The Battle for Telco TV Leadership: AT&T vs. Verizon

EL SEGUNDO, CA — In the fourth quarter of 2011, AT&T added slightly more video subscribers to its U-verse service than Verizon did for its FiOS offering - the tenth straight quarter that AT&T has exceeded Verizon, according to the IHS Screen Digest U.S. Media Intelligence Service from information and analytics provider IHS.

AT&T added 208,000 U-verse accounts during the final quarter of 2011, resulting in 804,000 new subscribers for the year. By comparison, Verizon had 194,000 new FiOS signups in the fourth quarter, for a total of 701,000 additional subscribers in 2011.

Verizon, which launched FiOS two quarters ahead of U-verse in 2004, remained the leader in terms of total subscribers, at 4.17 million. But although Verizon enjoyed a lead of almost 1 million at the end of 2008, AT&T has been making steady gains, gradually cutting Verizon’s lead. With U-verse subscribers reaching 3.79 million at the end of 2011, FiOS's lead narrowed to just 400,000 TV subscribers.

“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.

Year-over-year growth for U-verse in 2011 was 27 percent, and for FiOS was 20 percent. IHS estimates that at the end of 2013, U-verse subscribers will total 5.04 million, compared with 5.03 million for FiOS.

Comparing U-verse With FiOS
AT&T U-verse and Verizon FiOS both entered a U.S. pay-TV market dominated by traditional cable TV systems and direct broadcast satellite providers. However, they differ in their use of technology in several respects.

Verizon deploys fiber connections directly to homes, and AT&T mainly uses a combination of existing copper wiring and fiber optic infrastructure (though it has some fiber-to-the-home deployments). Also, Verizon uses traditional cable quadrature amplitude modulation (QAM) to deliver linear video feeds, using IPTV only for video on demand and interactive features; U-verse uses IPTV for its entire video offering.

Verizon stakes its reputation on quality, although its installation process is laborious and expensive; AT&T offers faster deployment times and a lower cost to consumers, even though the copper wiring it relies on as part of its solution could be decades old and less stable than the all-fiber solution of Verizon.

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 — 30 million compared with 16.5 million.

Verizon passed an additional 900,000 homes in 2011, but AT&T says it is essentially finished with its U-verse buildout and now will concentrate on deepening the penetration of homes passed. (In 2012, Verizon is also turning its attention from building infrastructure to increasing penetration.) AT&T has a penetration rate of 16 percent for dwelling units reached overall, but enjoys a larger 25 percent penetration in places where it has been marketing for 36 months or more.

Verizon's fourth-quarter numbers likely received a boost from a backlog of 100,000 installations incurred after a strike was settled in mid-September, along with the resumption of initiatives following an East Coast hurricane that delayed new installations. And although Verizon is predicted to lose its dominance in the space to AT&T by 2013, the company is expected to enjoy continued healthy growth.

Verizon may also reach a milestone in the first quarter of this year if it leaps over Charter Communications to become the sixth-largest multichannel operator in the United States.

Average revenue per unit (ARPU) in the fourth quarter for AT&T U-verse video customers amounted to $84.11, compared with $84.33 per month for Verizon subscribers.