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VNI Service Adoption Forecast

AT&T U-verse TV

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Text Box: EXECUTIVE SUMMARYCOMPANY PROFILEAT&T, headquartered in Dallas, TX, is one of the leading worldwide providers of IP-based communications services to businesses. They also have the largest international coverage of any U.S. wireless carrier, offering the most phones that work in the most countries; the largest Wi-Fi network in the United States; and the largest number of high speed Internet access subscribers in the United States.COMPANY HISTORYSBC Communications Inc. established itself as a global communications provider by acquiring Pacific Telesis Group (1997), Southern New England Telecommunications (1998) and Ameritech Corp. (1999). In 2005, SBC Communications Inc. acquired AT&T Corp., creating the new AT&T.

Challenge/Opportunity

Faced with broadband penetration maturity, increasing mobile substitution, and competition from cable on the small and medium businesses front, AT&T has an opportunity to increase its customer value proposition by offering an enhanced IPTV service, called U-verse TV, which leverages customers' next-generation IP network while allowing them to bundle it with their other services such as broadband access, home phone, and wireless services.

Services Offered

AT&T has introduced several enhancements for its U-verse TV customers at no extra cost. Many of the new features and content are enabled through strategic partnerships and alliances, including:

Total Home DVR, which gives you the freedom to watch and manage recordings from a single DVR on any connected TV in the house.

U-verse TV Multiview, a new app that lets you watch up to four channels at once on your TV screen.

Regular Additions to U-verse High Definition (HD) Channel Lineup, which now offers access to about 110 HD channels, which is typically more than the local cable providers.

AT&T U-bar, which gives you personalized, on-screen weather, sports, traffic, and stock information.

Media Share, which lets you stream your personal photos and music files located on your home computers to any connected TV in the home.

Weather On Demand, an app that gives you instant access to check the current weather conditions and detailed forecasts in any U.S. city.

Yahoo! Sports Fantasy Football, an app to help you manage your fantasy teams from your U-verse TV screen through the AT&T U-bar.

College Basketball from Yahoo! Sports, which gives basketball fans the ability to view tournament brackets, their personalized completed bracket, game summaries and box scores, and more through the AT&T U-bar during the basketball season.

Online Photos from Flickr, an app that lets you view on your TV personal photos that you have uploaded to flickr.com.

TV Awards and New Shows, a new app that helps you stay on top of this season's award shows and season premieres.

Remote Mobile Access, which allows AT&T U-verse TV and Internet customers to use any compatible AT&T wireless phone or handset to search U-verse TV program listings, schedule program or series recordings, and manage or delete stored DVR content.

Faster Internet Surfing Speeds, with the launch of Max (12 Mbps) and Max Plus (18 Mbps).

AT&T also expanded its U-verse offers with the introduction of AT&T U-verse Voice. U-verse Voice is a managed IP-based digital voice service that is delivered over the AT&T's fiber network.

Strategy

• Push adoption of triple-play or quad-play services through bundling services.

– "U-verse is beginning to reshape our consumer revenue profile," says Richard G. Lindner, chief financial officer and senior executive vice president. AT&T is leveraging the successful U-verse offering to help push other services through bundling.

• Increase customer loyalty. U-verse customers are found to be very loyal. With such loyalty, AT&T is hoping to:

– Drive up revenue per household. (AT&T posted its seventh consecutive quarter of year-over-year growth in consumer revenues per household, up 2.5 percent.)

– Use U-verse to help retain wireless and wireline customers. (In the third quarter, AT&T had a 27.5 percent smaller decline in consumer connections than the third quarter a year ago. AT&T credits this smaller decline to the U-verse offering, but this could also be credited to a better economic outlook than a year ago.)

Success Factors/Metrics/Monetization

AT&T expects 2009 U-verse revenues to top US$2 billion, with more growth ahead. The pricing strategy for U-verse offering is very much tied to other services.

• The goal is to increase U-verse TV subscribers by 240,000, bringing the total to 1.8 million, up more than 1 million over the past year. Across all eligible living units, U-verse TV penetration is just above 12 percent.

• According to a survey just published by the analyst firm Strategy Analytics, over 80 percent of Verizon FiOS and AT&T U-Verse television customers reported to be "very" or "extremely" satisfied with their provider. Cable customers, on the other hand, had the lowest satisfaction levels.

• More than three-quarters of U-verse customers were triple or quad play, combining TV, broadband, voice, and wireless.

• A year ago, consumer wireline IP revenues made up 23.2 percent of consumer wireline total. In the third quarter, these products represented nearly a third of consumer wireline revenues.

• Price packages vary by region.

Company Background

AT&T U-verse services are enabled by a 100 percent IP-based platform delivered over AT&T's fiber-rich network, which brings optical connections deeper into residential neighborhoods. This strategy allows AT&T to deploy advanced IP-based television and Internet services using only a fraction of the capital required by other providers.

References

• AT&T Investor Relations: www.att.com/gen/landing-pages?pid=5718

www.intomobile.com/2009/07/21/att-announces-new-netbooks-and-a-new-connectech-service.html

www.liliputing.com/2009/11/att-want-a-3g-netbook-youll-have-to-pay-for-it.html

http://seekingalpha.com/article/168288-at-amp-t-q3-2009-earnings-call-transcript

www.redorbit.com/news/technology/1049939/att_uverse_named_best_business_strategy_by_
industry_analyst_firm/index.html

www.dallasnews.com/sharedcontent/dws/bus/stories/DN-netbooks_26bus.ART0.State.Edition1.3c97ed3.html

www.gartner.com/it/page.jsp?id=501276

www.att.com/u-verse