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AT$T has been offering dish TV as a substitute in most of it's service areas (as part of a triple play package). Verizon has been doing this to a lesser extent too in the northeast. It would make sense for AT$T to buy out one of the DBS providers since it has no plans for widespread fiber deployment beyong new luxury construction (investor flashback - AT&T once bought a major cable company then sold it at a loss).

from: Wall Street.com

Will AT&T Chicken Out?

April 08, 2007

AT&T (T) may not follow its fellow telecom giant Verizon (VZ) into the fiber to the home business, at least not to the tune of $23 billion. Verizon is counting on picking up cable customers by offering voice, TV, and broadband service in one package.

As an alternative, AT&T may try to buy Echostar (DISH) or DirecTV (DTV). The market cap of DISH is $20 billion and DTV is $29 billion. But, unlike Verizon's investment, both of the satellite companies come with customers and billions of dollars in revenue. From that standpoint, the idea of an acquisition makes sense.

But, satellite TV is not interactive. It cannot produce true video-on-demand and comes into the home through a different "pipe" than broadband or voice. The products can be bundled from a billing standpoint, but they are not the kind of "all in one" service that cable and fiber to the home offer. Also, AT&T would have to continue to rely on DSL for most of its broadband service, and DSL connections are not usually as fast as what cable offers.

Whether consumers care that their services all come into the home though a common connection may be academic as long as the products work fine and the price is low.

If AT&T can buy a satellite TV operator, it takes almost all of the risk out of being in the TV business. The big phone company picks up enough revenue to justify the purchase on its own merits, and, fiber to the home may never garner enough customers to justify the cost.

Douglas A. McIntyre