DirecTV Plugs Into BPL

DirecTV Group Inc. (NYSE: DTV) advanced its broadband and voice bundling strategy today by striking a wholesale distribution deal with Current Communications Group LLC , an early developer of broadband over powerline (BPL) systems and technologies.

Under the deal, DirecTV -- still well behind cable in its ability to bundle voice, video, and data services -- will begin marketing a BPL-powered Internet service by the end of this year or early 2008, starting in the Dallas-Ft. Worth area, where Current is building a BPL network expected to cover 1.8 million homes and businesses. Current expects to complete that network in about four years.

The deal also applies to other markets where Current builds out its BPL technology.

Current also operates an earlier-generation BPL system in Cincinnati in tandem with Duke Energy, which merged with Cinergy in 2005.

According to Brendan Herron, Current's vice president of corporate development and strategy, the company is in discussions with other utilities in the U.S. and abroad for its BPL system and for Smart Grid, a platform that improves the efficiency of a utility company's electric distribution system. He did not offer details on Current's expansion plans, including locations or the size of future service footprints.

The BPL system in Cincinnati can deliver symmetrical speeds of 3 Mbit/s, he says. In Texas, a newer version of the technology is expected to produce speeds up to 10 Mbit/s, putting it on a par with some cable modem speed tiers.

Current has not disclosed how many BPL customers it has in the Cincinnati market. "But we know from experience in Cincinnati, [DirecTV's] customers are going to be happy, also," Herron asserts.

That DirecTV is giving BPL a close look isn't much of a surprise, considering how things are beginning to line up at the corporate level. John Malone's Liberty Media Corp. (NYSE: LMC), in the process of taking the reins of DirecTV, is a Current backer, alongside other biggies such as Google (Nasdaq: GOOG) and General Electric Co. (NYSE: GE)

The connection with Current marks DirecTV's latest attempt to complement its satellite TV service with Internet and/or voice offerings.

Most recently, DirecTV, along with satellite rival EchoStar Satellite LLC , inked a co-marketing deal with WiMax carrier Clearwire LLC (Nasdaq: CLWR). Clearwire and Sprint Corp. (NYSE: S) are jointly deploying wireless broadband services across the U.S. (See DBS Duo Adds WiMax and Clearwire & Sprint Team on WiMax.)

DirecTV also has marketing relationships with several telcos, including Verizon Communications Inc. (NYSE: VZ), Qwest Communications International Inc. (NYSE: Q), AT&T Inc. (NYSE: T), and Cincinnati Bell Inc. (NYSE: CBB). EarthLink Inc. (Nasdaq: ELNK) and DirecTV have a partnership as well.

AT&T also works with EchoStar, and the telco is expected to finalize an exclusive deal with one of the satellite TV providers later this year.

"Malone's Current move provides both leverage in the negotiations and a counter strategy if AT&T moves to Dish," notes Matt Stump, an analyst with One Touch Intelligence .

Finally, DirecTV offers a broadband bundle through its deal with WildBlue Communications , which uses a satellite-based system.

Despite the latest deal with Current, all of those previous partnerships remain intact, according to a DirecTV spokesman.

Moreover, the DBS service giant, which has about 16.3 million subscribers, plans to begin selling WildBlue services under the DirecTV brand by the end of August, the spokesman adds.

Although DirecTV appears to be hedging its bets by striking a range of partnerships, the accord with Current will give DirecTV access to the powerline, the most common wire and distribution outlet in U.S. homes.

Still, the fact that DirecTV and EchoStar have to carve out bundling partnerships also represent the "Achilles' heel" of direct broadcast satellite (DBS), says Jimmy Schaeffler, senior research analyst at The Carmel Group .

"The problem with every one of these alliances is that they [the DBS providers] have to share," he says. "Their competitors, in this case the telcos and the cable operators, do not. That's the bottom line. They would love to have total control over a triple-play product, but they don't have the technology."

But of all the deals DirecTV has put together so far, the one with Clearwire "is the one I have strong inclinations toward," Schaeffler says.

— Jeff Baumgartner, Site Editor, Cable Digital News

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