Wednesday, November 14, 2018

AT&T Lays Foundation to Ditch DirecTV Satellite and U-verse TV in Favor of Online Streaming

In the not-too-distant future, AT&T will be delivering television programming to its DirecTV and U-verse TV customers over the internet instead of satellite or the variant of DSL its U-verse product uses.

Appearing at Morgan Stanley’s European Technology, Media and Telecom Conference, AT&T chief financial officer John Stephens told investors AT&T will be able to slash costs of television delivery by eventually retiring satellite service and rolling its U-verse TV into a single, self-installed, DirecTV set-top box product that will rely on broadband.

“It’s a device that allows us to, instead of rolling a truck to the home, we roll a UPS or FedEx truck to the home and deliver a self-install box,” Stephens said. “This allows the customer to use their own broadband. We certainly hope it’s our own fiber but it could be on anybody’s broadband. And they get the full-service premium package that we would normally deliver off satellite or over our IP-based U-verse service.”

AT&T employees are currently beta testing the new box and the company hopes to begin rolling it out to subscribers in 2019. Assuming they respond positively to the online streaming experience, AT&T will begin transitioning DirecTV customers away from its existing satellite platform and towards internet delivery. Stephens said the benefits are obvious: no more installers, roof-top satellite dishes, and service calls to deal with signal problems.

“The key is, as we roll that out to full production or full availability to our customers, you will see subscriber acquisition costs come down significantly because it’s the cost of that box as opposed to the cost of an employee rolling a truck, climbing the roof and installing the satellite [dish],” Stephens added.

The transition to less costly delivery platforms may be just in time for AT&T, which saw historically large subscriber losses on its DirecTV satellite platform. Other providers reported significant losses as well, demonstrating cord-cutting is a growing trend in the pay television industry. DirecTV’s expensive fleet of satellites carry not only nationally distributed networks but hundreds of local television stations beamed regionally to customers. The economics of satellite television may become questionable if customers continue moving away from linear, live television. Internet delivery services are much less costly and offer more robust on-demand viewing options.

Rural Americans may face the consequences of any transition. They are least likely to have suitable broadband service capable of supporting DirecTV’s streaming video service and could lose access to television altogether if AT&T (and Dish) retire their satellite fleets. That may be a small concern to AT&T, which has 25 million subscribers, the vast majority of which have access to broadband internet.

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