AT&T's De La Vega: U-verse bundles continue to drive wireline growth

Ralph De La Vega, President of mobility and consumer services, AT&T (NYSE: T) is bullish about the opportunities for its IP-based U-verse service.

Speaking at the Morgan Stanley Technology, Media & Telecom Conference, De La Vega does have something to talk about.

During the fourth quarter, AT&T added 246,000 new U-verse customers to reach almost a total of three million U-verse customers at the end of 2010, up from the 2 million customers it served as of the end of 2008.

At a time when AT&T continues to see ongoing erosion of its bread and butter PSTN voice. IP-based U-verse IP video is becoming the service provider's new wireline growth engine

"U-verse services are the number one reason why we returned to growth in wireline consumer in the last two quarters," De La Vega said, adding that "because U-verse is IP, we can consistently innovate and bring exciting new features to our customers, including delivering companion content to your tablet while you're watching your TV screen."

All about bundling
But video is not the only service that's hooking U-verse subscribers.

As customers sign up for U-verse, they continue to bundle in other service such as PSTN and increasingly IP-based voice, broadband data and wireless to their TV purchase.

"These customers that we are adding are taking additional services so that over three quarters of our U-verse subscribers are on triple or quad play bundles," De La Vega said. "Since launching U-verse five years ago, it is now a $5 billion annualized revenue stream for AT&T."

Although De La Vega admits that its Fiber to the Node (FTTN)-based VDSL2 broadband service is slower than other providers like cable, he argues "that when you use the Internet you may have high speed in the access link, but when you hit the Internet you get the same speed there, and our infrastructure is very consistent and reliable."

That's not to say that AT&T isn't looking at upping bandwidth through advanced methods that complement VDSL2 such as pair bonding, dynamic spectrum management (DSM) and vectoring. To date, AT&T can deliver 25 Mbps to homes in U-verse-capable markets.

"We continue to watch and we think we have the capability to continue to improve as customers demand more and more bandwidth," De La Vega said.

In addition to adding data and wireless to the U-verse bundle, customers are continually adding VoIP to the bundles they buy. Customers have been adding VoIP to the bundle at a rate between 60-65 percent.

"VoIP is helping us to replace the access line revenue we're losing on TDM voice," De La Vega said. "We're getting the TV revenue, the high speed access revenue and we're now getting in many cases a VoIP charge to give the customer a complete package."

Along with the increase in consumer bundle adoption, AT&T is also equipping its billing systems in U-verse markets to also handle wireless service.

By adding wireless to its billing systems in U-verse capable markets, AT&T not only gives the user a simplified bill with a potential quad play bundle of voice, broadband data, video and wireless, but it enables AT&T to improve its billing operations to serve customers.

"That means my customer operations business is much more simplified, much more streamlined and the customer gets a better bill and it lowers our cost structure," De La Vega said.

Increasing installation efficiency
With over five years of U-verse service deployments under its belt, the other question is what will be the upgrade cycle for the set top boxes and home gateways that reside in the home to distribute data and related content.

Traditionally an advocate of wireline-based HPNA to distribute TV and broadband service, De La Vega said AT&T would like to leverage new WiFi-enabled devices that would likely save network installation time-one of the Achilles heels in bringing IPTV to the home for all service providers.

"Today, an installation it connecting the boxes in the home in a wired way, but we have been working for a number of years in trying to simplify that operation so the boxes connect to one another wirelessly in a house," he said. "I am thrilled when you can go into a house and not worry about the infrastructure in the house and just connect you wirelessly to the set top boxes."
 
That's not to say AT&T is abandoning HPNA, however. The more likely scenario is they would simultaneously use HPNA and WiFi.

"We'll use a combination of both and there may be some situations where wireless does not work in one house so we don't want to rely on any one technology," De La Vega said.  

For more:
- listen to the webcast here

Related articles:
Assessing the top 10 wireline service providers in Q4 2010
AT&T's Q4 wireline results bolstered by IP-based business, consumer services

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