Building on Bundles

SBC, Qwest Significantly Expand Resale of Satellite TV

Study after study shows most residential customers prefer a bundle of services from a single provider. Offering a broad range of services also has been shown to decrease customer churn. Steve Kirkeby, senior director of telecommunications studies at J.D. Power, says: “We see that a lot of consumers are appreciating the fact they have a choice and more and more are wanting to have a single source for multiple services.”

SBC this summer revealed its intention to add branded EchoStar Communications Corp. satellite-based DISH Network TV services to its product bundle in early 2004. The move will enable SBC to deliver unparalleled one-stop customer service and a single bill for bundles including video, wireless, local, long distance and broadband Internet services, says SBC Chairman and CEO Ed Whitacre.

“That’s a package our telecom and cable competitors can’t match,” says Whitacre.

The two companies have begun joint development work on integrated order entry and billing tools. SBC affiliates will manage customer relationships including ordering, provisioning, customer care and billing, and will provide customers with a single monthly bill for bundled services. EchoStar will continue to offer DISH Network satellite TV service, which today reaches at least 8.5 million customers nationwide, in SBC areas through its established retail channels.

SBC reportedly made a pass to buy satellite TV company DIRECTV this spring, but those talks apparently broke down when Rupert Murdoch’s News Corp. ultimately agreed to buy the direct broadband satellite company.

SBC also has a long-standing relationship with EchoStar, in which SBC recently agreed to make a $500 million investment in the form of convertible debt. The companies in April 2002 announced a deal to bundle SBC’s DSL and EchoStar DISH on a standalone basis in select markets. However, the companies have been reticent to provide information on the availability or success of their combined offerings under that deal. This new deal is a broad expansion of that effort — including a wider palette of services targeting SBC’s entire territory, the companies explain.

With Murdoch’s purchase of DIRECTV, EchoStar is the only other major DBS player in the market. Whitacre says SBC has chosen to collaborate with EchoStar on this venture because EchoStar is a “strong, well-focused company” with “industry-leading sales figures.” The deal enables SBC to get to market with video quickly in a way that “is financially smart,” Whitacre says.

SBC says its relationship with Yahoo! will serve as a model for its new alliance with EchoStar. In November 2001 SBC inked a co-marketing agreement with Yahoo! Inc. to provide DSL and dial-up Internet services within the telco’s 13- state territory. The co-branded offer, called SBC Yahoo! DSL Internet, includes a suite of customized products and services, many of which are optimized for broadband connections.

The co-branded SBC DISH Network satellite television service will offer SBC customers access to hundreds of popular, all-digital television channels, including movies, sports, news, music, international and high-definition TV programming. Pricing for the service had not been announced at press time.

SBC and EchoStar also plan to develop cobranded set-top boxes to support DISH, DSL and, possibly, home networking.

The same week SBC and EchoStar made their announcement, Qwest announced it has established marketing relationships with EchoStar as well as DIRECTV Inc.

During a media briefing this spring in Denver, Qwest said it was preparing to announce an alliance with a DBS provider to deliver video services, since it doesn’t view VDSL as a profitable near-term method for video delivery. “They need broadband and we need video,” Teresa Taylor, executive vice president of products at Qwest, said at the time, referring to DBS providers. “So the nature of that brings companies together.”

Two years ago, Qwest forged its initial relationship with DIRECTV through which the RBOC has been reselling the company’s satellite TV services in select apartment complexes. (Through the new deal, DIRECTV now is the exclusive digital satellite TV provider for multiple dwelling units in those territories where Qwest provides video programming services.) Meanwhile, Qwest has been using VDSL equipment from Next Level Communications to serve 40,000 customers in Phoenix and Denver. Qwest offers multichannel video entertainment to approximately 64,000 customers through a variety of delivery options including VDSL, satellite and hybrid fiber/coax.

The new DIRECTV alliance will enable Qwest to make satellite TV services available to its customers in single-family homes in Phoenix and Tucson, Ariz., and Seattle. Additional markets are expected to come online throughout the remainder of this year and into 2004.

The EchoStar relationship, meanwhile, will enable Qwest to deliver DISH Network satellite TV services initially to its customers in single-family homes in Colorado and Nebraska, with more markets targeted through 2004.

Qwest is working with both its satellite TV partners to explore next-generation services and migrate to a more integrated model in the first half of 2004 where Qwest will be the primary interface for various customer interactions including service and billing. Through Qwest, residential customers in these markets can make one phone call to order local, long-distance, DSL, wireless and now television service.

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