AT&T Communications CEO John Donovan said the phone company’s as-yet unnamed streaming video service will “radically reshape” customers’ concepts of television service, but added that subscriber losses at its more traditional TV offerings will continue.

“It’s the consumer product I’m most excited about since the iPhone. It radically reshapes what your concept of television is,” Donovan said of the new streaming service at the Credit Suisse Communications Conference in New York. “We think we’re going to be really disruptive in the market on features and capability, but we need to evolve our product. And that’s the way we want to do it.” 

Donovan, who has responsibility for AT&T’s wireless, wireline and video distribution businesses (accounting for roughly 80% of overall revenue), said video losses over the past few quarters were expected as AT&T transformed its concept of the business.

AT&T lost about 544,000 customers at its DirecTV satellite TV unit and shed another 83,000 customers at its streaming DirecTV Now business in Q1, mainly as the company removed heavy discount offerings from its lineup. At the Credit Suisse conference, Donovan said the losses were a combination of the overall secular decline in the industry and “customer cleanup,” which he said will continue through most of this year.

“There are a set of customers that are going to only be in the market to buy [a fixed service] below the cost,” Donovan said. “...In the early days of a decline curve, the first thing you want to do is grab all of the customers. That’s really good logic because if you’re going to make a big technology shift, you want to do that with the customer. I think now we’re getting a lot better handle on the sub-segmentation of this and beginning to understand who gets the most value from the product.”

But he admitted that the past practice of many OTT services, including his own, of providing video service at a loss can’t be sustained for the long term.

“The fundamental issue around TV is -- using broad-brush numbers -- you have to know what the customer is willing to pay 100 bucks for,” Donovan said. “Trying to give them 100 bucks of value for $40 or $50 or $60, that’s not going to be a fit that is going to work for the customer or the organization in the long run.”

Related: WarnerMedia Reveals SVOD Platform Details 

Donovan said that almost every company in the industry is trying to figure out what model will work best as consumers shift from just wanting more stuff to wanting the stuff they want.

“The most important thing we have to do is to address broader price points that are much broader than simply saying ‘Do you want HBO or Cinemax or not,’ ‘Do you want the upgraded sports package or not,’” Donovan added. “That’s how we differentiated before. Good, better, best were just three content offers. But those didn’t stretch far enough. And so we’re going to have to build new products that stretch across a wider range.”

That would be AT&T’s latest streaming service -- slated for a Q3 beta launch -- Donovan said.

LAS VEGAS—As AT&T Communications CEO John Donovan explained it, “wireless is a fiercely competitive industry, but also one born of superlatives.”

Indeed, as the wireless industry continues to build the hysteria and wonderment about its upcoming 5G network standard, the infighting is intense. Case in point: AT&T rivals Verison, T-Mobile and Sprint recently took issue with AT&T's labeling of enhanced 4G LTE services in some markets as "5G Evolution."

In select locations, customers—who won’t have access to 5G smart phones until later this year—received notifications on their Android handsets that they were accessing A&T’s confusing conflation of 5G.

But these customers were actually only accessing 4G LTE Advanced network capabilities.

Speaking during an afternoon CES keynote, Donovan used the opportunity to troll AT&T’s rivals, noting that AT&T merely “got our competitors frustrated.”

AT&T’s customers need an “indicator,” he said, that the speeds they were accessing with 4G LTE Advanced were “twice as fast” as those they were getting with traditional 4G LTE.

Donovan, however, was just getting started. 

Related: AT&T Launches 5G Network—Capped at 15 GB and Topping Out at 140 Gbps

In mid-December, AT&T targeted “select businesses and consumers” in Atlanta, Charlotte, Dallas, Houston, Indianapolis, Jacksonville, Louisville, Oklahoma City, New Orleans, Raleigh, San Antonio, and Waco to receive a free Netgear Nighthawk mobile hotspot that will let them access AT&T’s seminal 5G network infrastructure.

This came nearly two months after Verizon launched fixed 5G services to “select” customers in Los Angeles, Houston, Indianapolis and Sacramento. Few consumers in those cities actually had access to Verizon’s proprietary-standards-based launch, however.

“We were proud in December that we had a real device in the store that you could buy in 12 cities,” Donovan said. “We were up first.”