I have posted several times on Verizon (NYSE:VZ) and their FiOS program. As such it is fitting to take a look at the other large telecom TV program underway in the US: Project LightSpeed or U-verse by AT&T (NYSE:T).
Two conclusions are clear from reading, listening to AT&T presentations and discussing the program with people who are familiar with deployments of the IPTV architecture by AT&T.
(1) Fiber to the premise is much easier to complete then originally estimated and (2) receiver state control and delivery of video over copper is much harder to deliver in a high quality then estimated. Investors looking for a revenue boost to Microsoft from receivers in 2007 will be disappointed.
It is likely that AT&T will be forced to make an architecture change for video delivery. The clear challenge is speed and distance over the copper plant from DSLAM. Back office integration issues are well documented in the press, but they will be worked out over time. These issues do not mean a vendor selection change, but rather a delay in the deployment schedule and subscriber growth and may imply a fiber to the premise strategy (i.e. Verizon) or switched video to the node (i.e. traditional cable HFC architecture) with QAM modulation to the set top box.
I think the service will not be working to expectations until mid to late 2008. AT&T’s video service is limited to 1 HD and 2 SD receivers with no DVR. The main limitation is the maximum downstream rate achieved is 25 Mbps, with 2 Mbps upstream over 3k from the FTTN architecture.
In a bonded copper architecture, they are achieving 25Mb/s to around 5k feet. Copper bonding allows AT&T to support multiple HD set tops (which is not available today). The primary vendors of the program are: Alcatel (ALU), Microsoft (NASDAQ:MSFT), Motorola (MOT), Cisco (NASDAQ:CSCO), and Fuji.
U-Verse video subs are up to 7000 (more than doubling this quarter). They recently reached the 1000 new subs per week rate, which indicates for the first time they can attract and process orders. Pair bonding will not be ready to deploy until late Q1 or early Q2 '08. This makes U-Verse a second class citizen to cable and satellite. Along with bonding will be a deployment of the INID. The INID will terminate VDSL and will remain permanent on the home (eliminating the modem). This allows for DSL and VOIP Uverse customers to self-install their service. HD streams are running at 8.5Mb/s per stream. SD is 1.8Mb/s. Later this year, HD will drop into the 6 - 6.5Mb/s range. All set top boxes are HD capable. However only 1 HD stream per customer is allowed. (Note this is an issue as Comcast and DirecTV allow for multiple HD streams to multiple receivers) DVRs are SD only AT&T is averaging 2.85 set tops per home FTTN costs per home passed is $350. This includes everything (transport, access, etc).
Full Disclosure: I do not own shares of any of the companies mentioned in this post.