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AT&T U-verse Narrows Sub Gap With Verizon FiOS TV

12 Mar, 2012 By: Erik Gruenwedel

Analyst says U-verse will supplant FiOS by 2013, underscoring Verizon’s drive to partner with Redbox for added exposure to movies and entertainment

AT&T ended 2011 just 400,000 subscribers behind Verizon in the battle for top telco multichannel video program distributor, according to a new report.

The two telcos quietly have made inroads in the MVPD market at a time when cable and satellite TV operators shed video subs.

AT&T U-verse added more than 208,000 subs in the fourth quarter, while Verizon FiOS TV added 194,000 subs — making it the 10th straight quarter that AT&T’s incremental growth outpaced industry leader Verizon, according to research firm IHS.

Verizon, which added 701,000 subs in 2011, ended the year with 4.17 million pay-TV members, while AT&T added 804,000 to end the year with 3.79 million subs.

As both companies approach the end of network upgrades that allowed them to enter the TV business, AT&T has nearly twice the household reach of Verizon at 30 million, compared with 16.5 million for Verizon, according to IHS.

Verizon passed an additional 900,000 homes in 2011, but AT&T says it is essentially finished with its U-verse build out and now will concentrate on deepening the penetration of homes passed, something with which the two companies have not had a hard time in the recent past. AT&T notes it has a penetration rate of 16% for dwelling units reached overall, but enjoys a larger 25% penetration in places where it has been marketing for 36 months or more.

The narrowing gap between FiOS and U-verse underscores in part Verizon’s partnership with Redbox to roll out a digital movie rental service in the second half of the year. Indeed, Verizon in the first quarter of this year could surpass Charter Communications to become the sixth-largest multichannel operator in the United States.

Verizon deploys fiber connections directly to homes, while AT&T uses a combination of existing copper wiring and fiber-optic infrastructure to reach residences. Also, Verizon utilizes traditional cable quadrature amplitude modulation to deliver linear video feeds, while video-on-demand and interactive features such as widgets and the program guide are delivered via Internet Protocol Television (IPTV) technology. U-verse, meanwhile, uses IPTV throughout.

“U-verse’s strong growth relative to FiOS is setting the stage for AT&T to take over the lead from Verizon by a nose at the end of 2013,” said Tom Adams, senior principal analyst for U.S. media at IHS. “Ending the year, year-over-year growth for U-verse in 2011 compared with 2010 was up 27%, compared with FiOS which was up 20% in the same period. IHS estimates that U-verse subscribers at the end of 2013 will total 5.04 million, compared to 5.03 million for FiOS, as shown in the figure below.”

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