U-Verse Rollout Continues — But Slowly

AT&T reported its first quarter 2008 earnings yesterday. As with all such calls, the U-Verse rollout was an active topic for discussion. AT&T noted that it remains on plan to meet its current 2008 U-verse subscription target — but the rollout must nevertheless appear to be painfully slow to regulators.

Not too long ago, AT&T told every state in its operating area that the need to obtain a service franchise from each local government was the only impediment to the widespread deployment of its new video product. Time is now proving that the representation wasn’t altogether accurate.

AT&T’s been building fiber to its nodes for years now, and some of that effort shows — according to the company, 9 million households are now passed with its U-Verse network. Even so, the company claims fewer than 400,000 households as customers, for a paltry penetration rate of less than 5%. Why is the penetration so low? Many of the homes probably aren’t marketable yet, i.e., they don’t have the backoffice systems in place to support the service. As pointed out on the company’s last call, technicians also need to be hired and trained, and installation times that once averaged better than a half-day per home need to come down. No cohesive information is available as to the communities where U-Verse is available, and in many cases, services may be offered in some portions of a community but not in other areas of that same community. Potential customers are often left to search a database to see if their particular address has service available.

Bottom line: The availability of the U-Verse service is still years off for many, and may never become available for many more. Service improvements — some of which are already planned (like 10 Mbps Internet access and 2 high definition programming streams) — will make the product more attractive to those who have access. Once again, however, we should be reminded that the operational challenges for AT&T to bring their product to market are much larger than are any obstacles posed by the local government franchising process.