DirecTV Now, AT&T’s over-the-top online streaming cable television alternative is preparing to launch this Friday, Nov. 4, offering selected customers a free 7-day trial followed by a subscription offering more than 100 “premium” basic cable networks for $35/month.

As AT&T is rushing this service to the marketplace, details are still trickling in about the channel lineup, device compatibility, and exactly where AT&T plans to market the service. Stop the Cap! has collected details from a variety of sources to give readers additional insight about whether DirecTV’s satellite-less cable television alternative is right for you.

AT&T Will Not Market DirecTV Now to U-verse/DirecTV Satellite Customers

To protect against revenue cannibalization, AT&T will not be marketing or mentioning DirecTV Now to current AT&T U-verse or DirecTV satellite customers. The phone company does not want to lose their more profitable fiber-to-the-neighborhood or satellite dish customers to a lower-priced streaming-only alternative. A memo obtained by SatelliteGuys directed to AT&T and DirecTV supervisors and field technicians warns against even mentioning DirecTV Now unless they cannot complete an installation of U-verse TV or DirecTV satellite service:

As you may have heard, AT&T is launching a new over-the-top (OTT) service called DIRECTV NOW on November 4, 2016. OTT services provide potential customers with a streaming-only option when they are unable to have traditional DIRECTV or U-Verse TV service installed.

Though DIRECTV NOW does not require professional installation, technicians may want to be aware of the service and what it entails. For instances where a DIRECTV or U-Verse installation cannot be completed due to line-of-sight, landlord permission or other issues (emphasis from SatelliteGuys), technicians can provide information on the DIRECTV NOW service and let customers know they can visit directvnow.com to learn more.

Please note that DIRECTV NOW is a completely separate offering from traditional DIRECTV and U-Verse and should only be mentioned to customers when those services cannot be installed. If the customer is able to receive broadcast TV service, technicians should not proactively mention DIRECTV NOW as it is redundant with the DIRECTV and U-Verse Apps, which still offer streaming capabilities to subscribers of the DIRECTV and U-Verse TV services respectively.

In short, AT&T has no intention of competing with itself, which means customers in AT&T service areas will continue to be referred to U-verse for broadband and phone service and DirecTV’s satellite service for television, not DirecTV Now. The service will predominately be marketed to Millennials and the rest of an estimated 20 million Americans that have cut the cable TV cord or never signed up for service at all.

Key Points: You Need a Qualified Streaming Media Player and a Fast Internet Connection

• DirecTV Now is not expected to work with Roku at launch. Customers will need Apple TV, Amazon Fire TV/Stick, and/or Chromecast. More options are expected to arrive later. AT&T will initially promote the service for use with iOS or Android smartphones and tablets. AT&T Mobility customers will be able to stream DirecTV Now programming without it counting against your data plan, a controversial practice known as “zero rating;”
• A minimum internet connection speed of 12Mbps is required for “high quality” streaming;
• The DirecTV Now app will co-exist with the DirecTV app intended for satellite customers. The two services are considered independent of each other;
• A programming package will be required, but there is no contract. Customers cannot choose channels a-la-carte, except for premium movie channels like Starz. One streaming video-on-demand package dubbed Freeview will target Millennials specifically, and is expected to be advertiser-supported and provided at no charge;
• Customers can take advantage of a forthcoming free seven day trial by visiting directvnow.com and pre-registering.

DirecTV Now Programming Lineup

AT&T currently has agreements with 10 large programmer conglomerates, covering most of the major popular cable networks. A robust library of on-demand programming is also anticipated.

Among the networks we are confident will be a part of DirecTV Now:

• Disney: ESPN, ESPN2, ABC, Freeform, Disney Channel, Disney XD and Disney, Jr.;
• A+E Networks: A&E, Lifetime, History, LMN. FYI, VICELAND;
• Scripps: HGTV, Food Network, Travel Channel, DIY, Cooking Channel, Great American Country;
• Discovery Networks: The Discovery Channel and these likely additions: TLC, Investigation Discovery, Animal Planet, Science and Turbo/Velocity and OWN: Oprah Winfrey Network;
• Agreements have also been signed with Comcast/NBC, Time Warner, Turner Networks, Starz, AMC, and Viacom.

