AT&T; to Market Digital Satellite TV in L.A., 3 Cities

In its first step toward competing against cable television, AT&T; Corp. said Monday that it will immediately begin marketing digital satellite TV in Los Angeles and three other U.S. cities as part of a push to bundle long-distance, local telephone, video and online services to customers nationwide by the end of the year.

The service, known as DirecTv, features up to 175 movie, sports and news, entertainment and pay-per-view channels, compared with the 50 or more carried by most cable systems.

Since Congress deregulated the telecommunications industry in February with an eventual promise of lower prices to consumers, telephone and cable companies have been pressing into new businesses while trying to protect their turf against competitors.

AT&T; made one of the first strikes, paying $137.5 million in January to buy a 2.5% equity stake in El Segundo-based DirecTv, a unit of Hughes Electronics Corp. that in about two years has signed up about 1.4 million subscribers, about half the satellite TV market in the U.S. AT&T; has an option to purchase up to 30% of the company over five years based on the number of subscribers it enrolls, which also earns the company fees and commissions.

The company hopes that adding its marketing muscle and its 90 million customers nationwide to the mix will increase subscriptions before competition in the satellite arena heats up in 1997, with the entry of MCI Communications Corp. and News Corp., which in January won federal approval to launch a satellite.

DirecTv’s digital signal provides crisper pictures and sound than the analog signals used in conventional broadcasting, but the price is steeper than cable. AT&T; said it will cost about $800 for a pizza-sized satellite dish, a set-top box and installation and an additional monthly charge of $29.95 for 65 basic channels that include ESPN, CNN and the Disney Channel. For an additional $39.95 a month, the company will market a package of channels from United States Satellite Broadcast Co., including five HBO channels, three Showtime movie channels, plus MTV, Nickelodeon and VH1.

Though some analysts were surprised at the high cost, AT&T; believes its customers will be enticed by its zero-interest financing packages and incentives such as a month of free premium movie channels. It is also pushing the ease of ordering the service by phone rather than having to visit a consumer electronics retailer.

But analysts said that the price, which has been dropping about $100 a year, will have to come down considerably to make satellite more than a niche market.

“AT&T; is starting high and will adjust the price as they see how consumers react,” predicted Jimmy Schaeffler at the Carmel Group in Carmel.

L.A residents may have other choices for video later this year. Pacific Telesis Group expects to have its wireless cable system on the market by the end of the year. The state has also approved applications by 60 companies, including cable and long-distance carriers, to provide phone service to residents.