This time next week, AT&T will have passed the 1-million-subscriber mark for its U-Verse IPTV service, a landmark promised a year ago to be reached by this year’s end. Addressing investors at UBS’s annual global media and communications conference today, AT&T chief executive officer of operations John Stankey said that U-Verse is achieving more than 10% penetration within one year of marketing to a consumer base.

“We spent a lot of time in front of audiences like this talking about [U-Verse] and the question was, will it work? I think I can stand in front of you today and say definitively, the data says it’s working and it’s working great,” Stankey said in his presentation. “We’ve passed 17 million living units by the end of this year in the footprint we can serve with this technology. That footprint is now larger than Verizon’s path and marketable footprint.”

While scale was the goal of the year, Stankey said that AT&T is also starting to make impressive technology enhancements to differentiate its U-Verse product. These include broad high-definition offerings, improved compression capabilities, total-home DVR and, beginning in 2009, embedding Internet capabilities and content in the TV.

“This is why we did IPTV, and this is why we built that software infrastructure,” Stankey said. “We have a very competitive and capable linear TV offering, and the push now is to begin further differentiation of this service relative to what others in the entertainment space can provide.”

On the operational front, AT&T has decreased its install times quarter over quarter and increased its video ARPU in the double digits since it entered the market 18 months ago. Stankey said that the broadband attach rate is very high, with 54% of TV customers who weren’t previous DSL subscribers bringing broadband to their bundle.

Adding HD streams alone wasn’t a boon to subscribers this year, but Stankey stressed the breadth of U-Verse’s HD offering as pivotal to its success. By next week, U-Verse will also include more than 100 channels in each market. Stankey said the sky’s the limit for opportunities in building out U-Verse beyond its existing footprint, as well as adding higher bandwidth.

“We are starting to play around with new models as we see more fragmentation in the video market,” Stankey said. “There’s possibly a ‘TV light’ model that makes sense moving forward in certain places that starts to look pretty attractive to us. As we’ve frequently said, I don’t think the U-Verse build is going to be different than our broadband experience.”

When AT&T started with broadband, it determined its footprint and planned to build out to half of the customers in that region. Today, broadband now captures 80 to 85% penetration depending on the region, with some states as high as 90%. As costs changed over time and adoption grew, this build out model made the most sense, Stankey said. AT&T is still working to complete the entire first 50% and will decide where to take it from there when it reaches that threshold, he added.