The new service is the latest attempt to compete with cable companies such as Cox Communications and Time Warner, which have been extremely successful in siphoning off AT&T's customers by offering so-called bundles of Internet, cable and phone services.
"There is a potential for a gaping hole when you look at how successful the cable companies have been," said Matt Davis, research director for IDC, an industry research firm.
While AT&T has long had its own bundle by offering Dish Network satellite TV service along with high-speed Internet and phone, it has not convinced many of its customers to sign up. In its most recent quarter, AT&T said that only 533,000 of the company's 33.1 million customers had its Dish Network service.
"Basically the satellite resale business has been weak at best," said Maribel Lopez, an analyst with Forrester Research, a market research firm in Massachusetts.
"It seems easy to allow you to move content around the home, but it's not," he said. "It's on the edge of what is available."
Still, one of the key features Homezone offers - the ability to download movies off the Internet for viewing on a television - is a service similar to the video-on-demand that cable companies have long offered.
Satellite companies have not been able to offer video on demand because of a limitation in their network, which only allows one-way transmission. By using an Internet connection, AT&T can now get around this problem.
Ryland Madison, director of product development for Cox Communications, also pointed out that his company's video on demand service is almost instantaneous, whereas Homezone's movie service can take as long 15 minutes to download.
"Is there a substantial competitive advantage to Homezone? The answer is no," Lopez said. "Is it more competitive than the typical satellite resell offering? Yes."
AT&T is rolling the service out slowly and offers it in only two other markets, San Antonio and Ohio. AT&T plans to launch the service to all its customers in the fall, said Daniel Fishlow, director of video services marketing for AT&T.
The extra cost for the service is around $10 and Fishlow estimated that a combination of high-speed Internet, satellite TV, a digital video recorder and Homezone would run about $60 a month.
Lopez said that pricing more than new features will be a factor in terms of getting customers to switch service providers as cable companies come up with similar services in the next year.
"There will be movement back and forth due to promotions, but I'm not sure if there will be movement because of feature sets," she said.
© Copley News Service
