Nation’s Biggest Telecoms Poised To Counterattack Cable Television

The battle lines in the cutthroat telecommunications industry are about to blur even further as the nation’s biggest telephone companies launch a long-promised counterattack against the cable TV industry, whose new phone services have been stealing away customers.

Associated Press in the Wall St. Journal
http://www.wsj.com

Starting Wednesday, SBC Communications Inc. will offer DISH Network satellite cable service to all of its residential customers in the 13 states where SBC is the dominant local phone provider.

Next week, Verizon Communications Inc. will begin selling DirecTV satellite cable across New England and New York state. Qwest Communications Inc., the Denver-based local phone company for much of the Rocky Mountain and Northwest, is already selling both DISH and DirecTV.

And later this month, BellSouth Corp. plans to begin selling DirecTV through its Web site in advance of a full-fledged launch in its nine-state region slated for the summer.

The phone companies are betting the marketing partnerships will help them keep existing customers, while convincing them to sign up for more services.

With the addition of cable TV to their lineups, the phone companies finally have at least one advantage over the cable industry, which has managed to build a strong lead in the high-speed Internet market even before the introduction of cable-based phone service began to accelerate over the past year.

Whereas before the two sides each offered a service the other didn’t, now the Bells have a full arsenal of products in their bid to slow the rapid decline of their core local phone business.

"These deals will allow the Bell companies to match the bundles offered by cable-television companies while also providing wireless services, which are not included in cable television company bundles," said Allen Long, president of the telecom consulting firm Long & Associates in San Francisco.

San Antonio-based SBC is the first of the Bells that will offer satellite TV as part of a single bill. SBC has seen 6.6 million local phone lines disconnected over the past three years, many siphoned away by cellphones and high-speed replacements for dial-up Internet connections, as well as growing competition for business customers and weak economic conditions.

The new SBC DISH offering is designed to help protect SBC’s remaining base of 54.7 million phone lines at a time when cable-TV companies have started to lure away local phone customers with Internet-based telephone services known as VOIP, or voice over Internet protocol.

On Tuesday, for example, Cablevision Systems Corp. reported that it has signed up 28,650 of its cable subscribers for phone service since the product was launched late last year across the company’s market in the New York City area. (See related article.)

Notably, analysts are projecting that SBC may sign up more than 400,000 customers for SBC DISH this year.

Although most of the revenues from the satellite-TV services will go to DirecTV and DISH parent EchoStar, the Bells see the ability to bundle as many services as possible as a strategic advantage.

"We have found that when a customer has two services with us and they add a third," the customer is 40% less likely to close their account, said Jeff Battcher, a spokesman for Atlanta-based BellSouth, which has been testing its DirecTV offering with employees for the past month.

In fact, although the discounts offered on multiservice bundles being offered by SBC and Verizon can save a customer more than $350 annually, price may be a secondary factor for many subscribers.

"In every piece of market research I’ve seen for the last four years, the number one reason people like bundles is convenience and simplicity of dealing with one company and one bill. No. 2 is price," said Mark Adams, executive director of consumer mass markets for Verizon.

Until June, however, technological constraints will keep Verizon and BellSouth from offering satellite-TV services on the same bill as their other services.

Meanwhile, the definition of what kind of company offers which kinds of services seems likely to blur far beyond the "simple" notion of a cable company selling phone service and a phone company selling cable.

On Tuesday, an electric company named Cinergy Corp. announced plans to offer high-speed Internet service over its power lines in Cincinnati, allowing customers to connect by simply plugging their computers into existing electrical outlets. The broadband services will be marketed initially to about 16,000 homes, expanding to about 55,000 by year-end.

Copyright © 2004 Associated Press

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