to what was perceived to be an entirely mature business, satellite TV distribution.

Under pressure to execute that strategy, retail employees engaged in all kinds of improper techniques to goose DirecTV signups. Bogus accounts were often created—employees fabricated customer emails, with AT&T systems not set up at the time to authenticate them. 

Customers were sometimes given discounts and other enticements to sign up for a DirecTV Now service they never had any intention of using or paying for—they were simply instructed to cancel before the 30-day free promo period ended, or were told AT&T would do that for them. 

In many cases, employees signed up AT&T customers for DirecTV Now without the customer ever even knowing about it. The scam required sales employees to cancel these subscriptions before the promotional period ended and the customer noticed the related charges on their credit card. But in some cases, that step was missed. 

“I barely even watch TV anymore,” said a Burlingame, California AT&T customer, who described her surprise in 2018 when she found 11 months of DirecTV Now charges on her credit card totaling around $330. 

When customer complaints started to roll in, and numerous AT&T retail outlets started reporting more DirecTV Now cancellations than signups, the Dallas-based telecom got suspicious in 2017 and launched an internal probe. Customer charges were reversed. Employees were disciplined and fired. 

AT&T’s reputation and video strategy were harmed. Shareholder lawsuits ensued. 

“Our investigation confirmed that the activity did not have a material impact on our publicly reported results,” AT&T rep Jim Greer told Forbes.

The AT&T TV app is once again available in Roku’s Channel Store.

The app, which houses the AT&T TV Now virtual pay TV service, had been unavailable for Roku users to add to their channel portfolios since the beginning of January. (AT&T TV Now subscribers had been able to keep using their Roku devices to access their vMVPD service, provided they had already downloaded the app and didn’t delete it.)

The news was first reported by Cord Cutter News. Next TV editors were able to download the AT&T TV channel on Roku. The channel had to be searched for—in other words, it’s not listed as a “featured channel” that automatically surfaces.

Visit Next TV to read more stories like this one. 

AT&T TV Now finished the first quarter with 788,000 users, less than half of what it peaked with during the summer of 2018, before AT&T pulled its aggressive promotions for the service. The re-inclusion of the AT&T TV app is probably more meaningful in that it signals that AT&T and Roku are engaged in productive negotiations regarding AT&T’s soon-to-launch new direct-to-consumer service, HBO Max.

Also read: AT&T TV App Ends Support for Roku

Notably, last week, AT&T’s soon-to-be CEO, John Stankey, revealed that HBO Max will probably not launch with app support for Amazon Fire TV. Analysts suspect the complicated negotiation of how HBO Max is integrated into components like Amazon Prime Channels needs to be worked out.

Also read: AT&T Doesn’t Want Amazon to ‘Disaggregate’ HBO Max into Prime Channels, Analyst Says

But while Stankey was specifically pessimistic about exclusion from the No. 2 OTT device ecosystem in the U.S., AT&T has not locked down the No. 1 ecosystem for HBO Max, either.

Roku issued this statement last week: “As the #1 streaming platform in the US with over 40 million active accounts that rely upon Roku to access their favorite programs and to discover new content, we are focused on entering into win-win distribution agreements with all new OTT services as part of their launch strategies. While we don’t typically comment on specific deal terms or negotiations, the fact is that in this instance while we believe that HBOMax would benefit greatly from distribution on Roku at launch, we do not currently have an agreement in place.”

The AT&T TV app is once again available in Roku’s Channel Store.

The app, which houses the AT&T TV Now virtual pay TV service, had been unavailable for Roku users to add to their channel portfolios since the beginning of January. (AT&T TV Now subscribers had been able to keep using their Roku devices to access their vMVPD service, provided they had already downloaded the app and didn’t delete it.

The news was first reported by Cord Cutter News. Next TV editors were able to download the AT&T TV channel on Roku. The channel had to be searched for—in other words, it’s not listed as a “featured channel” that automatically surfaces. 

AT&T TV Now finished the first quarter with 788,000 users, less than half of what it peaked with during the summer of 2018, before AT&T pulled its aggressive promotions for the service. The re-inclusion of the AT&T TV app is probably more meaningful in that it signals that AT&T and Roku are engaged in productive negotiations regarding AT&T’s soon-to-launch new direct-to-consumer service, HBO Max. 

Also read: AT&T TV App Ends Support for Roku

Notably, last week, AT&T’s soon-to-be CEO, John Stankey, revealed that HBO Max will probably not launch with app support for Amazon Fire TV. Analysts suspect the complicated negotiation of how HBO Max is integrated into components like Amazon Prime Channels needs to be worked out. 

Also read: AT&T Doesn’t Want Amazon to ‘Disaggregate’ HBO Max into Prime Channels, Analyst Says

But while Stankey was specifically pessimistic about exclusion from the No. 2 OTT device ecosystem in the U.S., AT&T has not locked down the No. 1 ecosystem for HBO Max, either. 

Roku issued this statement last week: “As the #1 streaming platform in the US with over 40 million active accounts that rely upon Roku to access their favorite programs and to discover new content, we are focused on entering into win-win distribution agreements with all new OTT services as part of their launch strategies. While we don’t typically comment on specific deal terms or negotiations, the fact is that in this instance while we believe that HBOMax would benefit greatly from distribution on Roku at launch, we do not currently have an agreement in place.”

AT&T TV, the streaming version of the telecom’s premium full-bundled pay TV service and its long term replacement for DirecTV satellite TV, launched nationally on March 2.

AT&T TV is being positioned as the balm for the wireless giant’s recent pay TV subscriber struggles. AT&T lost another 1.2 million customers across its DirecTV, U-verse and AT&T Now platforms in the fourth quarter alone. It has lost round 5 million satellite and IPTV video customers since 2016. 

“As we move through this year and we start shifting to AT&T TV, our gross add performance starts to get much stronger,” AT&T COO John Stankey told investment analysts during the company’s Q4 earnings call.

Also Read: AT&T TV Launches Nationwide, Telco Begins Phase-out of DirecTV Satellite

Cornerstone Broadband Product

AT&T is indeed bullish on the prospects for AT&T TV, which requires a proprietary Android TV-based set-top box and is delivered over the open internet, but is self-installed and requires no onsite technician support or pricey satellite launches. 

AT&T sees AT&T TV as the cornerstone of its fiber-to-the-home broadband product, which now has 4 million customers. AT&T is hoping to have around 3 million more of them by 2022, and being able to bundle in a premium pay TV service is part of that business equation. 

“Naturally, when you're able to put AT&T TV, a software-based product with fiber, it's a much more natural combination than a satellite dish and fiber. And so, as we start to roll out AT&T TV now in markets and we move in, we're going to see much stronger performance on the fiber side,” Stankey said.

Also Read: AT&T TV Will Make Cratering Pay TV Performance ‘Much Stronger,’ Operator Says

AT&T TV is currently being sold in a handful of markets. In November, AT&T TV was deployed in New York City, Seattle, Minneapolis and Miami. That added to a list of nine “pilot” markets that were initiated in August; Orange and Riverside, California; Topeka, Kan.; Wichita, Kan.; El Paso, Texas; Odessa, Texas; Corpus Christi, Texas; St. Louis; Springfield, Mo.; and West Palm Beach, Fla.

It’s widely assumed that AT&T TV will shove aside AT&T Now, the rebranded version of DirecTV Now virtual MVPD service that was launched with great fanfare in 2016 and grew quickly to nearly 2 million users—some of them paying money!—before AT&T pulled back its aggressive promotional fueling efforts for the service.