Missing are agreements with CBS and FOX. We’re also uncertain about the availability of local channels. Additional channels are expected to be offered at an additional cost above the $35 for 100+ channels. We’ll learn more by the weekend.

AT&T made a fortune spying on average Americans and sold what they learned to law enforcement agencies who only needed a paid account to access the data, not a subpoena signed by a judge.

The newest revelations of AT&T’s Project Atmosphere by the Daily Beast sucked the oxygen out of the room from collective gasps of those learning the enormity of private information AT&T is selling to any government agency willing to pay. The first news story about the program came in a 2013 New York Times report. But new evidence suggests AT&T’s project may represent the most extensive private surveillance program ever uncovered.

“The for-profit spying program that these documents detail is more terrifying than the illegal NSA surveillance programs that Edward Snowden exposed… If companies are allowed to operate in this manner without repercussions, our democracy has no future,” Evan Greer, campaign director at Fight for the Future, told Newsweek.

AT&T stores details for every call, text message, Skype chat, or any other form of communication that passes through its infrastructure, and has kept that data as far back as 1987, according to the Times 2013 Hemisphere report. The scope and length of the collection has accumulated trillions of records and is believed to be larger than any phone record database collected by the NSA under the Patriot Act.

AT&T’s Hemisphere program operates in the shadows and does not require compliance with the kinds of federal privacy laws and constitutional protections required to be honored by the nation’s law enforcement agencies. AT&T’s database allows anyone with a procedural administrative warrant (no judge’s signature required) to search through trillions of call records and obtain precise cellular location data to discover where a person is located, who he speaks to, and often why.

A suspect claiming to be in one location at the time of a crime can be challenged when AT&T’s data reveals a subject’s cell phone was actually located somewhere else. If a prosecutor wants to know who a suspect has called for the last five years, he can order a report from AT&T showing every call, every number dialed, how long the call lasted, and details about the person called (and who they, in turn, called).

Privacy advocates call the revelations “chilling” and claim AT&T goes well beyond the kind of surveillance practiced by federal government agencies revealed by Edward Snowden.

AT&T customers have it worst, because the company has direct access to any type of communication made over AT&T’s network. But customers of other telecommunications companies are also affected because communications regularly travel over networks owned and operated by AT&T. The spying program involves cell phone lines, landlines, and internet connections.

The secretive project also turns out to be extremely profitable for AT&T.

Spying is profitable.

“AT&T customers are outraged but this affects everyone,” Greer told Newsweek. “AT&T went far beyond complying with legal government requests and actually built a powerful data mining product to sell our private information to as many government agencies and police departments as they could.”

Taxpayers cover almost all the costs because AT&T Hemisphere clients are government agencies. Small rural police departments pay at least $100,000 for access to AT&T’s data, but significant-sized suburbs and cities can pay AT&T well into the millions.

The 2013 Times report mischaracterized AT&T’s effort as a “partnership” between AT&T and the U.S. government. The Obama Administration’s Justice Department defended AT&T’s efforts calling Hemisphere “an essential, and prudently deployed, counter-narcotics tool.”

But the Justice Department may have been smoking some of the contraband they seized when they made that claim, because this week’s revelations show the program was used for far more than fighting the War on Drugs. Law enforcement agencies have accessed AT&T’s database as part of investigations of everything from Medicaid fraud to homicide.

AT&T’s pay-per-spy program was developed independent of law enforcement agencies and was designed, packaged, and marketed to make AT&T a fortune from American taxpayers. It has raked in millions of dollars annually, according to the Daily Beast.

No pesky warrants are required, only a solemn promise to keep Hemisphere a secret if an investigation that uses the data ever becomes public. AT&T specifically engineered an “end run” that may ultimately prove illegal because law enforcement agencies may have created phony or misleading evidence to cover up for AT&T:

But those charged with a crime are entitled to know the evidence against them come trial. Adam Schwartz, staff attorney for activist group Electronic Frontier Foundation, said that means AT&T may leave investigators no choice but to construct a false investigative narrative to hide how they use Hemisphere if they plan to prosecute anyone.

Once AT&T provides a lead through Hemisphere, then investigators use routine police work, like getting a court order for a wiretap or following a suspect around, to provide the same evidence for the purpose of prosecution. This is known as “parallel construction.”

