Competition: AT&T’s Backup Plan Gets a Workout

AT&T’s plans for its Project Lightspeed Internet-protocol-based network have certainly grabbed headlines. But Lightspeed could end up being a big fake-out—though perhaps an unintentional one. Homezone could prove to be the more viable video/high-speed service. This summer, AT&T begins testing Homezone, which integrates EchoStar’s Dish Network channel lineup, DVR service, caller ID on the TV, content from Movielink and Akimbo, and photo and music downloading, says Ken Tysell, AT&T’s director of broadband applications. Customers will also be able to log on to their Homezone receiver remotely through a Web browser or wireless phone. Rollout, pricing and promotion plans for Homezone’s late summer premiere are being kept under wraps. San Francisco-based ThinkEquity Partners believes Homezone, not Project Lightspeed, will ultimately pose the greater threat to cable’s market share. In a note to clients, ThinkEquity predicted AT&T would scale back Lightspeed because of the immense bandwidth required to make it competitive. Oppenheimer & Co. cable analyst Thomas Eagan claims AT&T has concerns about Lightspeed’s viability, despite promises the venture will pass 18 million homes by 2008. "Call [Homezone] a cheaper experiment" that can mushroom quickly into a bigger deal if Lightspeed can’t hit its deployment deadlines, Eagan says. Homezone "is a reminder that cable’s competition isn’t going to stand still" while operators promote triple- and quad-play bundles, says Sanford C. Bernstein cable/DBS analyst Craig Moffett. Tysell of AT&T insists Homezone is neither a replacement for Lightspeed nor a stopgap measure. "Homezone can work for rural areas where it doesn’t make economic sense to build fiber to the home," he says. Assuming the tests don’t tank, cable operators could exploit Homezone’s confusing billing system: Customers would have to be both Dish Network and AT&T DSL subscribers before they can get Homezone. Cable marketers might find success in characterizing Homezone as a typical Frankenstein’s monster-type product from a telco.