Pricing

AT&T TV is starting out with a one-year promotional price of $50 a month, delivering over 70 channels, including ESPN, as well as 500 hours of HD DVR service—an offering that totally undercuts AT&T Now. (AT&T TV’s price shoots up to a very pricey $93 a month after that first year.)

Also Read: AT&T TV to Roll Out in February, Drive Fiber Penetration, Telecom Says

AT&T TV has three very traditional looking tiers, stepping through and to $55- and $65-a-month price tiers (these are first-year prices). All of them allow Google Assistant voice control through an Android TV interface. The full flora and fauna of OTT apps, including Netflix of course, is available through Google Play. Each of the three AT&T TV tiers is offering three months free of HBO, Cinemax, Showtime, Starz and Epix at signup. 

The mid-level “Premium” tier of AT&T TV—which bumps up to $110 month after the $55 first-year price—adds more than 20 additional channels, including Sundance, the Tennis Channel and MLB Network. 

The top-end Xtra tier of AT&T TV, which tops out at $124 a month after a first-year price of $65, adds an additional 20-plus networks over the midlevel Premium tier, including the Golf Channel and National Geographic Wild. 

Notably, in the fine print of the AT&T TV marketing page, a super top-end “Ultimate” tier is also described, priced at $80 for the first year and a whopping $135 a month subsequently. 

Each of the three AT&T TV tiers requires the traditional 24-month contract, meaning users will have to pay handsomely to cancel service early. And not included in the AT&T TV price for the mid-level Choice tier and above is the $8.49-a-month “regional sports fee” subscribers will have to pay. 

Also, the first AT&T TV set-top is free, but adding devices for other rooms is going to tack on a monthly fee.

Again, AT&T TV is packaged more as a traditional pay TV service, with all the requisite gouges, rather than a forward-looking OTT platform. 

After paying nearly $50 billion five years ago to get into the satellite TV business, AT&T is looking to AT&T TV to usher it out of it. We’ll see how it goes. 

“When I look at what's happening from an operational performance perspective and what the team is doing on gross add improvements, what we're seeing in churn improvements, the rollout of AT&T TV that really hits its stride in the second quarter in terms of its availability across the customer base,” Stankey added. "We’ll start to see those subscriber trends incrementally improve as those capabilities start to roll into the base. And we'll get to what I just indicated by the time we exit the year.”

Nationally deployed in the latter month of the first quarter, AT&T’s new premium IP-based pay TV service, AT&T TV, failed to reverse the steep subscriber losses the telecom company has been experiencing of late across its pay TV platforms. 

AT&T, which reported the loss of nearly 900,000 subscribers in Q1 across a “premium” pay TV portfolio that lumps in AT&T TV along with DirecTV and U-verse TV, didn’t break out subscriber metrics for the former. 

Also read: AT&T Loses Another 1M Pay TV Subscribers in Q1

However, AT&T CEO Randall Stephenson seemed to imply that uptake for AT&T TV hasn’t been incendiary since the product expanded nationally from limited beta release at the beginning of March. 

“Our expectations on AT&T TV have been very consistent with what we have seen even with the suppression of the pandemic in the latter part of March where we were restricted on the certain number of dispatches and some of our capacity there,” Stephenson said, speaking during AT&T’s first-quarter earnings call Wednesday. 

Stephenson cited a climate of “suppressed new add activity” in regard to consumers adding new entertainment services, despite the current uptick in video usage. 

Also read: AT&T TV: Everything You Need to Know About the Streaming Version of AT&T’s Premium Pay TV Service

“So we feel pretty good about that launch and where we went,” he added. “As you know, we have to ramp that throughout the year, so one month does not a year make. But we are right on the plan of what we expected in terms of volume and the customer feedback on the customers. We have put on the product has been probably stronger than what we expected.”

AT&T is seeking to transition users of its DirecTV and U-verse linear platforms to AT&T TV, an Android TV-based service that's self-install and doesn't require satellite launches. 

The video subscriber exodus continued at AT&T in the first quarter, with the telcom giant shedding 897,000 premium TV customers in the period, mainly from its DirecTV and U-verse units.

AT&T stopped signing up new U-verse customers in April, and the IPTV unit continued to bleed subscribers along with its DirecTV satellite service. The company added that it also lost about 138,000 customers in its streaming AT&T TV Now (formerly DirecTV Now) service, bringing the total number of lost pay TV customers to 1.035 million in the quarter. Over the past year, AT&T has lost about 4.5 million DirecTV, U-verse and AT&T TV Now customers.

AT&T said Tuesday that it plans to launch its latest over-the-top offering -- HBO Max -- on May 27. HBO Max is expected to offer programming from its HBO and Turner networks, as well as original shows and is seen by some as an eventual replacement for its other pay TV offerings.

Overall, AT&T’s revenue declined 4.6% to $42.8 billion, with the COVID-19 taking a $600 million bite out of sales. The company said COVID-19 also impacted EBITDA by about $433 million.

In a conference call with analysts, AT&T chairman and CEO Randall Stephenson said minus the coronavirus impact, AT&T’s performance in Q1 was as expected.

“It’s been a chaotic few weeks for all of us, and the COVID pandemic has had a significant impact to our first quarter, to the tune of 5 cents per share,” Stephenson said. “But if we set the COVID-19 impact aside for a moment, the first quarter was pretty much what we had expected. We expected to produce solid wireless results that would cover the HBO Max investment, The net result would be stable EBITDA and EBITDA margins , and that is exactly what we delivered.”

AT&T’s Mobility unit did outperform expectations -- postpaid phone net additions of 163,000 beat estimates of about 50,000 adds, and ARPU was higher than most analysts expected. And though revenue at the Entertainment unit was in line with expectations at $10.5 billion (7% below the prior year), it fell short of forecasts in cash flow and subscriber losses. Cash flow at Entertainment, which includes DirecTV, AT&T TV Now and U-verse, was down 6% in the period, 4.5% less than most analyst expectations, while subscriber losses were nearly 100,000 customers higher than consensus estimates.

At WarnerMedia, revenue was down 12% to $7.4 billion, due to lower ad revenue from the cancellation of the NCAA March Madness tournament. EBITDA fell 25% in the period to $1.8 billion, due to the COVID-19 impact.

“[W]e don’t see much in these results that change our underlying view that AT&T’s mobility business remains solid, but the company’s entertainment and WarnerMedia businesses face greater risk and uncertainty in general, and in regards to COVID-19 in particular,” Evercore ISI Group media analyst Vijay Jayant wrote in a note to clients. 

AT&T continues to fine-tune its video strategy as it seeks to transition the bulk of its pay TV subscriber base to its new internet-delivered premium service, AT&T TV.

AT&T TV subscribers will now have a year of free HBO service when they sign up. The will also receive three free months of Showtime, Starz, Epix and Cinemax. 

Update: New DirecTV sign-ups have also been offered a free year of HBO. 

The offers appear to be separate from AT&T’s #ConnectedTogether campaign, which is currently offering free premium channel content to DirecTV, U-Verse, AT&T TV and AT&T TV Now subscribers.

The telco is also looking to reposition its skinner virtual pay TV service, AT&T TV Now, lowering the price by $10 to $55 a month, but stripping it of its free HBO perk. (The premium channel is now available to new AT&T TV Now subscribers as a $10-a-month add-on.)

Also read: AT&T TV: Everything You Need to Know About the Streaming Version of AT&T’s Premium Pay TV Service

The moves come as the COVID-19 pandemic crisis dampens AT&T’s hopes for a turnaround in its pay TV business, which lost nearly 5 million users last year. 

