U-verse TV Hits 2 Million Mark

AT&T expects to sign up its 2 millionth subscriber for U-verse TV on Wednesday -- and the telco introduced its fastest DSL service to date, at 24 Mbps downstream -- but analysts say the new services won't stop its wireline business from contracting further.

The U-verse High Speed Internet Max Turbo, available to residential customers in certain areas for $65 per month as part of a bundle with TV service, provides up to 24 Mbps down and up to 3 Mbps up. The Max Turbo service will be available initially in Austin, San Antonio and St. Louis markets, starting this week.

Max Turbo, which is available to eligible small business customers for $95 per month, supersedes AT&T's previous top tier of 18 Mbps.

AT&T, which has added more than 1 million U-verse TV customers in the last 12 months, is hoping the bundling strategy slows its landline losses. The telco said that as of the end of the third quarter, more than 90% of U-verse TV customers also take DSL service, more than 60% of new U-verse TV customers bundle U-verse Voice, and more than 75% of U-verse TV customers have a triple- or quad-play.

"Customers love that they can get a complete and integrated quad-play of services with U-verse," said Ralph de la Vega, head of AT&T Mobility and Consumer Markets.

Separately, AT&T has launched a subscriber-acquisition program offering up to $400 in Visa prepaid gift cards to triple-play U-verse subscribers who sign up online through Dec. 31.

As of the end of September, U-verse TV was available to about 15 million homes in 22 states. The U-verse fiber-to-the-node network currently passes more than 20 million homes.

Nevertheless, while U-verse TV and Internet services help boost average revenue per customer, AT&T has been experiencing accelerating losses in its core landline business, according to Sanford Bernstein analyst Craig Moffett. In addition, he noted, video services are relatively low-margin because of high programming costs. As a result, Moffett expects AT&T's overall wireline margins to decline from 31.8% in 2009 to 26.3% in 2013.

"We are witnessing the slow end of the wired phone network," he wrote in a research report Wednesday.

AT&T lost 803,000 residential phone lines in the third quarter, to stand at 25.2 million, down 11.8% from a year ago. On the broadband front, the more advanced U-verse DSL broadband service had a net gain of 252,000 subscribers, which offset a decline in traditional DSL connections for a 90,000 net gain in wireline broadband connections. The telco had 13.55 million DSL subscribers as of the end of September.