Video: Home invasion

By Jerry Cobb Reporter
CNBC
updated 6/20/2006 6:02:38 PM ET 2006-06-20T22:02:38

Starting next month, AT&T's high speed Internet customers will be able to watch satellite TV from the Dish Network, download movies from movielink.com and watch them on TV, on demand.  The service, dubbed Homezone, is the latest salvo in the ongoing battle between the phone and cable companies for control of your living room.

"For a certain class of customers, the ability to look at video on their television set that's coming from the internet will create a new kind of experience, something they haven't been able to do before," said Josh Bernoff, an analyst who follows the television industry at Forrester Research.

Like other phone companies, AT&T is playing catch up with the cable companies, which have been offering customers a so-called "triple play" of phone, television and Internet service. Satellite companies are also scrambling to stay competitive, but their technology can't deliver phone service or video on demand.

"They cannot offer the bundle, they cannot offer the triple play,” said Adi Kishore, director of media and entertainment strategies at Yankee Group. “And partnering with a telco makes sense in the short term.  Long term, though, we know the phone companies are rolling out services over their own networks. So eventually they're going to be competing with their current partners."

Homezone is just part of AT&T's broader strategy to deliver bundled services to consumers. The phone giant is also spending more than $4.5 billion dollars on Project Lightspeed, a new high-speed network to carry voice, video and Internet traffic.

“For them to be able to match cable is going to take a pretty significant investment in their networks (and) in their infrastructure,” said Kishore. “And it's also going to take time."

Project Lightspeed is expected to reach 19 million homes by the end of 2008. In the meantime, AT&T hopes to give cable operators a run for their money with its Homezone service, which should be available to about 80 percent of its customers by the end of the year.

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