AT&T Broadband and TiVo Inc. are hooking up to offer cable customers in selected cities a TiVo personal video recorder (PVR) that works with AT&T's digital set-top boxes.

While direct broadcast satellite companies have made receivers incorporating PVRs available to consumers willing to buy them, cable operators have been reluctant to bear the cost of building PVRs into set-top boxes that they provide to subscribers.

?This is clearly a near-term strategy for us,? says AT&T Broadband spokesperson Tracey Baumgartner. ?Long term, we'd like to have this technology embedded into the cable boxes. But we know that people want this technology now. We found with our test with ReplayTV in Denver and Boston last year that the technology is so compelling that people are willing to pay more for it. So rather than wait for the advanced boxes, we decided to offer our customers standalone boxes with extra features.?

For TiVo, the pact widens its distribution pipeline. With sales lagging expectations at retail electronics stores, PVR makers have been looking for other ways to get their critically acclaimed technology into homes and targeting cable operators as a high-volume opportunity. With AT&T's marketing push, TiVo executives are expecting a spike in sales.

AT&T, on the other hand, has been suffering from below-industry-average cash flow margins for the past year. This service provides the company with some much-needed additional revenue without the expense of truck rolls or providing customers with expensive equipment.

Beginning Nov. 15, AT&T customers in the New England region, Denver and several San Francisco Bay Area cities, including Cupertino, Los Altos, Mountain View, San Jose, Santa Clara and Sunnyvale, will be able to buy a TiVo recorder with 40 hours of recording time for $299.

Customers call TiVo, which then ships the units to consumers, who in turn can install the units themselves, says Baumgartner. The deal gives customers a box that will record ten more hours of programming for the same price as boxes sold at retail, she says. This is by no means an exclusive endorsement by AT&T. The company expects to have other PVR deals in place in the future, Baumgartner says.

Analysts liked the deal last week. In a research note, David Lee Smith of Dain Rauscher said the deal will expand TiVo's marketing power in the AT&T markets.

Subscriptions to TiVo will cost AT&T customers $9.95 per month or $249 for the lifetime of the recorder. Both TiVo and AT&T Broadband will share the revenue, but Baumgartner declined to provide financial details between the two companies.

The TiVo box uses an infrared blaster to interface with the cable set-top, Baumgartner says. The interactive program guide in the TiVo box will work independently from the guide in the set-top box. Eventually, when the PVR functionality is incorporated into the set-tops, the guides will intermingle.

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