AT&T's Thousand-Channel Plans

You're bound to see a number of things when you enter a poker room. There are the cocktail waitresses, the sparsely populated cashier's cage, and the usual complement of bored retirees, middle-aged grinders, and young turks. They're typically as different as night and day, except for one thing: Red Bull. The caffeinated energy drink is the beverage of choice for sleepless card sharks of all ages.

Its next stop might be your family room couch -- if the new and improvedAT&T (NYSE: SBC  ) has its way, that is. On Friday, regional telco SBC completed its $16 billion acquisition of AT&T, then promptly told The Wall Street Journal that it plans several initiatives to reduce its dependence on traditional long distance. Among the potentials: a TV service offering 1,000 or more channels.

Look, I know it seems like there are already 1,000 channels on today's tube -- heck, for poker alone -- but trust me when I say the actual figure's still in the hundreds. As if that matters. I mean, really, isn't there a point at which the number of channels you have is irrelevant? And didn't we already establish that it's 57? Who actually wants 1,000 channels, anyway? Do you? If you answered yes, then please, stop mainlining the jitter juice and get to a doctor. Or a park. Or anywhere other than in front of your TV.

Ranting aside, it's worth noting that this strategy -- if you can call it that -- is basically the same old convergence that's existed for a while now. Cable operators such as Comcast (Nasdaq: CMCSA  ) have been working on phone service for years. More recently, Web maven Yahoo! (Nasdaq: YHOO  ) has dipped a toe into home entertainment, inking a deal with TiVo (Nasdaq: TIVO  ) .

The allure of convergence lies in its potential profits. Each time you buy another digital service using the same set of wires, your provider's margins and earnings improve. So, naturally, AT&T figures the right idea is to hit you with as much content as it can. Its competitors are no different.

And that, ultimately, presents a major problem: Not everyone can be all digital things to all digital wannabes. Which means a shakeout is coming, and someone is going to lose -- and lose big. Don't be surprised if the "new" AT&T makes that list. And don't be shocked if one of the other biggies, or a Rule Breaking upstart, realizes that digital entertainment and communications has become a specific, personalized business in an industry dominated by one-size-fits-all behemoths. The company that moves fastest to give consumers the choice and flexibility they're truly clamoring for -- without requiring its customers to juice up on Red Bull for late-night viewing parties -- will make its investors very, very rich. Better stay tuned.

Flip through further Foolishness:

Does AT&T's 5.3% dividend yield sound mouthwatering? We think so, too. Find out how to earn market-crushing returns by getting paid to invest. Take a risk-free trial toMotley Fool Income Investortoday.

After a Red Bull, Fool contributor Tim Beyers makes Seinfeld's Kramer look like Rip Van Winkle. Consider yourself warned. Tim didn't own shares in any of the companies mentioned in this story at the time of publication. You can find out what's in his portfolio by checking Tim's Fool profile. AT&T -- formerly SBC -- and TiVo areMotley Fool Stock Advisorpicks. The Motley Fool has an ironclad disclosure policy.


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