“This document here is striking,” Schwartz told The Daily Beast. “I’ve seen documents produced by the government regarding Hemisphere, but this is the first time I’ve seen an AT&T document which requires parallel construction in a service to government. It’s very troubling and not the way law enforcement should work in this country.”

The federal government reimburses municipalities for the expense of Hemisphere through the same grant program that is blamed for police militarization by paying for military gear like Bearcat vehicles.

AT&T isn’t feeling threatened by this week’s revelations or their implications, releasing a lukewarm statement implying Hemisphere is just a way for AT&T to efficiently respond to law enforcement subpoenas:

“Like other communications companies, if a government agency seeks customer call records through a subpoena, court order or other mandatory legal process, we are required by law to provide this non-content information, such as the phone numbers and the date and time of calls.”

AT&T is being misleading, according to ACLU technology policy analyst Christopher Soghoian.

“They say they only cooperate with law enforcement as required, and frankly, that’s offensive when they are mining the data of millions of innocent people, and really built a business and services around the needs of law enforcement,” Soghoian told the Daily Beast.

AT&T will launch its anticipated DirecTV Now all-streaming cable television alternative next month at an unprecedented price of $35 a month for more than 100 channels, viewable for free without counting against your AT&T smartphone or tablet usage allowance.

Targeting cord-cutters, the new service will not require a satellite dish or expensive equipment — just a reasonably fast internet connection.

AT&T CEO Randall Stephenson used the announcement at a Wall Street Journal-sponsored event to claim the new service was an example of how AT&T won’t increase prices as a result of its proposed merger with Time Warner, Inc.

“That’s not a medium for raising prices,” Stephenson said, referring to AT&T’s new service. “Anybody who characterizes this as a means to raise prices is ignoring the basic premise of what we’re trying to do here.”

AT&T and Time Warner’s respective CEOs appeared together at the event as part of a week-long press blitz to promote their $85.4 billion merger deal, which is getting considerable blowback from politicians, consumer groups, and Wall Street.

Stephenson and Time Warner CEO Jeff Bewkes claim they are re-inventing the cable television business model and forcing innovation.

“If there was ever an environment that was begging for innovation, it was this environment,” Stephenson said. Bewkes added: “We would say and we’ve been saying it since 1995, every channel in the country should look like HBO or Netflix—there’s no reason we can’t.”

AT&T defends its $35 price point, which is half the price many cable companies charge for cable television, claiming it can afford to charge those prices by doing away with service calls, equipment, satellites, and infrastructure that traditional cable operators have to cover. DirecTV Now will rely on smartphone and desktop apps, and presumably third-party set-top boxes like Roku and Apple TV to provide its lineup.

AT&T hasn’t announced an official channel list for the service, but AT&T has been in serious negotiations with most of the major content conglomerates, so the lineup is likely to cover all the major cable networks, presumably local stations, and include an on-demand library. Customers may not get some of the secondary cable networks most cable systems bury on three or four digit channel numbers in Channel Siberia, but few viewers are expected to miss channels that attract fewer than 50,000 viewers nationwide.

Stephenson promised that future programming cost increases would be offset by developing “new ad models” that will cover most of the price increases.

One impediment to AT&T and Time Warner’s grand plan is the pervasive issue of data caps and usage-based billing, which could prove a lethal deterrent to customers ditching traditional cable TV in favor of online alternatives. AT&T itself imposes data caps on its DSL service, and has an unenforced cap on U-verse. Comcast continues to charge overlimit fees for customers exceeding 1TB of usage per month and smaller cable operators often include even smaller usage allowances.

Customers are highly skeptical of DirecTV Now because AT&T is involved. David Hill shared his prediction:

Undoubtedly you will get a $35 rate… for 6 months.  Then because you have been a good, paying customer, they will raise it to $75 a month.  But of course, new customers, can still get the $35 deal plus a $400 Amazon gift card.

When you call customer support (if you can actually get through to a living person) and ask for the same $35 rate the new guys get, why you will be told that you cannot get that rate because, well, you already ARE a customer.  So eat dirt.

Then when you work your way via the endless menu items to cancel the service about 2 weeks later and for years after you will be flooded with endless postcards and letters BEGGING you to come back.  You were a GREAT customer and WE want YOU BACK.  Right now!

