AT&T's (NYSE: T) U-verse is coming off a strong quarter (see this story) of growth--more than 209,000 new subscribers in the second quarter--and recorded $1 billion in revenue for the first time ever in the second quarter. Jeff Weber, VP of U-verse and video products, told FierceIPTV that the outlook for 3Q looks to be as strong, if not better. He also talked about whether over-the-top delivery was a friend or foe to the industry, where AT&T was heading with TV Everywhere, the role content providers were playing in the ecosystem and what role technology would play in U-verse growth.
FierceIPTV: Last week's earnings report shined a real spotlight on U-verse...
Jeff Weber: Our earnings showed around a 209,000 net gain in subscribers, and the $1 billion U-verse revenues for the quarter, and just generally the growth and success we're seeing around U-verse, well, we're really happy with it; more importantly, customers seem really happy with it.
FierceIPTV: What's the driver?
Weber: It really boils down to a couple of things. One, the TV service is very good. The experience, how easy it is to use, the ability to get the content... all those sort of blocking and tackling things that just make a huge difference in the overall experience. And, two, the fact that it is really differentiated from our competitors, because it is a complete U-verse Anywhere story: I can control content from a mobile phone, I can look at U-verse online and get 20,000 shows if I'm at my laptop, I can control my DVR. It's a very complete experience, in addition to the best experience when I'm sitting on my couch. We want to make sure viewers have a great TV experience. We just announced Cubs Multiview, (see this story) in partnership with the Cubs and WGN. U-verse customers can look at seven different camera angles and they can chose which ones they want to watch, they can change the camera angle. You become the director and producer of your Cubs broadcast.
FierceIPTV: That's the beauty of IPTV, it's playtime all over again...
Weber: Exactly. Another example: My Multiview. It's an important platform for us. We've had it out there for the past few weeks. You choose what you want in your Multiview, up to 55 different channels.
On a Saturday afternoon this fall I can put on four channels of college football. I can make it a Multiview of just football or a mix of things. You're using IPTV technology, which is great, but it translates into giving you, the customer control over that experience. It is leveraging technology to make that TV and overall video entertainment experience much better, simpler, easier and more personalized. And that's what we're going to continue to do.
We're seeing very good feedback on My Multiview, and usage is up. People have never been able to be in control like that before. They kinda like that.
FierceIPTV: It's exciting stuff...
Weber: It is. It's testing right off the charts because it's really easy to set up, and really easy to use. I watch what I want to watch. Immediate channel change, it's been well received. It's how you differentiae the TV experience, how you make channel TV different for customers.
FierceIPTV: Is that enough? Is this the most consumers can expect from IPTV?
Weber: No, it's clearly a starting point. There's always the question of how much do customers want, how fast can they absorb change and new products; at the end of the day, a lot of times I just want to flop down on my couch and watch TV, just let it entertain me, I don't want to work at it. But there's a balance there, and it's always there, it's not so much a technology discussion as it is a content-rights discussion. Content providers, rightfully so, are very interested in making sure they are compensated for the content they're investing in and producing, and so I think that moderated the speed we could be moving from just a technology perspective.
It's early in the long marathon of continuing to improve the service.
But, if you look back over the last few years, the constant cadence of applications and TV enhancements, and bringing mobile remote access to a handset, and U-verse online, there is a very regular cadence of improvement that our customers are getting. And so, when you look back at the end of any given year, you can pick any point in time, the difference in the service they have, the number of channels and all of the capabilities that a customer has, is fundamentally different than when they made that purchase. Because we're IP, because it's an all-IP infrastructure and software-based platform, we have an ability to continue to do that at just a different rate than our cable competitors can do. There are an infinite number of things we can do on Multiview, but it's just one platform of innovation. There's whole-home DVR, TV applications, there's the ability to click from your remote and make a phone call, all of those are ways we can continue to integrate, drive innovation and create that differentiation and just better experience for customers. There's no telling a year from now the kind of capabilities we'll be rolling out for customers, but it is really fundamental shifts in improvement almost every year, almost every quarter.
FierceIPTV: In the AT&T universe, what role does U-verse play? Is it customer retention? Expansion? Or is it a stand-alone product?
