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Cable/Video

SBC's EchoStar Pact: For Real?

SBC Communications Inc. (NYSE: SBC) says its tight, exclusive alliance with EchoStar Communications Corp., announced today, gives it a winning hand against cable multiple systems operators (MSOs) (see SBC, EchoStar Team for Dish TV).

SBC has exclusive rights to sell EchoStar's satellite TV service in its 13-state region in a co-branded offering. The two will cooperate to link their billing and OSS systems so customers will have a single point of contact -- SBC. They'll also work on a new set-top box for bundled SBC services. Service will start early in 2004, SBC says, though no date is set.

SBC is also putting $500 million into a convertible debt arrangement with EchoStar.

Qwest Communications International Inc. (NYSE: Q) today also signed a partnership with EchoStar and another satellite provider, DirecTV Inc. (see Qwest Teams With EchoStar, DirecTV).

In a conference call, EchoStar execs downplayed the Qwest deal, saying it was a reseller agreement that won't deliver an integrated bundle.

For its part, SBC contends the combination of TV with its video, wireless, local and long-distance voice, and Internet access will be a compelling reason to go with the regional Bell instead of an MSO. "Cable suppliers can't match the bundle," said SBC CEO Edward E. Whitacre Jr. in a press teleconference today.

Neither SBC nor EchoStar, however, would quantify the discounts expected to come with the grouped services. Nor would they specify how revenues are to be shared between the two.

The parties concede that executing the deal will be a challenge. Carrier operations support systems (OSSs) are notoriously complex and prolific (see MCI in OSS Chaos), and getting two providers' systems to work together by 2004 is a lot to ask.

For months now, regional Bells have been talking about making satellite alliances to compete against providers with cable TV services (see No Oasis in Cable Market). SBC has had an arrangement with EchoStar since April 2002, whereby customers of SBC's DSL and EchoStar's DISH TV service get discounts by buying both. With DirecTV, SBC has a deal whereby the satellite provider exited the DSL business in SBC's region and handed over its customers, with incentive discounts, exclusively to SBC.

But analysts are skeptical about taking things further than this. At least one can't see the value of the arrangement: "It doesn't really make sense to me," says Jim Lawrence of Stratecast Partners. If SBC is able to use EchoStar's satellite network for the content or infrastructure to roll out switched video services, that may be significant. But in that case, EchoStar would be shooting itself in the foot by helping set up its own competition in an area it may wish to forge into later, Lawrence says.

Another analyst says he's open to things working out. "I'm not sure previous pushes are the best indicator of what this could be," says William Power of Robert W. Baird & Co. Inc. If it helps SBC retain customers on core access lines, it might be worth it.

At least SBC didn't buy EchoStar outright -- though it reportedly considered buying DirecTV earlier this year. It's therefore shielded in part from the kind of liability that goes with a failed merger if things don't work out as planned. If they do, perhaps that $500 million is an investement in SBC's and EchoStar's joint future.

— Mary Jander, Senior Editor, Light Reading

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firstmiler 12/4/2012 | 11:43:56 PM
re: SBC's EchoStar Pact: For Real? After a lot of "pooh-pooh"ing of the value of Triple-Play services from the ILECs it appears that they are positioning themselves for the future by doing just that. However, they seem to be leaning a bit heavily on the notion that centralized customer service, unified billing, and discounted bundles will be enough of a value proposition to thwart the MSOs.

While the synergies and savings just mentioned certainly are of some value, I don't think it will be the golden "10%" incremental value that causes folks to change providers. As we have seen, the pricing on all this stuff (Internet, Voice, and Video) is quickly becoming commoditized, bundling will not change this dynamic and it is hard to envision significant price decreases that could not easily be mimicked by the competition.

By using legacy transport technology, copper/analog for the terrestrial and RF for the satellite, they are missing the key to the next step of this revolution which will be fully bidirectional IP services over an extensible infrastructure. Yes, I am talking Fiber. Once this is in place a Service Provider will be in position to defend his franchise by preventing any would-be competitor from usurping his offering by overbuilding with a superior infrastructure.

The apps that we will see in the next ten years will be dramatically different from what is consumed today. The infrastructure and strategic plans of the service providers needs to be ready to accomodate them. Only the quick will survive.

FM
lastmile 12/4/2012 | 11:43:55 PM
re: SBC's EchoStar Pact: For Real? "By using legacy transport technology, copper/analog for the terrestrial and RF for the satellite, they are missing the key to the next step of this revolution which will be fully bidirectional IP services over an extensible infrastructure. Yes, I am talking Fiber. Once this is in place a Service Provider will be in position to defend his franchise by preventing any would-be competitor from usurping his offering by overbuilding with a superior infrastructure."

