U-verse growing rapidly

San Antonio-based telecommunications giant AT&T Inc. said it now has 100,000 subscribers to U-verse, the pay-TV service it rolled out to compete with cable rivals.

The company also said the copper and fiber-optic network over which it delivers video programming now passes 5 million households, 3 million shy of the 8 million it's projected to reach by the end of this year.

The new subscriber landmark comes about half a year after AT&T delayed its U-verse expansion to fix technical glitches that dogged early customers. The company ended last year with just 3,000 customers, most of them in its San Antonio launch market, leading some analysts to question whether it effectively could use the platform to reach customers nationwide.

"Since the end of last year, we've added 97,000 new customers, and we think that shows good progress," company spokesman Wes Warnock said. "We're very happy with where we are at this point."

This month, AT&T will begin expanding U-verse's interactive features to include games and the ability for customers to check stocks, weather and Yellow Pages listings via their TV remote, Warnock added. Dallas will be the first market where such features become available, and others will follow in coming weeks.

The company also plans to launch at least five additional high-definition channels in coming weeks, Warnock said.

"We think those interactive features are what help differentiate between us and cable," he said. "And this is just the beginning."

AT&T is eager to get into the video business as cable providers such as Time Warner Cable and Comcast Corp. have moved aggressively into the residential and business phone market. Both phone and cable companies are eager to lure customers with a so-called "triple play" of telecom services that includes phone, video and high-speed Internet service.

Rival phone company Verizon Communications Inc. is installing new fiber directly to customers' houses to deliver its video service called FiOS.

While standard phone service has become less profitable for telecom providers, Frost analyst Le Keough said consumers are spending more on other services such as broadband access and video. That increases the urgency for phone companies like AT&T to expand into video.

"Households spending on those services is increasing faster than the rate of inflation," Keough said. "If you can exploit that, it's a good market to be in."

U-verse's rollout delays and technical glitches last year touched off speculation that AT&T would seek another way to enter the video business — buying a satellite TV provider, for example. But analysts said the company's brisk and continued expansion has hushed much of that talk.

"The U-verse deployment sounds like it's actually starting in earnest," Keough said. "If they managed to fix their technical issues, the rest of the rollout should be successful."

Warnock said AT&T remains committed to U-verse and has worked through its technical issues. It has expanded the service market by market this year, reaching 30 metro areas, including Los Angeles, Houston and Milwaukee.

In May, AT&T said it will spend up to $1.4 billion more than planned to continue expanding U-verse. That boosts its projected cost to $6.5 billion by the end of 2008 from previous estimates of a little more than $5 billion.

What's more, in December the company will announce plans to expand U-verse into the Southern states served by phone company BellSouth Corp., which it bought this past year. That announcement, Warnock said, will expand its rollout beyond earlier projections that its network would pass 18 million homes by the end of 2008.