Swooning over AT&T's new project

July 28, 2009: 8:00 AM ET

Car TV service CruiseCast is promising -- if only it didn't make us carsick.

Look kids, live TV!

Look kids, live TV! Photo courtesy of AT&T

I started regretting the Chef Boyardee mini pasta and meatballs I ate for lunch around the time we were making our third turn in midtown Manhattan. I tried not to reveal my discomfort, instead nodding studiously as Winston Guillory Jr., the president of RaySat Broadcasting Corp, showed me yet another feature of CruiseCast, and in-car television service it is offering with telecom giant AT&T. (T)

The combination of trying to make eye contact with him, taking notes, watching the live feed and looking at the driver dodge New York pedestrians left me a little light headed.

But once I got past my queasiness, I could see some of the virtues of the service, which uses satellite technology to deliver live television to the back seat of your car. Like JetBlue's (JBLU) in-seat television service, CruiseCast offers a welcome diversion for kids in the backseat, especially when they've watched all the DVDs a dozen times. And there's simply no substitute when it comes to viewing live events or catching up on breaking news.

Here's the breakdown: You get this three-pound, disc-shaped antenna that looks like a 1980s arcade mouse.  The antenna is secured on your car's roof rack (if you have an SUV) or by a magnetic mount. The feed is then transferred to a receiver underneath the backseat. And from there, the passenger can watch live television and flip through the 22 offered TV channels — including anything from Adult Swim Mobile to CNN mobile — and 20 satellite radio stations.

AT&T's charging $1,299 for the equipment and then a monthly subscription fee of $28 on top of that.  Comparable services include  Sirius XM Radio's (SIRI) three-channel TV offering, which is $299 if you don't get it pre-installed in the factory. Then, monthly subscription is $6.99 a month but it's only available for existing satellite radio customers, so monthly costs will come out to about $20 a month. The other rival system comes from KVH Industries' (KVHI) TracVision, which costs $3,000 and subscription services will vary depending on whether you're an existing customer of TracVision partner DIRECTV (DTV).

Will consumers tune in? So far, only 1,000 subscribers have hopped on board and Avis has agreed to install CruiseCast in its rental cars in selective areas of Florida. Right now, AT&T's talking to auto manufacturers about potential partnerships in which cars could pop out of the factory with CruiseCast already ready to go. (Lucky for AT&T that former CEO Edward E. Whitacre is now chairman of GM (MTLQQ).)

Jim Croley,  director of business development for AT&T, acknowledges that pushing a luxury service in a down market is a tough sell, especially when it involves the struggling auto industry.  He says AT&T is ready to move quickly if the demand is there - or redirect resources if consumers balk.

"We don't know exactly what the market is for TV," he says. "If it's great, then we will turn up the temperature. If customers don't respond, we'll move onto something else."

Indeed, for AT&T, with more than $124 billion in annual sales last year  "car TV" is likely a small bet, not the $1 billion-in-revenue kind of business that can really make a huge impact at  AT&T.

"It's not a game changer," says Piper Jaffray's senior analyst Chris Larsen. "AT&T's just throwing new projects on the wall and seeing what will stick."

Ironically, the biggest competitor to CruiseCast may be the very wireless services AT&T offers through its mobility division: Mary-Beth Kellenberger, global program manager at consulting group Frost and Sullivan, says consumers may simply view web video and live feeds on a cell phone or a laptop that has roaming Internet connection.

AT&T and other manufacturers disagree, of course. Qualcomm, (QCOM)  the wireless technology company that offers wireless television service is pushing its own TV-in-the-carservice with Audiovox.  Bill Stone, president of Qualcomm's FLO TV unit, argues that the real problem is awareness of in-car television, not actual demand.

Analysts believe consumer appetite for such services are about  five years away; that's when technological developments will drive prices down, making systems more affordable and attractive to the general consumer. And even then, Frost & Sullivan's Kellenberger things vendors have a better shot of winning business from mass transit purveyors than individual customers.

Whether these products make it in the marketplace or not, I think I'll stick to products that will keep my lunch down. Call me cheap, old-school or just plain prone to motion sickness, but the radio dial is much more appealing to me.

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