U-Verse TV Banks a Million

AT&T hit the goal it set a year ago by signing up its 1 millionth U-verse TV customer this month, but the Internet-protocol TV service's penetration rates still lag those of its major telco peer, Verizon Communications.

U-verse TV, first launched in San Antonio in June 2006, has been deployed in 79 major markets in 16 states. But using Verizon's FiOS TV as a benchmark for comparison, U-verse TV has been slower to take off, even accounting for the fact that AT&T was later in coming to market.

U-verse TV service was available to approximately 9.4 million homes as of the end of the third quarter, yielding an overall penetration rate of about 8%. Verizon's FiOS TV had a penetration rate of 19.7% in the third quarter of 2008, with 1.6 million subscribers, up from 15.2% a year earlier.

In a statement, AT&T said, “As a new service, any calculation of penetration should take into account the length of time that service has been available.” The company said that in “established” market areas, it has achieved more than 10% penetration in less than 12 months.

By comparison, FiOS TV on average has achieved 17% penetration in markets where it has offered service for 12 months and more than 26% penetration within two years, Verizon president Denny Strigl said on the company's third-quarter earnings call in October.

And U-verse has hit setbacks on the way to the 1 million mark.

Last year, AT&T said it would spend $500 million more in 2007 and 2008 than it previously expected to build out the fiber-to-the-node network underlying U-verse TV while scaling back the number of homes it expected to pass this year to 17 million (down from a previous estimate of 19 million).

Early on, the telco blamed a slower-than-expected U-verse TV rollout in part on the need to “make enhancements” to the IPTV software provided by Microsoft. The service also suffered a nationwide outage in October 2007 as AT&T was upgrading its back-end operations support system.

Despite those glitches, U-verse TV received the highest customer-satisfaction ranking in three out of four regions on the J.D. Power and Associates 2008 Residential Television Service Provider Satisfaction Study, conducted in July. (FiOS TV was No. 1 in the fourth, the North Central region.)

AT&T is increasingly focused on “quadruple-play integration” with U-verse — meaning it's blending wireless with other elements of the bundle. For example, it now offers free access to its nationwide network of Wi-Fi hot spots to its high-speed Internet subscribers. The telco has put wireless chief Ralph de la Vega in charge of consumer marketing initiatives for the consolidated Mobility and Consumer Markets group.