Last week, MoffettNathanson analyst Craig Moffett said that instead of an earlier projection, which called for AT&T’s pay TV base to shrink by 13.1% in 2020 to 16.9 million subscribers, he now believes it will now decline by 16.6% to 16.2 million customers. 

Also read: AT&T, DirecTV Set to Be Hit Hard by COVID-19 Recession: Analyst

AT&T last week revealed that it’s no longer adding new customers to its legacy IPTV platform, U-verse. And it’s working to transition much of its DirecTV customer base to AT&T TV.

“That would have been a difficult transition under the best of circumstances. These aren’t the best of circumstances,” Moffett said.  

As the product category evolves, and operators get better at the science of live-streaming video over the open internet, users of virtual pay TV platforms are becoming happier with their service.

An online survey of 6,462 U.S. households conducted by Leichtman Research Group found that 76% of respondents are very satisfied with their vMVPD service compared to 69% in 2018.

Visit Next TV to read more stories like this one. 

Only 14% are inclined to switch to another virtual pay TV service in the next six months compared to 27% in 2018, the last time LRG conducted its Internet Delivered Pay-TV Services study.

The vMVPD category includes Hulu Plus Live TV, Sling TV, YouTube TV, AT&T TV Now, fuboTV, Philo and Vidgo.

The 2020 version of LRG’s report suggests the category still isn’t all that accretive to the overall pay TV business. Only 12% of vMVPD subscribers were most recently non-subscribers to any type of pay TV service.

The biggest share of users, 44%, arrived from traditional cable, satellite or telco platforms, while 26% have kept their traditional service and 18% switched from another vMVPD.

Overall, 18% of adults ages 18-44 have a vMVPD service, with that age group accounting for 65% of U.S. vMVPD subscribers.

LRG found that 79% of all households have at least one SVOD or direct-to-consumer streaming video service, and 44% have three or more of these services.

“More than ever, consumers are exploring the trade-offs between traditional and vMVPD pay-TV services—along with an increasing number of streaming options—to find the combination of content and cost that best meets their needs,” said Bruce Leichtman, president and principal analyst for Leichtman Research Group, Inc. “Younger adults and those with more people and TVs in the household have thus far proven to be most attracted to the lower-cost and lower-channel vMVPD options.”

As the product category evolves, and operators get better at the science of live-streaming video over the open internet, users of virtual pay TV platforms are becoming happier with their service. 

An online survey of 6,462 U.S. households conducted by Leichtman Research Group found that 76% of respondents are very satisfied with their vMVPD service compared to use 69% in 2018. 

Only 14% are inclined to switch to another virtual pay TV service in the next six months compared to 27% in 2018, the last time LRG conducted its Internet Delivered Pay-TV Services study. 

The vMVPD category includes Hulu Plus Live TV, Sling TV, YouTube TV, AT&T TV Now, fuboTV, Philo and Vidgo. 

The 2020 version of LRG’s report suggests the category still isn’t all that accretive to the overall pay TV business. Only 12% of vMVPD subscribers were most recently non-subscribers to any type of pay-TV service.

The biggest share of users, 44%, arrived from traditional cable, satellite or telco platforms, while 26% have kept their traditional service and 18% switched from another vMVPD. 

Overally, 18% of adults ages 18-44 have a vMVPD service, with that age group accounting for 65% of U.S. vMVPD subscribers.

LRG found that 79% of all households have at least one SVOD or direct-to-consumer streaming video service, and 44% have three or more of these services.

“More than ever, consumers are exploring the trade-offs between traditional and vMVPD pay-TV services—along with an increasing number of streaming options—to find the combination of content and cost that best meets their needs,” said Bruce Leichtman, president and principal analyst for Leichtman Research Group, Inc.  “Younger adults and those with more people and TVs in the household have thus far proven to be most attracted to the lower-cost and lower-channel vMVPD options.”

AT&T said it is giving subscribers to its pay-TV services free access to premium channels including Starz, Epix and its own HBO and Cinemax for a limited time.

The company is also launching a new ad campaign that uses the hashtag #ConnectedTogether to show how with people practicing social distancing to slow the spread of the Coronavirus, AT&T’s people and technology are helping to bring people together.

The company, one of the nation’s largest advertisers, said it is replacing its current advertising with spots that deliver its message about the importance of connectivity during times of fear and division.

The first of the new spots show families getting together via video chat and workers connecting cables and working in control rooms.

AT&T said that effective Thursday it will begin offering free premium channel content to DirecTV, U-Verse, AT&T TV and AT&T TV Now subscribers. The offer starts Thursday with Starz (only to DirecTV and U-Verse subscribers). On March 2, subscribers will get Epix through April 16. On April 16 through April 20, they’ll get HBO and Cinemax.

AT&T just started on Monday rolling out nationally its new pay TV service, AT&T TV, which combines streaming over the open internet with the contractual, hidden-fee elements of a traditional bundled video package.

Speaking to investors Wednesday at a Morgan Stanley investor conference, AT&T President and COO John Stankey laid out AT&T’s new pay TV strategy, in which incumbent services DirecTV satellite, U-verse managed IPTV and AT&T TV Now virtual MVPD services are all marginalized.

Also read: AT&T TV: Everything You Need to Know About the Streaming Version of AT&T’s Premium Pay TV Service

Stankey said that even though AT&T paid $50 billion as recently as 2015 to buy DirecTV, it always knew the asset would be obsolete in five years.

Visit Next TV to read more stories like this one. 

“I think, back in July of 2015, after we closed the DirecTV transaction, we were pretty clear and said that at that point in time that we didn't see satellite delivery as necessarily a growth vehicle for entertainment moving forward,” Stankey told investors. “We like the DirecTV customer base, thought it was attractive. But we felt like the march needed to be to delivering entertainment over software.”

A Rightful Place in the Market

Stankey said that going forward, DirecTV will only be marketed to customers on a situational basis.

“We will continue to offer satellite and DirecTV where it has a rightful place in the market, places where cable broadband is not prevalent, oftentimes, more rural or less dense suburban areas,” Stankey said. “We'll continue to offer it for customers on a stand-alone basis, who find its superior content offering to be something that they wish to have. But in terms of our marketing muscle and our momentum in the market, it will be about software-driven pay TV packages either over bring your own hardware, which is AT&T TV.”

Stankey didn’t discuss U-verse, AT&T’s managed IPTV service. However, news site Cord Cutters reported the telco confirmed that U-verse is no longer being marketed online.

As for the erstwhile DirecTV Now, the skinny-bundled virtual pay TV service launched back in 2016 and now confusingly monikered as “AT&T TV Now,” Stankey said it was merely an “iteration” on the path to AT&T TV.

AT&T TV is a full-bundled traditional pay TV service being sold on a two-year contract basis, its base package discounted to $40 a month in the first year. The base price balloons to $93 for the second year, and there are hidden fees, including regional sports network and extra set-top dings.

The service streams to a proprietary Android TV-powered set-top, giving customers access to the full flora and fauna of the Google Play store, as well as the voice capabilities of Google Assistant. The service is self-install, meaning not only is AT&T off the hook for satellite launches, it also doesn’t have to worry about truck rolls anymore.

AT&T TV had already been deployed in 13 states under trial run. Stankey didn’t disclose how many customers the service had, only that the telco “was really pleased with what we saw yesterday.”

AT&T lost more than 4 million users in 2019 across DirecTV, U-verse and AT&T TV Now. It expects AT&T TV to reverse those customer growth fortunes, as well as offer it something sticky to bundle fiber broadband with.

