"There are many alternative services for consumers to look at and many more to come, on top of the networks offering their own stand-alone services," said Brian Wieser, senior analyst at Pivotal Research Group.
AT&T announced Monday it would offer three video streaming services: the new DirecTV Now, as well as current programs Freeview (previously called DirecTV Preview) and Fullscreen.
DirecTV Now is the first online TV service from a major cable and satellite provider. Starting on Nov. 30, the program's four different packages will give subscribers access to at least 60 and up to more than 120 channels at a price range of $35 to $70 a month without a satellite subscription. HBO and Cinemax can be added for an additional $5 each.
The company said DirecTV Now is aimed toward the 20 million households with no current cable or satellite service. But with services like Sling TV and Sony's Playstation Vue at competitive prices and Hulu preparing to launch a similar online-only TV service, DirecTV Now isn't the only game in town.
In addition, most people cut the cord because they want to watch select shows on a few networks. The problem with online services mimicking cable packages is that it doesn't let consumers pick which channels they want, Wieser said.
"The dream that consumers had was the premise of an a la carte world," Wieser said. "The consumer could only pay [as much as the cable companies] for a channel itself. But the price is only the price when you take a lot of services with it. It's always been an unrealistic fantasy."
Services that bundle channels are just a rehash of existing cable contracts and still require consumers to subscribe to increasingly expensive internet access.
Companies like Comcast, Charter and Verizon are updating their pricing structures to charge more for faster internet speeds to make up for lost cable subscribers, pointed out Greg Portell, lead partner in A.T. Kearney's consumer products and retail and communications, media & technology practices. AT&T could have a way around costly internet services through its wireless network, but the technical requirements are currently "a bit daunting," Portell said.
"In a world that is very traditional, it's nice to see them trying something different," Portell said. "But my sense is that a lot of constraints in what they offer is because of the legacy of the [cable] industry."
AT&T pointed out that its various packages come at multiple price points that give consumers choice and will also offer exclusive content including shows on its Audience Network, content from Reese Witherspoon's Hello Sunshine production company and the new Taylor Swift series "Taylor Swift Now!" AT&T wireless subscribers will also get data charges covered for Freeview and DirecTV Now, as well as for entertainment company Fullscreen's service.
The offering can be competitive among millennials, said Forrester senior analyst Jim Nail, adding that the partnerships with Amazon and Apple, as well as with Swift and internet stars from Fullscreen, make it a draw for youth and cord-nevers. Before being acquired by former Fox executive Peter Chernin's The Chernin Group and AT&T, Fullscreen Media made its name for creating social media-first programming and creating a network of online stars.
As for the danger that its own subscribers may cancel their DirecTV or U-verse subscriptions to buy into this service, the company said isn't worried. It sees DTV Now as an addition to its main DirecTV products.
"This is about extending our reach and showing our flexibility in an evolving market," an AT&T spokesperson told CNBC. "These services effectively broaden AT&T's reach to address segments of the market whose needs are not met by the traditional pay-TV model, specifically."
Nail also pointed out that AT&T has set "very conservative" expectations for the service.
"If they can't achieve these modest expectations with this kind of product backed with this firepower, it will be a statement about a fundamental flaw in the concept of [over-the-top streaming]," he said. "But I doubt that will happen."