SBC & BellSouth Should Have Bought Voom

SBC & BellSouth Should Have Bought Voom

Michael Harris

January 21, 2005

2 Min Read
SBC & BellSouth Should Have Bought Voom

Cablevision Systems Corp. announced last night it is selling its Voom satellite television service to Echostar Comminucations Corp. for $200 million. If any neurons were still firing in the Bell heads in Atlanta and San Antonio, however, SBC and BellSouth would have been the buyers. By way of background, the Voom saga has been a broadband edition of Family Feud. Cablevision Systems Corp. Chairman wanted to keep Voom, while his son CEO James Dolan, backed a board plan to dump the business, which lost over $75 million in the third quarter alone. The HDTV-oriented satellite service counted only 26,000 customers at the end of September 2004. On to the Bells missed opportunity. SBC and BellSouth are already successful partners in mobile carrier Cingular Wireless, and neither has a rational video strategy, despite their claims to the contrary. SBC continues to tout its 'Project Lightspeed' initiative to bring IPTV services to 18 million homes -- only half its footprint -- by the end of 2007 using fiber-to-the-node (FTNN) and 25-Mbps DSL technology. The price tag: up to $4 billion. For its part, BellSouth is banking on DSL2+ technology to deliver equivalent speeds, but with less fiber investment. In either case, they're considering pumping billions into a half-baked broadband strategy. By 2008, SBC and BellSouth may need all 25 Mbps to compete with cable's high-speed data service offerings, let alone video. If SBC and BellSouth bagged Voom, they could have instantly delivered a full-featured digital TV service to the nearly 50 million homes in their combined footprint. Consumers don't care whether their television comes through a dish or a wire, they just want a great product at a great price. SBC has proven this perfectly. In the third quarter of 2004 alone, SBC added 105,000 satellite TV customers through a resale deal with Echostar, pushing its total to 226,000. Of course, the Bells want to own the customer, not share the relationship. By buying Voom, they would have gotten the best of all worlds: inexpensive entry into the video business with an accelerated time to market, plus total customer ownership. Instead, by continuing with their DSL video pipe dream, MSOs are likely to count some 10 million local voice customers before a telco video product is fully deployed. Voom would have been a tremendous weapon for telcos. The service already counts 39 high-definition channels with plans to boost that total to up to 400 by the end of 2005. This is in addition to some 200 standard definition channels. With a Voom set-top box that integrated a broadband interface and PVR, SBC and BellSouth could have offered a HDTV and VOD service that matches virtually anything cable can deliver on the horizon. Add in Cingular wireless, DSL data and home phone services, and SBC and BellSouth would have been sitting on a killer quadruple play in short order. MSOs should count their blessings that the Bells missed an obvious opportunity.

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