AT&T, Verizon Hit Streets To Promote DSL Service

When you’re delivering an outdoor advertising message in San Antonio’s triple-digit heat, it helps if you bring ice cream.

That’s how AT&T is approaching a block-by-block introduction of its new U-Verse video service over fiber-optic phone lines, an offering that pits broadband from the traditional carriers against the well-entrenched high-speed cable services. AT&T said it plans to invest nearly $5 billion in U-Verse over the next three years.

Meanwhile, competitor Verizon has been rolling out its own $1.5 billion service, FiOS, with a similar street-marketing plan, originally used in the Dallas-Fort Worth suburb of Keller, Texas, and coming to New Jersey in November.

The reason behind the very personal nature of the two campaigns is that both services are offered only in limited areas, forcing the companies to take under-the-radar approaches to advertising, foregoing mass media that might create demand the firms could not satisfy. “If we went to mass marketing in the Dallas area, we would be advertising a service we couldn’t sell to most viewers,” said Verizon rep Eric Rabe.

Neither company will reveal budgets for the campaigns, but Rabe notes that street marketing is more targeted, and therefore more efficient. Industry sources peg the AT&T effort at as much as $100 million over the next three years; of the company’s total $1.7 billion in advertising in 2005, $37 million went to bundled consumer services, per TNS Media Intelligence.

To reach specific neighborhoods, AT&T is arriving in Good Humor ice cream trucks equipped with video screens touting the new service. The company also hosts “Dive-In Movie Nights” at local country clubs and swimming pools, where bathers can watch movies while lounging on floats. A mobile home equipped with U-Verse networking gear gets a special workout on holiday weekends. And in a page right out of Tupperware’s playbook, AT&T customers have been hosting in-home parties to demonstrate the services available.

“We learned early on that seeing is believing on U-Verse,” said Michael Grasso, assistant vp for consumer marketing at U-Verse. “When you put the remote control into the customer’s hand, it really changed the way the customer interacted with the TV service.”

To aid the direct-marketing effort, AT&T hired Haggin Marketing of San Francisco to produce letter kits and catalogs, with Dallas-based Javelin working on direct mail, door hangers and other communications. The Promotions Network, also in Dallas, contributed to the event marketing.

AT&T plans to take the localized U-Verse campaign to other cities in the 13-state region where the company is considered the local service provider.

While U-Verse is in its infancy, Verizon is about a year ahead with FiOS. Verizon launched its first FiOS campaign in Keller in September 2005, hosting movie nights at the town’s community center and providing hands-on demonstrations. While Verizon couldn’t match AT&T’s mobile demo home, marketers did show up in Hummers equipped with video screens. It’s tactics such as these that the company will bring to New Jersey later this year.

Verizon expects to have its video network available to 3.5 million residents by the end of 2008. Instead of Hummers, the New Jersey campaign will use Mini Coopers with plasma screens. And Rabe said the company might also take over local coffee shops to demonstrate the video service, as it did in Keller.

Even though the service will be offered in some parts of New York and environs, buying air time on the media would be cost prohibitive and frustrating for potential customers not yet wired for the service, Rabe said.

While Rabe anticpates that it will be at least a year before Verizon breaks a TV spot for FiOS, his company and AT&T are already challenging the dominance of cable with packaged offerings of satellite TV with high-speed Internet, wireless and landline phone service. Verizon’s satellite service comes from Dish Network rival DirecTV.

“With DirecTV, we added 60,000 households in the last quarter, and we’re approaching half a million,” Rabe said. “Of course that’s a far cry from Comcast’s 22 million.”

AT&T says it expects to achieve a market share of approximately 30 percent of television customers in the U-verse footprint by 2010.

When it comes to competing with cable operators, Verizon and AT&T claim better picture quality and more efficient interactivity through digital video recorders.

Independent telecommunications marketing analyst Jeff Kagan said the video over fiber lives up to those claims.

Indeed, CableLabs, the cable-supported research organization in Colorado, recently issued findings that $70 billion-a-year cable industry may have to invest billions of dollars into its infrastructure to keep up with Verizon and AT&T.

As phone companies invade cable’s video space, the nation’s largest cable operator Comcast is returning the favor, offering telephone service along with high-speed Internet and video service. Philadelphia-based Comcast is calling the package the “triple-play,” with an introductory price tag of $99 per month.

Kagan said that the traditional telecom carriers will have to undercut cable’s prices to take customers away from cable.

“Right now, people who hear about (video over DSL) think it’s interesting, but they don’t want to be bothered by it,” Kagan said. “Their lives are too busy. Price has to be part of it, but it can’t be the whole deal.”

“We’ve never seen this level of competition before and we don’t know who’s going to win,” he said. “But this is the year that it starts. This is the exciting year.”

The micro-marketing effort provides a template as AT&T prepares to take the campaign to Houston and neighborhoods in 13 other states by the end of the year.

As the street-level marketing continues in San Antonio, AT&T relies on satellite TV elsewhere to compete with cable operators.

In August, AT&T began a San Diego push for Homezone, a combination of Internet-based video with Dish Network programming. The video offering “underscores the company’s strategy to integrate the three screens that many consumers value most today: the TV, PC and cell phone,” said Rick Welday, chief marketing officer for AT&T Consumer.