“We're getting higher attach rates than what we would traditionally get in selling broadband with satellite,” Stankey said. “We saw higher growth rates than what we would typically see, and I think that's driven by the fact that the product is an updated, more feature-rich product. And of course, the fact that we can now bundle it more attractively in certain areas, such as our fiber footprint and offer very, very attractive bundles on it—customers are aware of that and are interested to try and kick the tires on it. So feel good about what the team was able to do over this period of time and bring it forward.”

AT&T just started on Monday rolling out nationally its new pay TV service, AT&T TV, which combines streaming over the open internet with the contractual, hidden-fee elements of a traditional bundled video package.

Speaking to investors Wednesday at a Morgan Stanley investor conference, AT&T President and COO John Stankey laid out AT&T’s new pay TV strategy, in which incumbent services DirecTV satellite, U-verse managed IPTV and AT&T TV Now virtual MVPD services are all marginalized. 

Also read: AT&T TV: Everything You Need to Know About the Streaming Version of AT&T’s Premium Pay TV Service

Stankey said that even though AT&T paid $50 billion as recently as 2015 to buy DirecTV, it always knew the asset would be obsolete in five years. 

“I think, back in July of 2015, after we closed the DirecTV transaction, we were pretty clear and said that at that point in time that we didn't see satellite delivery as necessarily a growth vehicle for entertainment moving forward,” Stankey told investors. “We like the DirecTV customer base, thought it was attractive. But we felt like the march needed to be to delivering entertainment over software.”

A Rightful Place in the Market

Stankey said that going forward, DirecTV will only be marketed to customers on a situational basis. 

“We will continue to offer satellite and DirecTV where it has a rightful place in the market, places where cable broadband is not prevalent, oftentimes, more rural or less dense suburban areas,” Stankey said. “We'll continue to offer it for customers on a stand-alone basis, who find its superior content offering to be something that they wish to have. But in terms of our marketing muscle and our momentum in the market, it will be about software-driven pay TV packages either over bring your own hardware, which is AT&T TV.”

Stankey didn’t discuss U-verse, AT&T’s managed IPTV service. However, news site Cord Cutters reported the telco confirmed that U-verse is no longer being marketed online. 

As for the erstwhile DirecTV Now, the skinny-bundled virtual pay TV service launched back in 2016 and now confusingly monikered as “AT&T TV Now,” Stankey said it was merely an “iteration” on the path to AT&T TV. 

AT&T TV is a full-bundled traditional pay TV service being sold on a two-year contract basis, its base package discounted to $40 a month in the first year. The base price balloons to $93 for the second year, and there are hidden fees, including regional sports network and extra set-top dings. 

The service streams to a proprietary Android TV-powered set-top, giving customers access to the full flora and fauna of the Google Play store, as well as the voice capabilities of Google Assistant. The service is self-install, meaning not only is AT&T off the hook for satellite launches, it also doesn’t have to worry about truck rolls anymore. 

AT&T TV had already been deployed in 13 states under trial run. Stankey didn’t disclose how many customers the service had, only that the telco “was really pleased with what we saw yesterday.”

AT&T lost more than 4 million users  in 2019 across DirecTV, U-verse and AT&T TV Now. It expects AT&T TV to reverse those customer growth fortunes, as well as offer it something sticky to bundle fiber broadband with. 

“We're getting higher attach rates than what we would traditionally get in selling broadband with satellite,” Stankey said. “We saw higher growth rates than what we would typically see, and I think that's driven by the fact that the product is an updated, more feature-rich product. And of course, the fact that we can now bundle it more attractively in certain areas, such as our fiber footprint and offer very, very attractive bundles on it—customers are aware of that and are interested to try and kick the tires on it. So feel good about what the team was able to do over this period of time and bring it forward.”

AT&T TV, the streaming version of traditional pay TV, is now available nationwide after launching into 13 test markets over last summer and fall.

AT&T said it is bundling the new video service with fiber internet for $80 a month for the first year—$40 each for broadband and TV.

Also read: AT&T TV: Everything You Need to Know About the Streaming Version of AT&T’s Premium Pay TV Service

The deal requires a two-year contract and shoots up massively in the 13 month—to $93 a month for video service alone. There’s also fees involved for things ranging from regional sports networks to leasing additional set-tops.

Visit Next TV to read more stories like this one. 

These very traditional-sounding telecom restrictions are juxtaposed against very OTT elements to the service. AT&T TV is build around a proprietary Android TV-based set-top, which provides full access to all the apps available in the Google Play Store, not to mention Google Assistant voice and home-automation support.

The service, which ships with one proprietary set-top, also includes 500 hours of DVR storage.

AT&T, which lost more than 4 million pay TV customers in 2019 across DirecTV satellite, U-verse and virtual MVPD AT&T TV Now, believes AT&T TV will stem its subscriber losses, while boosting its fiber internet sales.

The launch of the service displaces AT&T TV Now, which charges more for fewer channels in its current iteration. It would also seem to render DirecTV satellite something AT&T might consider divesting.

AT&T also believes the service will drive down operational costs for pay TV—AT&T TV requires now satellite launches. And it’s customer installed, so there’s no truck rolls involved.

"Our customers told us what they want from their TV service and we built AT&T TV around that,” said Thaddeus Arroyo, CEO of AT&T Consumer, in a statement. “AT&T TV is live TV made easy and when you add AT&T TV to our amazing 1 gigabit AT&T Internet you can’t go wrong.”

AT&T TV, the streaming version of traditional pay TV, is now available nationwide after launching into 13 test markets over last summer and fall.

AT&T said it is bundling the new video service with fiber internet for $80 a month for the first year—$40 each for broadband and TV.

Also read: AT&T TV: Everything You Need to Know About the Streaming Version of AT&T’s Premium Pay TV Service

The deal requires a two-year contract and shoots up massively in the 13 month—to $93 a month for video service alone. There’s also fees involved for things ranging from regional sports networks to leasing additional set-tops. 

These very traditional-sounding telecom restrictions are juxtaposed against very OTT elements to the service. AT&T TV is build around a proprietary Android TV-based set-top, which provides full access to all the apps available in the Google Play Store, not to mention Google Assistant voice and home-automation support. 

The service, which ships with one proprietary set-top, also includes 500 hours of DVR storage. 

AT&T, which lost more than 4 million pay TV customers in 2019 across DirecTV satellite, U-verse and virtual MVPD AT&T TV Now, believes AT&T TV will stem its subscriber losses, while boosting its fiber internet sales. 

The launch of the service displaces AT&T TV Now, which charges more for fewer channels in its current iteration. It would also seem to render DirecTV satellite something AT&T might consider divesting. 

AT&T also believes the service will drive down operational costs for pay TV—AT&T TV requires now satellite launches. And it’s customer installed, so there’s no truck rolls involved. 

"Our customers told us what they want from their TV service and we built AT&T TV around that,” said Thaddeus Arroyo, CEO of AT&T Consumer, in a statement. “AT&T TV is live TV made easy and when you add AT&T TV to our amazing 1 gigabit AT&T Internet you can’t go wrong.”

The State of Massachusetts said AT&T TV Now, Netflix and pretty much any other OTT service are not competitors to cable.

The state's Department of Telecommunications and Cable filed comments Thursday as part of its opposition to a request from Cox Communications. The cable company wants the FCC declare its Holland, Mass. system to be subject to "effective competition" from streaming service AT&T TV Now (formerly DirecTV Now). Such a ruling would provide Cox with regulatory relief. 

Related: Markey Warns Against Dubbing OTT Effective Cable Competitor

The state agency told the FCC that classifying as "effective competition" a non-facilities-based video service like AT&T TV Now, which requires the broadband facilities of a third party like Cox to get its video to its customers, would undermine the commission’s policy goal of encouraging facilities-based investment and limiting regulation of the internet."

