TV service from AT&T? Not yet in North Carolina

Technical glitches delay the phone company's plan to break the cable industry's near-monopoly

For 2 1/2 years, Time Warner Cable has sold telephone service in North Carolina.

But you still can't get cable TV from the telephone company. AT&T's state president for North Carolina, Cynthia Marshall, vowed to change that by year's end, but AT&T has been sidetracked by technical glitches that required upgrades, leading to delays.

Its U-verse television service, available in 18 markets, has signed 20,000 customers -- essentially the trial stage for a product potentially targeted at more than 20 million homes . Analysts say AT&T's Internet-based technology is not ready for prime time.

In an e-mail message provided by AT&T's public relations department, Marshall said that the company is committed to bringing U-verse to North Carolina. However, she was not available for an interview to elaborate on AT&T's plans for North Carolina, and the company is not committing to a timetable.

"It's been coming and coming and coming, and it's been slow in coming," said Elroy Jopling, a research director in Toronto at the Gartner research firm. "This is something where they can't come out of the gate and stumble. There's a lot riding on this."

For consumers, what's at stake is simply more viewing options and the possibility of lower prices. Cable TV companies, which have had near-monopoly, have boosted prices 93 percent nationwide in the past decade. But prices are 17 percent lower, on average, in markets with cable competition, according to the Federal Communications Commission.

The stakes are much larger for AT&T. The company will have to spend at least $6 billion to upgrade its network capacity, and that's only part of the risk. Broadcasting television signals using Internet technology is still largely untested on a large scale. AT&T can't work out system kinks using trial and error without the possibility of a public relations debacle, analysts say.

Ceding more ground to cable companies is something the phone industry can't afford to do. Cable -- with its voice over Internet phone service -- represents the biggest competitive threat in the telecommunications industry since the phone business was deregulated more than two decades ago.

Customers are canceling phone service in droves and switching to wireless, Internet phones and other competitors. About 800,000 have quit AT&T, formerly BellSouth, in this state, from a high of 2.5 million seven years ago. Each of those phone accounts represents a potential $100-a-month account of bundled services that include wireless, long distance, high-speed Internet and TV service.

Phone companies have tried to keep up with cable companies by reselling satellite, or dish, TV service. That competition has had a negligible effect on cable prices, and it's not viewed as a long-term solution. Satellite TV is on a separate network, not well-integrated into a phone company's communications system.

Service in N.C.

North Carolina's prospects for TV competition were fast-tracked with two major developments last year. The General Assembly said that cable TV providers don't have to get separate permits in each town they serve. That created a single statewide application, removing a major barrier for competitors.

Such a competitor emerged when BellSouth, the state's largest phone company, was acquired by AT&T. In June, AT&T began offering U-verse television service in San Antonio, then the service expanded to other markets.

AT&T is attempting to deliver television programs over its national broadband network. U-verse doesn't require as much bandwidth as cable TV because U-verse delivers one channel at a time. That means the signals can be sent to customers' homes over copper phone lines as much as 5,000 feet from the neighborhood connection to AT&T's national fiber-optic network.

Despite the technological differences, most customers will find U-verse programming and features similar to cable TV: several hundred channels, high-definition television, video on demand and digital recording.

U-verse lets viewers find programs by conducting searches using criteria such as actors' names, allows digital video recorders to be set remotely using a computer or cell phone and can record four programs simultaneously. AT&T is betting that near-instantaneous channel-switching speed will lure customers from cable.

Still, preferences for cable TV and Internet protocol TV can be subjective, analysts say.

"I've seen side-by-side tests, and [U-verse] is better," said Vince Vittore, an analyst with the Yankee Group in Boston. "But looking at video quality is a personal thing."

AT&T isn't the only phone company counterattacking cable.

Verizon is building out its TV network -- called Fiber Optic Service or FIOS -- and has signed up 348,000 customers. At the same time, Verizon has 618,000 satellite TV customers. It won't be ready to bring FIOS to North Carolina until 2009 at the earliest, spokesman Bob Elek said.

As the competition heats up, the phone and cable companies are expected to wage a technology arms race, piling on more-advanced features.

"It's the digital lifestyle that they're trying to promote," Vittore said. "It's the ability to interact with your TV."