SBC, Qwest announce triple-play deals

SBC and Qwest this week announced separate deals with satellite television providers to add video services to their voice and data bundles, a key step in competing with cable companies to offer "triple play" services.

SBC and EchoStar Communications have entered into a $500 million exclusive partnership that allows SBC to add television services to its bundled voice and data offerings.

Early next year, SBC says it will market EchoStar's DISH satellite TV service as the "SBC DISH Network" to the 13-state in-region customers of its bundled services. The two companies are now working on integrating operations, including order entry, customer service and billing, the RBOC says.

SBC is funding development of the co-branded video services with $500 million in the form of convertible debt.

The alliance fulfills a long-term strategic objective of SBC's to integrate television entertainment into its consumer bundles, and does so with a "modest" investment, according to the carrier. Earlier this year, SBC considered acquiring EchoStar competitor DirectTV, a unit of General Motors' Hughes Electronics business, for a reported $10 billion.

"For the past several months, we've aggressively looked for the best way to integrate television into our bundles of consumer services," said SBC Chairman and CEO Edward Whitacre, in a statement. Asked if the EchoStar deal was a "consolation prize" for not being able to acquire a satellite TV provider, Whitacre said: "I think this is the grand prize. (EchoStar) is the best company, the best-managed company, and I don't have to spend huge sums of money."

"The SBC-EchoStar agreement may have resulted in part from snags in the reported negotiations between SBC and DirecTV, specifically the issue that DirecTV would only give access to its customers on a two-bill solution," states UBS Warburg Analyst Aryeh Bourkoff, in a bulletin on the deal. "In our view, these types of joint-marketing agreements have not been successful in the past."

The deal provides SBC with the video component of a "triple play" - voice, data and video - service bundle with which to compete against cable companies that are offering voice and data and taking some telephony and broadband Internet access line business away from the RBOCs.

"EchoStar gives us what we've been seeking and puts us in a great strategic position to compete with any provider - telecom or cable company - in the years ahead," Whitacre stated.

UBS Warburg's Bourkoff believes the SBC/EchoStar alliance will prompt cable companies to become more aggressive on telephony services. The cable companies with the greatest exposure to SBC are Cox, Insight Communications, Time Warner Cable, Comcast and Charter Communications, according to Bourkoff.

SBC will market the "SBC DISH Network" TV service in bundles that may include local telephony, long distance (where available), wireless and DSL Internet service. SBC has 56 million access lines in its region; EchoStar's DISH Network reaches over 8.5 million subscribers nationwide.