Well said.
I have been talking fiber for many years now but it never seems to happen.
Reasons:
1. No money.
2. FCC.
3. But the main reason is that the RBOC's are slow. They will squeeze the juice out of POTS till they are dead and gone. "Triple Play" with the help of satellite! What a joke.
chip0145 12/4/2012 | 11:43:55 PM
re: SBC's EchoStar Pact: For Real? I agree with firstmiler.SBC with all its talk of PONs for first mile access is now turning to the Bell Canada model.I know that for a fact that triple play services cannot be delivered economically over a PON.I wish that these services providers would bite the bullet and go with a point to point Ethernet architecture that can be easily managed and is cost effective to deploy.Satelite service is not the answer.I think that SBC is confused.
BobbyMax 12/4/2012 | 11:43:52 PM
re: SBC's EchoStar Pact: For Real? This is a very fgood move on the part of the SBC. To be able to bundle many services would certainly bring down the prices. It also allows to come out with different pricing structures.

As far as the integration of OSSes is concerned, this work can be fanned out to Telcodia Technologies. They will also able to test for OSMINE compliance.

The only concern I have is Mr, Whataker ( Chairman of SBC. He is not very good in planning and execution. He made $8 million in salary and bonuses while thosands of SBC workers lost their job. SBC would do much better without Whitaker.
rjmcmahon 12/4/2012 | 11:43:52 PM
re: SBC's EchoStar Pact: For Real? This is a very fgood move on the part of the SBC. To be able to bundle many services would certainly bring down the prices.

Remember SBC and the others, who have been poor caretakers of our PSTN for so many years, couldn't even figure out email. They struggle to promptly answer and service the customer calls.

Only a fool would believe they could figure out how to bundle and support any new services. They don't have any idea what those services are. Therefore, in my judgement, they have zero possibility of truthfully ever providiing them. (Hence things like ISDN and fraudband.)
rjmcmahon 12/4/2012 | 11:43:52 PM
re: SBC's EchoStar Pact: For Real? I have been talking fiber for many years now but it never seems to happen. Reasons:
1. No money.
2. FCC.
3. But the main reason is that the RBOC's are slow.


I'd suggest your reasons are in the ballpark but not entirely accurate. I'd modify them to something like:

1. Payment for the public utility requires educating and informing citizens about the benefits of common carriage, open access, and bandwidth abundance in our communications infrastructure.
2. Unfortunately, the FCC hasn't helped with any of the above. Instead their policies, rules, and actions have inhibited communications while limiting our industry and our economy. This is done in the name of collecting tax revenues and protecting the status quo.
3. The RBOCs and the Cable cos, whose primary interest is to block the deployment of any fiber last mile which adheres to structural separation, waste so many human energies by constantly deceiving the public and espousing ignorance.

Those deploying modern communication utility infrastructures will understand and overcome these issues. It can be done. And when it is done, we will look back at our achievements with great pride, and forward, to our futures, with great hopes.
dodo 12/4/2012 | 11:43:51 PM
re: SBC's EchoStar Pact: For Real? rjm

check the following:

http://www.americasnetwork.com...

In a second, much less publicized case, Pacific Bell, a.k.a. SBC, lost a $4.6 million judgment in June to tiny Tel-Rom Communications, after a government contract to provide pre-paid calling card vending machines at three public airports in California went awry.
rjmcmahon 12/4/2012 | 11:43:51 PM
re: SBC's EchoStar Pact: For Real? I think that SBC is confused.

They are not confused. They are unethical and deceitful. They have no intention of ever providing anything real. Rather they spend the marjoity of their efforts on fraudulent activities.

Ever ask, "Why do so many of our phone bill payments get sent and aggrated in San Antonio, TX? And what exactly does San Antonio send out in return?"

Build the muni nets. Keep the money local, where it belongs.
busted 12/4/2012 | 11:43:47 PM
re: SBC's EchoStar Pact: For Real? me thinks y'all might be missing the point.

VZ, SBC and BS all want triple play, great. one challenge for the baby bells is where to get CATV content to deliver. well guess what, the dish guys have this and an alignment with them helps them get content.
strands555 12/4/2012 | 11:43:43 PM
re: SBC's EchoStar Pact: For Real? Bobby says: "This is a very f['n] good move on the part of the SBC. To be able to bundle many services would certainly bring down the prices."

rjm replied: "Only a fool would believe they could figure out how to bundle and support any new services."

to which I'd add, only a fool would believe that bundling inherently reduces prices. Satellite TV has no common operational elements with SBC's network which would reduce costs due to economies of scope. If they drop prices because you also subscribe to this satellite TV along with other of their services, it is as clear a case of tying as you'll ever find. RBOCs are already being called on DSL+phone tying, which at least shares some portion of the network. With satellite, there doesn't even need to be an investigation...they are 100% separate. See:
http://www.onlineathens.com/st...
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