Internet TV: AT&T's Dubious Attempt

"The pipes aren't fat enough," he asserts, adding that this is a problem "especially in an HD world."

Shift to High Definition

High definition televisions are currently in 18 percent of homes across the United States. Many industry experts feel that the upcoming Christmas season is when there will be a shift to HD, noting that service and content providers have finally intersected to usher in that change.

Networks have increasingly made more of their content available in HD. Some channels, such as HBO, Discovery, and ESPN offer HD-only counterparts in addition to their normal programming. With cable and satellite providers planning to host more of this content by this winter, Mitchell feels "this is the Christmas when we hit critical mass."

In addition, the price of HD-capable units has seen a substantial decline. A report released on July 4 by research firm DisplayBank predicts that full HD TVs (that is, those supporting 1920x1080 resolution) will account for 58 percent of overall 40-inch and larger TVs in 2010.

"That is one of the things AT&T totally mis-analyzed," Lin says. With the prices for large screen TVs falling, he expects more people buying screens larger than 40 inches.

"Once you get to a 40 inch or larger screen, standard definition will start to look fuzzy. Consumers will demand HD."

AT&T official literature states that it plans on supporting HD "later this year", however, given the limitations of the service, analysts say it is unlikely U-Verse will be able to cater to the growing HD demand.

Don’t Blame IPTV

Despite the HD deficiency in AT&T’s current service, Internet-based television itself does have much to offer, especially compared to traditional cable broadcasts.