To What Extent Does Consumer Video Drive Strategy at AT&T?

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To What Extent Does Consumer Video Drive Strategy at AT&T?

Randall Stephenson, AT&T chairman and CEO recently has said  “the consumer is about one thing, it's about video.” Coming from a firm such as AT&T, the comment shows--in large part--what is driving telco consumer services strategy.

Though many questioned AT&T’s acquisition of DirecTV, AT&T argued it had a plan both for wringing immediate and long-term value from the deal. So far, AT&T arguably is showing it is right.

Seen both as a way of creating a nationwide video footprint to match its mobile footprint and a way to create more value from bundling, the deal also was touted as boosting free cash flow needed to support AT&T’s hefty dividend payouts.

Less clear at the time was the way DirecTV would be leveraged to support the next generation of streaming services. AT&T might now be showing it has a plan for transition at scale.

AT&T’s new online streaming video service, DirecTV Now, will become the company’s primary video platform in three to five years, some inside AT&T apparently now predict. The speed of that change--and its implications--show just how much change might be expected in the entertainment video business and the service provider business model.

By switching to over-the-top delivery, AT&T in principle could avoid truck rolls, marketing, in-home capital and other fulfillment cost. DirecTV Now, though primarily aimed mostly at attracting new subscribers among the ranks of consumers disenchanted with linear services, might also eventually appeal even to consumers of facilities-based services that require a physical connection (satellite dish installation or installation of cables and set-tops.

Eliminating a truck roll and customer premises equipment could eliminate several hundreds of dollars of cost whenever a new customer is signed up and activated.

DirecTV Now, set to be introduced by the end of 2016, appears aimed at about 20 million households that have no cable or satellite service, competing with services such as Sling by Dish.

One might argue that DirecTV Now is worth doing if the “unconnected” were the only target. But the benefits might also extend to other consumers who already buy either a fixed network or satellite-delivered linear service.

For AT&T there are trade-offs in other areas, particularly the need to ensure that its access bandwidth assets are plentiful enough to support the big upsurge in bandwidth consumption on mobile and fixed networks.

Nobody knows precisely when the slow decline of the linear video business might become non-linear and rapidly decelerate. AT&T now is acting as though it wants to move faster, even if some might argue linear TV providers can rely on  a relatively long transition period.


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