Is this a stupid marketing policy or not?  In my MBA classes we were somehow mislead into believing exiting customers were your top A, number one priority.  Yet these internet companies cannot be bothered with keeping you.  Jerks, plain and simple.

AT&T CEO Randall Stephenson said the company’s deal with Time Warner will result in a new TV service that will offer more than 100 premium channels for $35 per month. He sat down with Time Warner’s Jeff Bewkes and WSJ’s Rebecca Blumenstein at the WSJDLive conference in Laguna Beach, Calif. (5:05)

It was a busy weekend for AT&T’s Randall Stephenson and Time Warner (Entertainment)’s Jeff Bewkes, culminating in an announcement from AT&T it was acquiring Time Warner in a deal worth $85.4 billion.

AT&T CEO Stephenson will remain as CEO while Bewkes stays temporarily to help oversee the transition of the merged company.

The deal has sparked confusion among some consumers who associate Time Warner with Time Warner Cable, but in fact the two entities are independent companies. Time Warner, Inc., is the entertainment and content provider that owns HBO, Warner Bros., CNN, TNT, and other networks. Time Warner Cable was spun-off in 2009 as an independent cable operator that was purchased by Charter Communications earlier this year.

AT&T’s interest in Time Warner is entirely about its video content. By owning Time Warner, AT&T can win deals to place its video programming on U-verse, DirecTV, and AT&T wireless smartphones and tablets without running into heated contract renewal negotiations, spiraling prices, and restrictions on how that content is viewed.

AT&T is hoping its acquisition will generate more revenue to make up for stalled wireless revenue growth. AT&T customers already can view DirecTV content on their smartphones without it counting against one’s usage allowance. AT&T could offer a similar usage cap exemption for Time Warner-owned programming, although it would raise the ire of consumer groups fighting for Net Neutrality, which prohibits preferential treatment of internet content.

Stephenson

Stephenson hopes the addition of Time Warner to the AT&T family will strengthen his existing plan to compete nationwide with cable television providers, offering a streamed bundle of cable channels under the DirecTV brand starting as early as this winter.

Stephenson has talked to Bewkes about a merger of the two companies since August, but Time Warner has always proved an elusive seller, having earlier rebuffed a buyout attempt from 21st Century Fox. Stephenson was talking to a man who pushed Time Warner Cable out of its corporate family nest back in 2009, and the reasons for doing so were ironic considering this weekend’s acquisition announcement:

Time Warner’s management believed that the separation was the right step for Time Warner based on the changes in Time Warner Cable’s business over time. […] Time Warner’s management believed that there were a number of potential benefits from the separation transaction:

• Time Warner would become a more streamlined portfolio of businesses focused on creating, packaging and distributing branded content.
• Time Warner and Time Warner Cable would each have greater strategic flexibility and each would have a capital structure that better suits their respective needs.
• The separation would provide investors with greater choice in deciding whether to own shares of Time Warner or Time Warner Cable or both companies based on their separate portfolios of businesses and assets.

What regulators ultimately think about the deal will probably take at least a year to learn, but reaction from Wall Street and both political parties was decidedly negative. AT&T’s decision to pay half the purchase price in cash worries investors more than the remainder of the cost paid in stock. AT&T’s stock price is falling, upsetting investors concerned about AT&T’s dividend, and the market may be signaling concern the merger might be a mistake of epic proportions similar to the disastrous $164 billion AOL-Time Warner merger in 2000.

Bewkes

Tom Eagan, an analyst with Telsey Advisory Group, said owning Time Warner for its content didn’t make much financial sense when it could license it for considerably less, as it does now.

“Why buy the cow when you get the milk for free?” Eagan wrote his clients.

Many analysts are wondering what changed Bewkes’ thinking that led to him spinning off Time Warner Cable in 2009, with his decision to sell in 2016. Time Warner got rid of its video distribution business because consumers were increasingly looking for alternatives to cable television. In 2000, that came primarily from satellite providers. Today it’s cord cutting.

