AT&T battles cable, satellite TV services

The San Francisco Chronicle reports:

AT&T launched a new television subscription service in select Bay Area cities Thursday, as it faces off against cable and satellite carriers and ushers in a new era of competition.

Called U-verse, AT&T's new television service is available in San Ramon, Danville, Cupertino and Saratoga, with plans for the rest of the Bay Area over the next two years.

Like AT&T's high-speed Internet service, U-verse uses telephone lines to send more than 300 television channels into the home. It represents a formidable threat to the cable television business since both can now sell discounted bundled packages, wrapping telephone, Internet and television services in one bill.

"There's a lot of pent-up demand for it," said Robert Serrano, an analyst at JupiterKagan Inc. "A lot of people just want to have that choice of competition."

AT&T's entrance into the Bay Area television market comes as the entertainment industry is undergoing a dramatic shift, with more and more consumers tuning in to the Web and watching video clips on YouTube, "Ugly Betty" on ABC.com or movie downloads from iTunes.

AT&T is spending $1 billion to upgrade its network in California so that it is fast enough for its services. But the deployment has been delayed as AT&T, which teamed up with Microsoft Corp., Alcatel and Motorola, faced technical problems and local, state and national regulatory roadblocks. Key wins in California and the Federal Communications Commission are expected to lower those hurdles.

The East Bay and South Bay mark the third and fourth markets for AT&T's rollout. Already in San Antonio and Houston, with about 3,000 subscribers, AT&T plans to launch the service in 11 more markets before the year ends. It expects to make it available to 19 million homes in the next two years.

"We're building as fast as we can," said Melba Muscarolas, vice president and general manager of AT&T's San Francisco Bay Area market. "We're eager to provide consumers with choice."

U-verse is comparable to Comcast's cable service, offering more than 300 channels from HBO to Disney and such features as video-on-demand and picture-in-picture. The price ranges from $44 per month for about 100 channels to $99 for 300 channels.

It also lets customers use the Web to program recordings remotely, something that Comcast doesn't now offer. The package also includes three Motorola set-top boxes, one with a digital video recorder that can record up to four programs at once.

Because of the system's limitations, however, consumers can only watch one high-definition program at a time; AT&T said it expects consumers to be able to watch two high-definition programs simultaneously on their television sets next year. HD channels cost $10 more a month.

Competition.