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AT&T Partners Up With DirecTV

There are three types of companies battling to own the pipeline of content to your TV: the cable giants, satellite TV operators, and most recently Telecom players AT&T and Verizon have been building out their own television options, U-Verse, and FIOS, respectively.

But now AT&T and DirecTV(DTV) are teaming up in a deal that will give DirecTV, the largest satellite provider, even more of an advantage over its rival, EchoStar . Starting in February AT&T will market and sell DirecTV's service as part of the telecom company's "Advanced TV" service. AT&T has been marketing Echostar'sDish Network service, but that contract expires Jan 31.

This is good news for DirecTV, and bad news for already suffering Dish Network, which last month reported the first quarterly decline in customers ever for a satellite TV provider, the company reporting a 25,000 drop in subscribers. DirecTV has a higher income customer base and is distinguished by a slew of high definition TV channels.

DirecTV is also offering exclusive content, like NBC's "Friday Night Lights," before it premieres on regular TV. Dish on the other hand has the lower-income customers who traded up (say when they bought new houses with highly leveraged mortgages). Now, with consumer spending pulling back, a subscription to Dish TV doesn't seem so crucial.

So why is AT&T selling a TV service if it has one of its own? AT&T's U-Verse TV is delivered over the Internet, and is rolling out very slowly; aiming for 1 million customers by the end of the year. Since the service is available to such a small sliver of the population, AT&T is using DirecTV as a stopgap, expanding its TV offerings and TV revenue while it expands its own service.

Questions? Comments? MediaMoney@cnbc.com

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  • Working from Los Angeles, Boorstin is CNBC's media and entertainment reporter and editor of CNBC.com's Media Money section.