Following Massachusetts logic, Netflix would not be considered an effective competitor to traditional pay TV, even though it is clearly pulling eyeballs away from both day-and-date and VOD cable content.

Netflix certainly doesn't see it that way. In a recent 10-K filing it said its competition includes MVPDs, and points out that it has more than 167 million paid subscribers.

While the FCC prefers facilities-based competition, it does not exclude non-facilities-based competitors from the regulatory conversation in other areas. For example, it approved the T-Mobile-Sprint deal in part because Dish gets to run the companies' spun-off prepaid wireless business, which still requires Dish to use the Sprint-T-Mobile facilities, as part of the effort to create a competitor to the merged wireless providers.

Back in October, the FCC granted an effective competition petition by Charter and, in the process, opened the door to Cox and others by ruling that AT&T TV Now, and by extension any similar OTT, was effective competition to traditional cable video, a finding that triggers basic rate deregulation.

Historically, cable providers have cited the ubiquity of satellite as justification for removing rate regulations. But in this test case of sorts, Charter and the smaller, independent operators represented by ACA Connects were basing that OTT competition call on the availability of AT&T TV Now and seeking rate dereg in various Massachusetts and Hawaii markets, essentially the last remaining rate-regulated markets because regulators in those two states had effectively rebutted arguments by Charter that the markets were effectively competitive. (The FCC under Democratic chairman Tom Wheeler voted to presume that cable face competition in all markets [thanks primarily to DBS] unless local regulators could rebut that. The former presumption had been they were not competitive unless cable ops could prove they were).

The FCC’s Charter order said AT&T's OTT service fits all of the definitions of an LEC-provided competitive video provider for purposes of the effective competition trigger — comparable services, offered direct to home, and marketed by AT&T. The item said a provider does not have to have its own facilities to be a comparable video service, one of the sticky wickets in the long-standing debate on how streaming video should be treated in Washington.

Cox followed Charter's lead and Massachusetts is now trying to close the door.

In addition to saying the lack of facilities makes AT&T TV Now a nonstarter as effective cable competition, the state said that, even if it were a competitor. there could be no guarantee that AT&T TV Now would continue to be viable given that it has lost half its subs since the Charter petition was filed and had its biggest sub loss to date in the fourth quarter of 2019. Then there was its drop of support for Roku devices, including Smart TVs.

"Overall, there has been significant upheaval in the streaming video industry over recent months and years," it told the commission. "As of January 2020, electronics giant Sony discontinued its Playstation Vue streaming live video service,148 after being named Wired Magazine’s Best Overall TV Streaming Service as recently as October 2019.149 Although many households subscribe to multiple streaming video services, analysts and video executives agree that there is likely to be substantial shrinkage in the number of streaming services in the near future."

Cable ops have been angling for the OTT effective competition tag, and for good reason.

To avoid a return to basic cable regulations, cable operators are looking to establish the precedent that OTT video maintains the effective competition status of almost all systems today, and do so now, as cord-cutting continues to cut into subscriber counts for traditional competitors and as over-the-top becomes the video delivery system of choice for former satellite customers.

Cable companies fear that if the subscriber counts for DirecTV or Dish Network go south, local franchise authorities could cite that as a reason they were no longer subject to effective competition and reinstate basic rate regulations.

“Roku is becoming the Facebook of TV.”

That’s the rather provocative charge being made by one of several unnamed media company executives in a Digiday story, published today, which attempts to put two recent pubic tiffs the technology company has had with media partners in context. 

Over the weekend, Roku settled at the last minute a program licensing dispute that threatened to keep the Fox app off the Roku platform during the most highly viewed programming event of the year, the Super Bowl. Roku has also been at odds with AT&T, which pulled the app for its virtual pay TV service, AT&T Now, off the platform recently. 

Related: Roku, Fox Reach Streaming Deal Before Super Sunday

In the Digiday story, the unnamed media executives describe an evolution in which Roku is no longer a “neutral” platform, on which they negotiate a simple licensing agreement to have their app put into the ecosystem. 

As anyone who has tracked Roku’s trajectory knows, the company has transformed itself from merely being a seller of devices and an OTT operating environment into an advertising juggernaut of late. Roku reported a 79% year-over-year gain in “platform revenue” (largely advertising) in the third quarter, to $179.3 million—only the latest quantum leap in ad sales for the Silicon Valley streaming video company. 

At the heart of this ad sales growth has been the Roku Channel, an AVOD platform full of recent library theatrical titles, TV episodes, as well as an emerging selection of on-demand new, sports and kids programming. 

Media executives complain that in order to get good placement and promotion of their apps, they’re increasingly being pressured to also license programming for the Roku platform—the same kind of “pay to play” behavior that’s often ascribed to Facebook. 

“Before it was all just neutral, but now Roku is trying to direct anyone on Roku to The Roku Channel and that’s part of the icy relations,” said one media executive to Digiday. 

“They may be taking a viewer from me that would have watched a significant amount of my programming in my app to watch only a sliver of my programming [in The Roku Channel], and that person might say they’d rather just watch The Roku Channel and don’t need to watch my app again,” the executive said.

Added another media exec: “Roku is competition now because of the success of The Roku Channel.”

When queried by Next TV, Roku responded with this statement: "Roku offers a large and valuable audience to content partners. We help content providers acquire, engage and monetize. When content partners succeed, we succeed. Content partners have choices. They can have a standalone streaming channel, their content can be found inside The Roku Channel, or they can do both. Many of our partners are choosing to have their content inside The Roku Channel because it is one of the largest AVOD audiences on the Roku platform. We create significant viewing and favorable economics when they become part of The Roku Channel and it’s a place where we can innovate new content experiences and ad capabilities.  And many advertisers invest with us primarily to reach addressable audiences, at scale, and to take advantage of our unique data, measurement and formats."

The statement added, "Bottom line, The Roku Channel is an important and valuable part of that overall capability that is delighting consumers and helping partners succeed."

AT&T said it lost a cumulative 1.16 million pay TV subscribers in Q4 -- 945,000 at its DirecTV and U-Verse subsidiaries alone -- but financial results were ahead of expectations as it readies for the launch of its HBO Max streaming service.

Most analysts expected AT&T to lose about 900,000 video customers in the period, a target the company missed handily, but still fewer than the 1.4 million it lost in Q3.  AT&T said it ended the year with 20.4 million total video connections, 4.1 million fewer than the 24.5 million customers it had at the end of 2018.

Related: AT&T: No Mas 

AT&T expects to launch its HBO Max streaming service in May, and the company said it has forgone some content licensing revenue in anticipation of that debut. In that light, revenue at its Entertainment declined 6.1% to $11.2 billion (but ahead of analysts’ expectations), while cash flow was $2.04 billion, down about 3.1% compared to the prior year.

At WarnerMedia, revenue declined 3.3% to $8.9 billion. Turner networks revenue was up 1.6% to $3.3 billion, reflecting higher affiliate fee rates, offset by a decline in ad revenue and overall lower domestic audience delivery. HBO revenue increased 1.9% to $1.7 billion. 

The FCC has clearly started something with its determination that streaming service AT&T Now represents effective MVPD competition to Charter's cable video service in Massachusetts, leading to a fight between cable ops and the FCC on one side and local regulators on the other.

The FCC has said the presence in a market of direct-broadcast satellite service (DirecTV or Dish Network) can trigger an effective competition finding, but this was first time a streaming service — in this case virtual MVPD AT&T TV Now — filled the bill.

