* Network says it is suing AT&T for breach of contract
* Early coverage "not much different" from cable rivals-Kurtz
* Defining mission clearly is crucial for Al Jazeera-advertisers
* Channel may need to pay distributors to reach more viewers-media exec
By Liana B. Baker and Lisa Richwine
Aug 20 (Reuters) - New cable network Al Jazeera America introduced itself to viewers on Tuesday with reports on political strife in Egypt and the impact of climate change on U.S. cities, shortly after a major pay TV distributor declined to carry the channel.
The decision by AT&T's U-verse pay-TV service stemmed from a contract dispute over terms to carry the new network, AT&T spokesman Mark Siegel said. Al Jazeera responded by suing AT&T for breach of contract in Delaware Chancery Court.
Globally, Al Jazeera is seen in more than 260 million homes in 130 countries. But the new U.S. channel funded by the emir of Qatar has so far had difficulty getting distributors, in part because Al Jazeera was perceived by some as being anti-American during the Iraq war.
Before AT&T's announcement, Al Jazeera America said it would be available in more than 40 million homes, about 40 percent of U.S. pay TV households and roughly half the reach of Time Warner Inc's CNN. U-verse was launched in 2006 and had 5 million video customers at the end of June in markets such as Texas and California.
"We could not reach an agreement with the owner that we believed provided value for our customers and our business," AT&T spokesman Siegel said.
Al Jazeera America said in a statement AT&T had "unilaterally" deleted the network and "presented us with circumstances that were untenable - an affiliate that has willfully and knowingly breached its contractual obligations."
The network said it had "no choice" but to file a lawsuit over the matter.
Defining the new channel's mission clearly will be crucial for Al Jazeera to gain a foothold in the United States, according to advertisers, executives and industry experts.
In its first hour at midafternoon, Al Jazeera pledged to cover "issues that matter to America and the world beyond." Anchors said they would provide in-depth coverage of stories ignored by other media outlets, with bureaus in cities they considered underserved such as Nashville and Detroit.
Al Jazeera America hired ABC news veteran Kate O'Brian to be its president and hired on-air talent like CNN veterans Ali Velshi and Soledad O'Brien.
Its news coverage kicked off with reports on Egypt, a Georgia elementary school shooting and wildfires in the western United States, topics covered by cable news competitors on Tuesday. Al Jazeera America also reported on a hunger strike by inmates protesting conditions in California prisons and Kodak's plan to rebound from bankruptcy.
It turned to sports with an interview of retired slugger Gary Sheffield about baseball's steroids scandal. A show called "Inside Story" explored the impact of climate change on U.S. cities and working conditions in Bangladeshi factories.
Audience ratings data were not yet available.
COVERAGE DESCRIBED AS BALANCED
Media critic Howard Kurtz, speaking on rival Fox News Channel, said Al Jazeera America's early coverage was "not much different, at least so far, than what you might see on Fox News, CNN or MSNBC." One top story on Egypt was "right down the middle" in terms of balance, he said.
The network is airing six minutes of commercials per hour, below the 15 to 16 minute average on other cable news outlets. Executives indicated they are willing to lose money in the near term.
Advertisers on Tuesday included Procter & Gamble Co's Gillette for its Fusion razors and phone service provider Vonage .
U-verse is the second TV provider after Time Warner Cable to drop the network since it acquired Current TV in January and replaced it with Al Jazeera America. Comcast, DirecTV, Dish and Verizon are carrying the network.
Merrill Brown, a former media executive who helped launch cable news network MSNBC, said Al Jazeera America may need to pay distributors if it wants to reach more viewers, particularly since it is not owned by a media conglomerate that can package it with other channels to gain leverage in negotiations.
"It's hard to believe they are going to get this thing nationally distributed without paying for carriage," Brown said.