Combining AT&T and Time Warner would create a mega-corporation that would own or control many of the largest cable networks and a major Hollywood studio and allow AT&T to maintain absolute control over how that content was distributed. Shareholders were concerned about the price tag of the deal, driving shares down in both companies. Combining AT&T’s existing debt with Time Warner will leave the combined company saddled with $175 billion in debt — a massive amount of money that may not be financed at near zero percent interest for long, if the Federal Reserve boosts interest rates. Moody’s has put AT&T’s credit ratings up for review for a possible downgrade as a result.

Both Republicans and Democrats reacted with unease about the prospect of creating another Comcast/NBCUniversal-sized entertainment company. Almost all were skeptical about the benefits to consumers. AT&T’s competitors seemed even more chilled, fearing AT&T’s control of both the content and the means to distribute it would give the juggernaut an unfair advantage. For example, AT&T could give itself a discount to carry Time Warner programming on U-verse and DirecTV that would be unavailable to competitors. It might also take a harder line on competing providers at contract renewal time.

Some regulators and politicians believe bigger has not proved better for consumers in the telecom space, particularly after seeing the results of Comcast merging with NBCUniversal. Critics contend Comcast has never taken the deal’s approving consent decree seriously, and have dragged their feet on adhering to the deal’s many conditions. Consumers have gotten almost nothing from the merger except higher cable bills.

Analysts predict AT&T will do everything possible to minimize regulator review of its deal. The first step will be to eliminate the FCC from the deal review process, which is a very real possibility considering Time Warner and AT&T have few deal-related FCC-issued licenses beyond a single independent television station in Georgia owned by Time Warner. That station could be sold or transferred to a separate entity within months. The deal will get a mandatory review by the Justice Department, looking for evidence of antitrust. AT&T plans to claim the merger combines two entirely different companies and won’t have any implications on competition.

Critics of the deal think otherwise, pointing to the potential of favoring AT&T over cable companies with lower programming rates. Net Neutrality proponents are also concerned about AT&T’s practice of zero rating its own content, which gives AT&T a competitive advantage in the wireless space.

With the advent of AT&T/DirecTV Now, AT&T’s new over-the-top streaming TV service launching later this year, AT&T is preparing to bury the U-verse brand.

Earlier this year, AT&T customers noticed a profound shift in the company’s marketing priorities. The phone company began steering potential customers to AT&T’s latest acquisition, satellite television provider DirecTV, instead of U-verse. There is an obvious reason for this – DirecTV has 20.45 million customers as of the second quarter of 2016 compared to 4.87 million customers for AT&T U-verse TV. Volume discounts make all the difference for pay television companies and AT&T hopes to capitalize on DirecTV’s lower programming costs.

AT&T’s buyout of DirecTV confused many Wall Street analysts, some who believe the days of satellite television are past their peak. Satellite providers lack the ability to bundle services, although some phone companies partner with the satellite company to pitch phone, broadband, and satellite TV to their customers. But consider for a moment what would happen if DirecTV introduced satellite television without the need for a satellite dish.

Phillip Dampier: The “U” in U-verse doesn’t stand for “unlimited.”

AT&T’s DirecTV Now will rely on the internet to deliver television channels instead of a satellite. AT&T is currently negotiating with most of the programmer conglomerates that own popular cable channels to allow them to be carried “over-the-top” through broadband connections. If successful, DirecTV Now could become a nationwide powerhouse alternative to traditional cable TV.

AT&T is clearly considering a potential future where DirecTV could dispense with satellites and rely on broadband instead. The company quietly began zero rating DirecTV streaming in September for AT&T Mobility customers, which means watching that programming will not count against your data plan. For current U-verse customers, broadband speeds have always been constrained by the need to reserve large amounts of bandwidth to manage television viewing. Although AT&T has been boosting speeds in selected areas, a more fundamental speed boost could be achieved if AT&T dropped U-verse television and turned the service into a simple broadband pipe that relied on DirecTV Now to manage television service for customers.

AT&T seems well on the way, adding this notice to customer bills:

“To make it simpler for our customers U-verse High Speed Internet and U-verse Voice services have new names: AT&T Internet and AT&T Phone. AT&T Internet product names will now align with our Internet speed tiers. Our voice plan names will remain the same.”

An earlier internal company memo suggested AT&T would eventually transition all of its TV products into “AT&T Entertainment” after completing a transition to its “next generation TV platform.” Increasingly, that platform seems to be an internet-powered streaming solution and not U-verse or DirecTV satellite. That transition should begin in January.

