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Latest IPTV Flavor: 'Stop-Gap'

Before the ink was even dry on AT&T's   Homezone IPTV service rollout in Ohio and San Antonio, analysts and the company called it Internet TV service for the impatient.

With good reason. The Homezone service offers IPTV to consumers who don't want to wait for fiber-optic to appear for their data bundle, according to Amanda Ray, a company spokesperson.

The service allows users to download videos, view photos on their TV or remotely manage their home DVR, which is helped by U-Verse,AT&T's other IPTV service,

Homezone requires subscribers to sign-up with a bundle of phone, Internet and satellite TV services from partners Yahoo  and Dish Network's EchoStar Communications .

Although the Homezone service itself costs $9.99 a month, the entire bundle ranges between $80-$140, depending on service level and area, according to Ray.

By the end of 2006, AT&T expects to roll out the Homezone service across its 13-state service region. The company refused to discuss specific areas and potential subscriber numbers.

Ray affirmed what AT&T said in June upon Homezone's unveiling: U- Verse, where available, is the company's primary IPTV product.

"U-Verse is definitely the end game" for AT&T's IPTV push, said Joe Laszlo of JupiterKagan Research. U-Verse, with more than 200 channels, video-on-demand and internal DVR, is not expected until around 2008.

As previously reported, AT&T expects to spend $4.6 billion providing IP-based television service to 19 million U.S. homes by the end of 2008.

With its latest roll out, AT&T believes it has something as a stop-gap service to thwart its cable rivals from capturing more subscribers to its data bundles of video, voice and Internet service. Laszlo called Homezone a "half-step toward IPTV."

While AT&T considers Homezone complementary and will not pull the service from areas also offering U-Verse, its marketing effort will go toward U-Verse, said Ray. Customers requesting Homezone will need to call AT&T.

But if U-Verse will eclipse Homezone, where's the market? Although the service holds some appeal, the segment of potential subscribers is much smaller than U-Verse, Laszlo noted.

For tech savvy consumers deeply interested in entertainment, Homezone could be the ticket. It offers consumers more entertainment and might entice cable users to downsize their cable package in favor of IPTV's video-on-demand features.

Homezone enables AT&T to gain the widest IPTV footprint too, spanning both areas where fiber is available and spots left untouched, reasons Michell Abraham of In-Stat. However, consumers faced with adding a dish on their roof may wait until U-Verse is available in their area, Abraham said.

Homezone enables what Gartner terms a "Digital Castle" linking home entertainment and information resources, a feat sought by cable companies, but now offered by telcos, said analyst Patti Reali.

Homezone may also help AT&T fine-tune its IPTV interface, something even cable operators are struggling with, Laszlo said.

Verizon , competing with AT&T to deliver IP-based television, offers an all-fiber alternative called FiOS. Verizon aims to garner more than one million households in nine states by the end of the year.