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Telco Triple-Play Triggers Single Price War

NYTimes reports that investors are watching to see whether the AT&T U-verse service will work well enough to attract the millions of new subscribers that AT&T needs to stave off rivals stealing millions of its phone service customers. With U-verse, AT&T can assemble a package of television, broadband and phone services to match the bundle sold by cable companies.

But cable providers like Time Warner Cable, which serves about half the homes in San Antonio, are fighting back. To keep customers from leaving, they are discounting their television and phone plans, throwing in premium movie channels and faster Internet connections.

The face-off has turned San Antonio into a proving ground for the intensifying showdown between the phone and cable industries. What transpires here is expected to be repeated in the 15 or so other cities and towns (including Houston) where AT&T plans to introduce U-verse this year, and the 55 where Verizon now sells television.

"The cable guys are not going to sit around and wait," Jeffrey Halpern, a telecommunications analyst at Sanford Bernstein, said. "They offer television, broadband and phone now, so if the Bells don't have television, they can't fight back."

But building a television service and getting people to drop their cable or satellite plan are two different things. Like Verizon, which now sells programming in New York, Florida and five other states, AT&T is discounting heavily to attract new customers.

Clearly, the price war has only just begun. Cable and satellite pay-TV service providers have a much lower-cost business model -- with all the inherent benefits of a legacy delivery infrastructure, and content licensing agreements that are based upon a huge existing subscriber base.

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