An FCC determination of effective competition means that local franchise authorities (LFAs) can no longer regulate basic cable rates. All cable franchises are now considered effectively competitive, save for some systems in Massachusetts and Hawaii. That is because the FCC under Democratic chairman Tom Wheeler reversed the FCC's long-standing presumption against effective competition and, instead, assumed they were competitive unless LFA's could prove they were not.

Not long after the FCC's Charter decision last fall, Comcast filed for similar relief, citing the Charter decision and saying it should get the same status in 84 communities in the state where it delivers cable service.

But Massachusetts regulators are pushing back, signaling their plan to challenge the Charter decision and then asking the FCC to hold Comcast's request for relief in abeyance until that challenge is resolved.

Comcast says "no way." It told the FCC last week that there is nothing extraordinary about someone challenging an FCC decision and Massachusetts should not get the "extraordinary circumstances" relief of that abeyance. As to not granting Comcast the same relief as Charter in the state, the company told the FCC: "Subjecting Comcast to regulatory burdens that do not apply to any other competitor in the highly dynamic video marketplace doesn’t serve the interests of consumers and is contrary to congressional intent," Comcast told the FCC

The FCC back in October found in the Charter decision that virtual pay TV service AT&T Now qualified as a competing video service  because it checked all the boxed for an LEC-provided competitive video provider for purposes of the effective competition trigger — comparable services, offered direct to home, and marketed by AT&T. The item said a provider does not have to have its own facilities to be a comparable video service, one of the sticky wickets in the long-standing debate on how streaming video should be treated in Washington.

Related: Markey Warns FCC about Giving OTT Effective Competition Status

FCC chair Ajit Pai said at the time that given the rise of Netflix, Hulu, and Amazon, and the addition next month of Disney Plus and Apple TV, it strained credulity to argue that cable was not now subject to effective competition "across the nation."

But the Massachusetts Department of Telecommunications & Cable and the state's attorney general countered that OTTs do not offer channels of video service and that basing an effective competition filing on a non-facilities-based streaming video service "would undermine  the commission's policy goal of encouraging facilities-based investment and limiting regulation of the internet."

The state also argues that OTT's are a limited (no local TV channels), higher-cost alternative rather than a similarly situated competitor, and so giving them MVPD status would hurt consumers.

Historically, cable providers have cited the ubiquity of satellite as justification for removing rate regulations. But in this test case of sorts, Charter and the smaller, independent operators represented by ACA Connects, based that OTT competition call on the availability of AT&T TV Now, the former DirecTV Now.

To avoid a return to basic cable regulations, cable operators are looking to establish the precedent now as cord-cutting continues to cut into subscriber counts for the satellite competitors, whose ubiquity led to the FCC presumption of competition, and as over-the-top becomes the video delivery system of choice for those former satellite customers, as well as for cable operators who have made it clear that migration to broadband delivery of video and away from their traditional video distribution channels is the future of their business.

Related: Kansas's Rainbow Becomes Latest Cable Operator to Drop Linear Video

Cable companies fear that if the subscriber counts for DirecTV or Dish Network go south, local franchise authorities could cite that as a reason cable ops were no longer subject to effective competition and reinstate basic rate regulations.

AT&T told customers today that the AT&T TV app is no longer available on Roku devices, effectively ending app support for virtual MVPD AT&T Now on the top OTT device ecosystem.

According to an AT&T customer support page, discovered by Cord Cutter News, the app became unavailable on Roku boxes, streaming sticks and enabled smart TVs yesterday, January 1.

“Already have AT&T TV on your Roku device? You can keep using it as long as you don't delete the app. We're actively working on a new agreement with Roku and hope to resolve this soon,” the support page said.

AT&T TV supports AT&T Now, the vMVPD AT&T is quietly shoving aside to make room for the confusingly monikered AT&T TV, the live-streamed version of AT&T’s premium pay TV service.

AT&T TV is currently in beta and set to roll out nationwide in February, and the new service doesn’t have much need for living-room based OTT devices. Rather, AT&T TV requires a proprietary Android TV-powered set-top, rendering app-based viewing to iOS and Android mobile devices.

But this is certainly a major nail in the coffin for AT&T Now (formerly DirecTV Now), which was on the way to becoming the top virtual MVPD before AT&T suddenly stopped its aggressive loss-leader promotional support for the service in late 2018.

According to Strategy Analytics data released over the summer, Roku is the No. 1 OTT device ecosystem in the U.S., accounting for 15.2% of connected TVs.

AT&T told customers today that the AT&T TV app is no longer available on Roku devices, effectively ending app support for virtual MVPD AT&T Now on the top OTT device ecosystem.

According to an AT&T customer support page, discovered by Cord Cutter News, the app became unavailable on Roku boxes, streaming sticks and enabled smart TVs yesterday, Jan. 1. 

“Already have AT&T TV on your Roku device? You can keep using it as long as you don't delete the app. We're actively working on a new agreement with Roku and hope to resolve this soon,” the support page said. 

AT&T TV supports AT&T Now, the vMVPD AT&T is quietly shoving aside to make room for the confusingly monikered AT&T TV, the live-streamed version of AT&T’s premium pay TV service. 

AT&T TV is currently in beta and set to roll out nationwide in February, and the new service doesn’t have much need for living-room based OTT devices. Rather, AT&T TV requires a proprietary Android TV-powered set-top, rendering app-based viewing to iOS and Android mobile devices.  

But this is certainly a major nail in the coffin for AT&T Now (formerly DirecTV Now), which was on the way to becoming the top virtual MVPD before AT&T suddenly stopped its aggressive loss-leader promotional support for the service in late 2018. 

According to Strategy Analytics data released over the summer, Roku is the No. 1 OTT device ecosystem in the U.S., accounting for 15.2% of connected TVs.

With AT&T currently rolling out a full-featured virtual pay TV bundle that’s priced less than its legacy AT&T TV Now streaming service, the telecom is “essentially exiting" the business, said Moffett Nathanson analyst Michael Nathanson.

Formerly known as DirecTV Now, AT&T’s three-year-old vMVPD has been in obvious decline, finishing the third quarter with 1.145 million remaining subscribers. This was down from a high of 1.809 million users at the end of the second quarter of 2018. 

AT&T has stopped offering promotions like free OTT players for AT&T Now signups. It’s also no longer giving away the service to subscribers to unlimited wireless and other AT&T products. 

Most tellingly, however, AT&T is slowly rolling out AT&T TV, which is a full featured streaming pay TV service, undercutting the AT&T TV Now with a $60 entry-level price point that delivers 73 channels and 500 hours of cloud DVR storage, as well as a free Android TV-based OTT device. 

AT&T Now delivers only around 45 channels for a monthly price that has risen to $65. 

Related: AT&T TV ‘Pilot’ Launch Expanded to Four More Markets

The marginalization of the once vital AT&T Now service comes as another notable player in the vMVPD business, Sony PlayStation Vue, prepares to exit the market in January. 

For his part, Nathanson made his comments in a report highlighting his firm’s recent “Fall Summit on Cord-Cutting and the Future of Video.”

Another notable outcome from that event: Around 40% of the remaining pay TV ecosystem is exposed to cord cutting.

Nathanson surmises that about 60% of the 93.4 million pay TV homes in the U.S. contain regular sports viewers. And as long as major sports leagues continue to tie their key rights to the U.S. pay TV ecosystem, these viewers will provide a “potential floor” to the market. 

Nathanson bases his conclusions on data supplied by research company Altman Vilandrie & Company. His findings suggest that 85% of remaining pay TV subscribers are regular sports and news viewers. However, it’s the “sports” portion of that audience remains “the most entrenched pay TV subscribers, Nathanson suggests. 