Gone by end of 2016.

It would represent a formidable change, but one that makes sense for AT&T’s investors. The transition to IP networks means providers will offer one giant broadband pipe, across which television, phone and internet access will travel. The bigger that pipe becomes, the more services customers are likely to use — and that means growing data usage. Having a lot of fiber infrastructure also lays the foundation for expansion of AT&T’s wireless network — particularly towards 5G service, which is expected to rely on small cell technology to offer faster speeds to a more localized area — fast enough to serve as a home broadband replacement. Powering that network will require plenty of fiber optics to provide backhaul access to those small cells.

Last week, AT&T announced it launched a trial 100Mbps service using point-to-point millimeter-wave spectrum to offer broadband to subscribers in multiple apartment complexes around the Minneapolis area. If the initial trial is successful, AT&T will boost speeds to include 500Mbps service to those same complexes. AT&T has chosen to provide the service outside of its usual service area — Minneapolis is served by CenturyLink. AT&T acquired a nationwide license to offer service in the 70-80GHz band back in 2009, and an AT&T spokesperson claimed the wireless signal can reach up to two miles. The company is also experimenting with new broadband over power lines technology that could offer service in rural areas.

Just like its wireless service, AT&T stands to make money not just selling access to broadband and entertainment, but also by metering customer usage to monetize all aspects of how customers communicate. Getting customers used to the idea of having their consumption measured and billed could gradually eliminate the expectation of flat rate service, at which point customers can be manipulated to spend even more to access the same services that cost providers an all-time low to deliver. Even zero rating helps drive a belief the provider is doing the customer a favor waiving data charges for certain content, delivering a value perception made possible by that provider first overcharging for data and then giving the customer “a break.”

As of mid-September, streaming media analyst Dan Rayburn noted Akamai — a major internet backbone transit provider — was selling content delivery contracts at $0.002 per gigabyte delivered, the lowest price Rayburn has ever seen. Other bids Rayburn has reviewed recently topped out at 0.5 cents per gigabyte. According to industry expert Dave Burstein, that suggests large ISPs like AT&T are paying something less than a penny per gigabyte for internet traffic.

“If you use 139GB a month, that costs your provider something like $1/month,” Burstein wrote, noting doubling backbone transit costs gives a rough estimate of the cost to the carrier, which also has to carry the bits to your local exchange. In this context, telecom services like broadband and phone service should be decreasing in cost, not increasing. But the opposite is true. Large providers with usage caps expect to be compensated many times greater than that, charging $10 for 50GB in overlimit fees while their true cost is well under 50 cents. Customers buying a cell phone are often fitted with a data plan that represents an unprecedented markup. The extent of price increases customers can expect can be previewed by looking at the cost of phone service over the last 20 years. The average, often flat rate telephone bill in 1995 was $19.98 a month. In 2014, it was $73 a month. In 2015, it was $90 a month. Those dramatically rising prices in the last few years are mostly as a result of the increased cost of data plans providers charge to clean up on customers’ growing data usage.

Both Comcast and AT&T are dedicated to a campaign of getting customers to forget about flat rate, unlimited service at a reasonable cost. Even as both companies raise usage caps, they continue to raise prices as well, even as their costs to provide the service continue to drop. Both companies hope to eventually create the kind of profitable windfall with wired services that wireless providers like AT&T and Verizon Wireless have enjoyed for years since they abandoned unlimited flat rate plans. Without significant new competition, the effective duopoly most Americans have for telecommunications services offers the opportunity to create a new, more costly (and false) paradigm for telecom services, based on three completely false claims:

• data costs are expensive,
• usage must be monetized, and
• without a bigger return on investment, investors will not finance the next generation of telecom upgrades.

But as the evidence clearly shows, profits from selling high-speed internet access are only growing, even as costs are falling. Much of the drag on profits come from increasing costs related to licensing television content. Voice over IP telephone service is almost an afterthought for most cable and phone companies, often thrown in for $10-20 a month.

AT&T’s transition puts all the attention and its quest for fatter profits on its broadband service. That’s a bad deal for AT&T customers no matter what the company calls its “next generation” network.