Bloomberg is reporting that AT&T is phasing out its U-verse DSL-based TV/Internet service, instead directing all new customers toward its recently acquired DirecTV service. Current U-verse customers can retain their service, although fourth-quarter results show that AT&T saw its largest U-verse turnover--240,000 customers--to date. DirecTV, meanwhile, gained 214,000 customers in the same time frame.
AT&T Inc. is phasing out the U-verse TV service as it pushes new customers to newly acquired DirecTV, a sign the company is giving up on once-heralded plans to compete head-on with cable through telephone lines.
The biggest U.S. pay TV provider has stopped building U-verse set-top boxes and is nudging prospective customers toward its satellite unit, which has lower hardware and programming costs. The shift is the first stage of a plan to create a "home gateway" within three years that will consolidate all AT&T services and act as a central hub to deliver video to any device.
"AT&T is going to actively get out of the U-verse business," said Chris Ucko, an analyst with CreditSights Inc.
The de-emphasis of U-verse underscores AT&T's promise to squeeze $2.5 billion in annual cost savings from its purchase of DirecTV last year. The provider is under pressure to improve profit margins amid a wireless price war. It also faces $22 billion in capital spending, an estimated $10.6 billion cost to acquire new airwaves, about $6.5 billion in debt maturities and an $11 billion dividend this year, all while working to improve its credit rating.
Current U-verse subscribers will be able to retain the service, and AT&T is even offering new promotions to those who keep it. But new customers are being directed by its marketing department to choose the satellite package.
The shift to DirecTV was reflected in fourth-quarter results. U-verse subscribers fell 4 percent, the worst loss ever, as 240,000 customers canceled service, the company said. And while DirecTV gains of 214,000 customers almost offset the loss, U-verse defectors helped pump up cable TV growth. Comcast Corp. had its biggest user gain in eight years.
AT&T says that while it's focusing on DirecTV, it isn't shutting down U-verse.
"To realize the many benefits of our DirecTV acquisition, we are leading our video marketing approach with DirecTV," said Brad Burns, an AT&T spokesman. "However, our first priority is to listen to our customers and meet their needs, and if we determine a customer will be better served with the U-verse product, we offer attractive and compelling options."
At its start in 2005, U-verse was hailed as a breakthrough product that was shepherded through development by Chief Executive Officer Randall Stephenson before he took the top job. Designed as an improvement from the dial-up Internet era, it offered faster, souped-up DSL -- or digital subscriber line -- service that carried both TV programs and broadband access.
U-verse, along with Verizon Communications Inc.'s FiOS, gave the phone companies the ability to offer a bundle of TV, phone and Internet services to chip away at cable's dominance. By 2007, AT&T was touting U-verse's picture quality and the higher number of HD channels it had compared with cable.
To read the complete Bloomberg article, click here.
• AT&T to Buy DirecTV at HomeTheaterReview.com.
• Comcast to Release HDR-Capable Set-top Box in 2016 at HomeTheaterReview.com.