Weber: I'm tempted to answer "D, all of the above."
Clearly it is a customer expansion, you've got to look at every quarter a couple hundred, 250,000 new subscribers, and we're very pleased with that, even though we always want more, of course. So, there's tremendous growth there. Then, $1 billion in U-verse revenue, a significant milestone... the retention piece of it though, we get 95, 96, 97 percent of the time, when a customer buys TV service, they usually get broadband. And 70 percent of the time they're taking voice, so all of that, three out of four TV customers have at least three services. So they have three or four, including wireless service, with us. So it's a retention play, when we talk about broadband and voice, clearly. We're clearly seeing retention of voice because of the kind of things we talked about: I can check call logs on my TV, those kind of things.
It is a growth story on one hand, it is a retention story on the other hand, and I guess, increasingly, you see it, just the soft side, the amount of time we spend talking about it with our investors and in our earnings sessions. How important and central that is to us going forward.
The net is, it does grow, it does retain and it is the central consumer story going forward. It's why we're so focused on two things: One, having the best TV service out there, because that is at the center of that customer's buying decision. And, two, driving integration--real product integration, not bundles--real product integration with wireless (see related story) and the other services. Because it completes that whole story and makes it easy for a customer to make that decision.
FierceIPTV: People talk about the death of copper ...
Weber: Yeah you have to make a little more investment, just like anything else; you can't just let it sit there. Put a little fiber with it and put some great new technology with it and, no question, you have a state of the art product at one-fourth the cost that it would take to put fiber all the way to the home.
FierceIPTV: What does pair-bonded VDSL mean to U-verse? Is it a huge deal, or just a good expansion too?
Weber: It's a big deal. It is a really important tool to continue to expand our footprint and make sure we can deliver service to our customers. It's a great technology, really cool technology underneath it, but at the end of the day, if you're a customer, what it means is, maybe, you couldn't get service before and you can now. We think the technology is cool because it's efficient and a good way to get you the service. As a customer, it's the same service and now we can deliver it to customers we couldn't otherwise. It's a very big deal to us, we're very focused on it, and we're thrilled with it and the performance we're seeing. If you're the customer, you just got service and, fine, you're really happy.
FierceIPTV: Is Verizon's slowing down of its FiOS push an opportunity for AT&T?
Weber: We have a different footprint, so I wouldn't say opportunity in the sense of real significant head-to-head video competition, but I do think it's a crystal clear validation that the strategy we took, the architecture and investment at a fundamentally, order of magnitude different level of cost to go do this, was the right one, as opposed to the really expensive, slower way of going at this. So, we don't compete in wireline footprint head-to-head, but it is a validation that the investment strategy and the network strategy was the right one.
And, every quarter, we continue to grow that footprint and we're not slowing down.
FierceIPTV: So, $1 billion last quarter. What do you do for an encore?
Weber: You sound like my bosses. The focus is, exactly what we've been talking about. The key to all this success is driving the differentiation; a much better, simpler, integrated experience. The dollars, obviously will follow and are important, I don't mean to diminish that, but that is a result of making sure we have this better integrated product. And we are extremely focused on that. All good things, I think, have come from that. So, it's continuing to roll out more and more applications, and driving that integration, bringing wireless and TV together in a much more meaningful way as we go forward, all of those things.
FierceIPTV: What are the subscriber growth goals for the quarter?
Weber: We haven't really talked about any of that publicly; you can expect, though, a pretty consistent cadence. 2Q is always a little bit lighter, that's just an industry cycle; 209,000 last quarter, we did a million (subscribers) last year, that was a sort of significant number. Kind of order of magnitude, that's about right.
FierceIPTV: OTT delivery is talked about in all these different forms... How does AT&T see over-the-top delivery, and what do you do to take advantage of it?
Weber: OTT... the hype is Y2Kish, almost. I look at that as not much of a threat, but more as a complement.
FierceIPTV: More friend than foe?