Cord cutting is at a tipping point, with 23% of SVOD users now 55 and older, and pay TV operators now officially done with subsidizing unprofitable customers through aggressive promotions.

According to MoffettNathanson analyst Michael Nathanson, around 40% of the remaining pay TV ecosystem is exposed to cord cutting.

Nathanson surmises that about 60% of the 93.4 million pay TV homes in the U.S. contain regular sports viewers. And as long as major sports leagues continue to tie their key rights to the U.S. pay TV ecosystem, these viewers will provide a “potential floor” to the market.

Nathanson made his comments in a report highlighting his firm’s recent “Fall Summit on Cord-Cutting and the Future of Video.”

Nathanson bases his conclusions on data supplied by research company Altman Vilandrie & Company. His findings suggest that 85% of remaining pay TV subscribers are regular sports and news viewers. However, it’s the “sports” portion of that audience remains “the most entrenched pay TV subscribers, Nathanson suggests.

AT&T Now Going Bye Bye?

Meanwhile, with AT&T currently rolling out a full-featured virtual pay TV bundle that’s priced less than its legacy AT&T TV Now streaming service, Nathanson said the telecom is “essentially exiting" the vMVPD business.

Formerly known as DirecTV Now, AT&T’s three-year-old vMVPD has been in obvious decline, finishing the third quarter with 1.145 million remaining subscribers. This was down from a high of 1.809 million users at the end of the second quarter of 2018.

AT&T has stopped offering promotions like free OTT players for AT&T Now signups. It’s also no longer giving away the service to subscribers to unlimited wireless and other AT&T products.

Most tellingly, however, AT&T is slowly rolling out AT&T TV, which is a full featured streaming pay TV service, undercutting the AT&T TV Now with a $60 entry-level price point that delivers 73 channels and 500 hours of cloud DVR storage, as well as a free Android TV-based OTT device.

AT&T Now delivers only around 45 channels for a monthly price that has risen to $65.

Related: AT&T TV ‘Pilot’ Launch Expanded to Four More Markets

The marginalization of the once vital AT&T Now service comes as another notable player in the vMVPD business, Sony PlayStation Vue, prepares to exit the market in January.

AT&T has quietly launched the streaming version of its premium DirecTV satellite TV service, which it calls AT&T TV.

An AT&T rep told MCN that the service became available this week in New York City, Seattle, Minneapolis and Miami. In August, she said AT&T began “piloting” AT&T Now in nine markets; Orange and Riverside, California; Topeka, Kansas; Wichita, Kansas; El Paso, Texas; Odessa, Texas; Corpus Christi, Texas; St. Louis; Springfield, Missouri; and West Palm Beach, Florida.

The self-installed streaming service, which starts out for $59.99 a month for the first year with a 24-month contract, ships with an Android TV-powered set-top. After the first 12 months, the price of this entry-level “Entertainment” tier elevates to a very linear-pay-TV-like $93 a month.

The Entertainment tier has around 73 channels, including local broadcast stations, as well as ESPN, but no regional sports networks. Not including the Spanish-language-focused Optimo tier, there are four escalating AT&T TV tiers in all, cuitimanating with the $79.99-a-month Ultimate package. Here’s a link to the channel lists.

AT&T comes with a 500 GB cloud DVR. And the 4K-capable Android TV device, which supports popular OTT apps like Netflix, is free. But you only get one—additional devices for secondary viewing rooms costs $10 a month.

AT&T executives have lauded the operational costs improvements of AT&T TV over traditional DirecTV service, noting that they don’t have to launch pricey satellites, or send out truck rolls, to support the product. Also, integration of popular OTT apps—a challenge for traditional managed-service pay-TV offerings—is rather organic, since AT&T TV is and of itself a streaming service.

Shipping with a piece CPE, and including contracts, AT&T TV is not to be confused with AT&T TV Now, the virtual MVPD that AT&T seems to be quietly marginalizing. Indeed, the price of the 45-channel AT&T TV Now base package has swelled to $65 a month, just three years after the service was launched as “DirecTV Now” and priced at $35 a month.

After nearly reaching 2 million users in the third quarter of 2018, AT&T TV Now has been in steady decline, with AT&T cutting it off from the aggressive promotional deals that fueled its early growth. The vMVPD lost another 195,000 customers in the third quarter of this year, and now has around 1.145 million left. 

WASHINGTON — In what could signal a big change in regulatory approach, Federal Communications Commission chairman Ajit Pai is proposing to set the precedent that streaming services qualify as “effective competition” to multichannel video programming distributors sufficient to trigger basic rate deregulation.

The FCC has said the presence in a market of direct-broadcast satellite service (DirecTV or Dish Network) can trigger an effective competition finding, but this would be the first time a virtual MVPD — in this case AT&T TV Now — filled the bill.

Pai said in an Oct. 3 blog post that an order would be teed up for a vote at the Oct. 25 meeting granting Charter Communications’s request (backed by ACA Connects) for a finding of effective competition. Pai almost certainly has the votes for approval or he would not have scheduled it for a public vote.

Historically, cable providers have cited the ubiquity of satellite as justification for removing rate regulations. But in this test case of sorts, Charter and the smaller, independent operators represented by ACA Connects are basing that OTT competition call on the availability of AT&T TV Now, the former DirecTV Now.

To avoid a return to basic cable regulations, cable operators are looking to establish the precedent now as cord-cutting continues to cut into subscriber counts for traditional competitors and as over-the-top becomes the video delivery system of choice for former satellite customers.

Cable companies fear that if the subscriber counts for DirecTV or Dish Network go south, local franchise authorities could cite that as a reason they were no longer subject to effective competition and reinstate basic rate regulations.

A finding of effective competition lifts basic-cable price regulation, which has now been eliminated in all but that handful of systems. Cable operators deemed subject to effective competition also do not have to provide broadcastTV signals on the basic tier.

“Adopting this order would be a major step toward the commission recognizing the realities of the modern video marketplace, and the increasingly important role that streaming services are playing in it,” Pai said.

The item raises the issue of just how the FCC should define OTT services beyond effective competition, and the specter of subjecting them to the same regulatory regime, such as program-access and program-carriage rules.

The Charter ruling could fuel that debate anew, given that the cable industry has made it clear that broadband video is the future of the business and also given that the current definition of the effective competition trigger is “at least two unaffiliated [MVPDs], each of which offers comparable video programming to at least 50% of the households in the franchise area.”

The FCC’s Charter order says OTT fits all of the definitions of competitive video provider for purposes of the effective competition trigger — comparable services, offered direct to home. The item says a provider does not have to have its own facilities to be a comparable video service, one of the sticky wickets in the debate.

Pai has said the FCC should not redefine OTT providers as MVPDs subject to FCC program-access regulations. But that was back in 2015.

His predecessor, FCC chairman Tom Wheeler, proposed redefining linear over-the-top providers (with day-and-date channel lineups similar to those of traditional cable and satellite) as MVPDs, but got pushback from some OTT providers. as well as from cable operators.

Wheeler was looking to give OTT providers FCC-enforced access to vertically integrated programming to give them a boost as video competitors to cable.

WASHINGTON — In what could signal a big change in regulatory approach, Federal Communications Commission chairman Ajit Pai is proposing to set the precedent that streaming services qualify as “effective competition” to multichannel video programming distributors sufficient to trigger basic rate deregulation.

The FCC has said the presence in a market of direct-broadcast satellite service (DirecTV or Dish Network) can trigger an effective competition finding, but this would be the first time a virtual MVPD — in this case AT&T TV Now — filled the bill.

Pai said in an Oct. 3 blog post that an order would be teed up for a vote at the Oct. 25 meeting granting Charter Communications’s request (backed by ACA Connects) for a finding of effective competition. Pai almost certainly has the votes for approval or he would not have scheduled it for a public vote.

Historically, cable providers have cited the ubiquity of satellite as justification for removing rate regulations. But in this test case of sorts, Charter and the smaller, independent operators represented by ACA Connects are basing that OTT competition call on the availability of AT&T TV Now, the former DirecTV Now.

To avoid a return to basic cable regulations, cable operators are looking to establish the precedent now as cord-cutting continues to cut into subscriber counts for traditional competitors and as over-the-top becomes the video delivery system of choice for former satellite customers.

Cable companies fear that if the subscriber counts for DirecTV or Dish Network go south, local franchise authorities could cite that as a reason they were no longer subject to effective competition and reinstate basic rate regulations.

A finding of effective competition lifts basic-cable price regulation, which has now been eliminated in all but that handful of systems. Cable operators deemed subject to effective competition also do not have to provide broadcastTV signals on the basic tier.

“Adopting this order would be a major step toward the commission recognizing the realities of the modern video marketplace, and the increasingly important role that streaming services are playing in it,” Pai said.

The item raises the issue of just how the FCC should define OTT services beyond effective competition, and the specter of subjecting them to the same regulatory regime, such as program-access and program-carriage rules.

The Charter ruling could fuel that debate anew, given that the cable industry has made it clear that broadband video is the future of the business and also given that the current definition of the effective competition trigger is “at least two unaffiliated [MVPDs], each of which offers comparable video programming to at least 50% of the households in the franchise area.”

The FCC’s Charter order says OTT fits all of the definitions of competitive video provider for purposes of the effective competition trigger — comparable services, offered direct to home. The item says a provider does not have to have its own facilities to be a comparable video service, one of the sticky wickets in the debate.

Pai has said the FCC should not redefine OTT providers as MVPDs subject to FCC program-access regulations. But that was back in 2015.

His predecessor, FCC chairman Tom Wheeler, proposed redefining linear over-the-top providers (with day-and-date channel lineups similar to those of traditional cable and satellite) as MVPDs, but got pushback from some OTT providers. as well as from cable operators.

Wheeler was looking to give OTT providers FCC-enforced access to vertically integrated programming to give them a boost as video competitors to cable.

Neither side is commenting, but a reading of the immediate tea leaves suggests that AT&T and Sinclair Broadcast Group may be heading toward a resolution that will give the broadcaster a retras deal without depriving DirecTV, AT&T TV Now and U-verse customers of its programming.

Sinclair began warning AT&T subscribers of the possibility of a blackout last week, and set a deadline of 5 p.m. Eastern Time on Friday (Sept. 27) to reach a deal. That deadline passed without a deal but more importantly AT&T customers didn’t lose access to Sinclair content while the negotiations moved on.

Related: Hill Presses AT&T, Sinclair to do Retrans Deal 

As of 10:30 p.m. on Saturday (Sept. 28), talks were still ongoing. But Sinclair removed messages warning of a blackout on the websites of its stations, and a website specifically set up for retrans spats -- www.keepmycontent.com -- merely stated: “Thank you for being a loyal Sinclair viewer. We continue to work with AT&T to maintain access to our programming.”

While a blackout could still happen, those were good signs that a deal could be reached soon.

Sinclair said previously that 136 stations in 86 markets, as well as The Tennis Channel, could go dark to DirecTV, AT&T TV Now and U-verse customers across the country. Pulling signals has been an effective tactic for broadcasters in past retrans negotiations, but AT&T has taken a hardline in recent talks.

Chances are that extensions will continue to be granted as talks move on. That would be ideal for AT&T’s customers, who would be able to watch programming -- especially the NFL on Sunday -- while the companies try to work out their differences. 

AT&T said it has named John Stankey chief operating officer of the parent company, while retaining his role as CEO of WarnerMedia.

The newly created role comes on the heels of the retirement of AT&T Communications CEO John Donovan. Donovan is set to retire on Oct. 1, upon which time former AT&T Communications’ Technology and Operations group president Jeff McElfresh will replace him as CEO of the unit. McElfresh will report to Stankey, as will Xandr CEO Brian Lesser.

As head of AT&T Communications, McElfresh will be in charge of a telecom, wireless, broadband and pay-TV unit (which includes it DirecTV, U-verse, AT&T TV Now and AT&T TV divisions), with about 100 million customers.

In his new role Stankey will report to AT&T chairman and CEO Randall Stephenson, putting him a step closer to the top spot in the company. 

“Now is the time to more tightly align our collection of world-class content, scaled consumer relationships, technical know-how and innovative advertising technology,” Stephenson said in a press release. “It’s the natural next step in bringing together the distinct and complimentary capabilities of AT&T Communications, WarnerMedia and Xandr to deliver for consumers the benefits of a modern media company. AT&T is alone in the industry in being able to bring together these three great businesses for the launch of innovative consumer offers, relevant advertising and new entertainment services like HBO Max.”

Stankey takes on the new role just as AT&T is readying the full launch of its streaming video service AT&T TV, scheduled for the fall. The service began a test launch in a few markets in August. 

“John is an outstanding executive who has led nearly every area of our business, helped shape our strategy and excelled at operations throughout his career. The Board and I look forward to John hitting the ground running in his new role as president and COO,” Stephenson said.

Like Stankey -- who joined AT&T in 1985 -- McElfresh is a phone company lifer, with nearly 25 years at AT&T in a variety of roles. In addition to AT&T Communications’ Technology and Operations group, he has served as CEO of AT&T’s Vrio and its DirecTV Latin America and SKY Brasil businesses; and President of AT&T Mexico.

AT&T and Starz said they have reached a multi-year, comprehensive carriage agreement, securing the rights for AT&T to carry the full suite of Starz and Starz Encore linear and HD channels, on demand and online services across its DirecTV, AT&T TV and U-verse platforms.

“Our customers want more choice and value in addition to compelling entertainment in our channel offerings. We’re pleased to deliver that combination in this new agreement with Starz,” said AT&T Communications chief content officer Daniel York in a press release.

With the deal, Starz avoids a lengthy blackout with the top pay TV distributor in the country. With its AT&T TV Now, DirecTV and U-verse platforms, AT&T reaches about 23 million homes across the country.

Related: Starz, Altice Reach Long-term Carriage Deal 

“Starz is pleased to have found a mutually beneficial way to extend our relationship over the next several years to give millions of AT&T subscribers access to our acclaimed premium original content and vast library of blockbuster films,” Starz chief operating officer Jeffrey Hirsch said in a press release. “By working together, both companies are in a position to continue to deliver great value to our shared customers.”

Epix has launched on the AT&T TV Now streaming service nearly three months after the premium service launched on AT&T’s DirecTv’s satellite service.

AT&T TV Now, formerly DirecTV Now, will offer Epix for $6 per month.The launch follows Epix and AT&T’s recently announced carriage agreement and the network’s May 19 launch on the DirecTV satellite service. Subscribers of the streaming service will have access to Epix original programming, including Pennyworth and upcoming drama Godfather of Harlem.

RELATED: AT&T, Epix Reach Carriage Deal 

“We’re thrilled to be launching on the AT&T TV app, making our premium programming available to even more AT&T customers across the country,” said Michael Wright, Epix president in a statement.. “It’s an incredibly exciting moment for the network as we continue to expand our distribution footprint and bring our superior customer experience and quality programming to new audiences.”

Added Daniel York, Chief Content Officer for AT&T: “We’re pleased to expand the Epix offering to our AT&T TV Now subscribers, giving our customers even more choice in quality premium programming.”