Weber: I think so. I absolutely think so. The business model around content and advertising and how that ecosystem fits together would suggest that the content guys aren't willing to just blow that relationship with the Comcasts and DirecTVs and AT&Ts of the world, so we look at U-verse online... 20,000 assets out there--full assets--we've got 100,000-plus assets, but 20,000 episodes that a customer can watch. And, that's over the top, typically today to a laptop or a PC; we provide PEG, local community channels, over the top to U-verse TV today, and have been doing that for a couple of years. So, over the top, as a distribution I think is an absolute friend. Most people talk about over the top as a disruptive business model, and I see less threat there. We'll continue to work on getting out content to U-verse customers, and giving them the ability to consume their content on any screen, and control that overall experience from any screen... over the top is one of the ways we do that. So I tend to think of it as a positive thing, as a real tool for us in an all-IP world, it's a great capability. But it is just that, it's one more tool in the tool kit as opposed to this end-all thing that is going to change the world, as we know it.
FierceIPTV: So, for AT&T, TV Everywhere would be just OTT with a key?
Weber: Exactly. With a little authentication tied to it and it doesn't seem so scary all of a sudden.
FierceIPTV: How big of a roll do you see TV Everywhere playing for AT&T? And when do you roll out a true TVE product.
Weber: TV Everywhere, I guess the right way to answer that is, probably a pretty big roll. Because it ties the access to all that TV programming on all screens to your core TV programming, which is great. But we will move at the rate the industry moves, because that's a big industry discussion and not a "This guy has an advantage over that guy," discussion. We'll move with the industry, we have entitled content, on U-verse Online today, so we certainly have the capability, because we're all IP we probably could move faster than some of our competitors, but again, that probably will be gated by content rights, so I don't know that anybody will be out there ahead of the other. We put that together with sort of a keen interest in mobile, as you might imagine, and so completing that U-verse anywhere discussion and making it not just that everybody has the same TV Everywhere stuff, but we've got a more complete experience across multiple screens, is really how I tend to think about that. And I think that right now we're in a pretty good position to deliver on that.
FierceIPTV: You look at the industry, and it's like watching somebody walk down an icy street. It speed up, then comes to a dead stop; companies talk about it, then they don't. It's just a little dicey out there right now, isn't it?
Weber: It really is. And it is the dance between the service providers, the Comcast and the DirecTVs etc., and the content providers. And because there is so much money in the industry, that can't get out of balance. And so they tend to keep each other in check and that probably causes things to move a little bit slower, no big surprise there, but it also keeps a healthy ecosystem in total and makes sure it doesn't get out of whack. Because if it gets out of whack, one way or the other, customers aren't going to have access to content over time. And that's just obviously a non-starter to anybody in the industry. So, I think it's probably pretty measured and the hype is greater than the speed with which it moves. So, certainly, we're participating in all of that and have views on how to shape it, but that is one piece of a total solution for customers and it starts with better TV, laptops, and PCs are part of that, handsets and tablets are another part of that whole discussion. I just think that as long as you keep it in the context of it really is a complete U-verse service and it's not just about TV Everywhere or over the top specifically, it is the whole service and there are lots of ways we can deliver on that.
FierceIPTV: With the demand increasing for quality delivery of content, super HD, 3D, how do you deal with needing a bigger pipe all the time?
Weber: Pair bonding is part of that story, compression is part of that story, the continued evolution of VDSL and the technology and what speeds we can deliver with the same pipe, continue to evolve. So, it's sort of the same thing as five or six years ago; the question you would have asked then would have been: "How are you going to do HD?" The answer then was compression and VDSL... it's the same story. The numbers keep going up, but what we've seen very clearly over the last five or six years is copper is not dead, there's not a fixed end that we see like "At 30 megs you're done." That's just not a true statement. At 50 or 80 megs, with things like VDSL vectoring, which is a technology that's out there, you can go even higher still.
So, how do we deal with it? We'll bond in some cases, compression continues to get better, new technologies will allow us to be even more efficient than VDSL today and we've had a very, very clear road map and good runway to stay ahead of what customers have to have. So, 3D? Fine. We deliver 3D; we did the World Cup. We'll stay abreast of that as the industry moves, although that's a bit of an overhyped story as well. So, there's not a single answer to that question but I feel really comfortable that the combination of answers keeps us really competitive for a long time."