In a move to add video services to its product bundles, Qwest Communications International Inc. has established marketing relationships with satellite TV companies DIRECTV Inc. and EchoStar Communications Corp., the same day SBC Communications Corp. announced a strategic deal with EchoStar.
During a media briefing this spring in Denver Qwest said it was preparing to announce an alliance with a DBS provider to deliver video services, since it doesn't view VDSL as a profitable near-term method for video delivery. "They need broadband and we need video," Teresa Taylor, executive vice president of products at Qwest, said at the time, referring to DBS providers. "So the nature of that brings companies together."
Two years ago Qwest forged its initial a relationship with DIRECTV through which the RBOC has been reselling the company’s satellite TV services in select apartment complexes. (Through the new deal DIRECTV is now the exclusive digital satellite TV provider for multiple dwelling units in those territories where Qwest provides video
programming services.) Meanwhile, Qwest has been using VDSL equipment from Next Level Communications to serve 40,000 customers in Phoenix and Denver. Qwest currently offers multichannel video entertainment to approximately
64,000 customers through a variety of delivery options including VDSL, satellite, and hybrid fiber/coax.
The new DIRECTV alliance will enable Qwest to make satellite TV services available to its customers in single-family homes in Phoenix and Tucson, Ariz., and Seattle. Additional markets are expected to come online throughout the remainder of 2003 and
into 2004.
Beginning in early August, Qwest will introduce additional packages including the DIRECTV programming.
As for the EchoStar relationship, that will enable Qwest to deliver DISH Network
satellite TV services to its customers in single-family homes in Colorado and Nebraska initially, with more markets expected to be added this and next year.
Qwest is working with both its satellite TV partners to explore next-generation services and migrate to a more integrated model in the first half of 2004 where Qwest will be the primary interface for various customer interactions including service and billing. Through Qwest, residential customers in these markets can now make one phone call to order local, long-distance, DSL, wireless and now television service.
SBC’s relationship with EchoStar, meanwhile, is a more strategic one and is further along than is the satellite TV provider’s Qwest deal, according to EchoStar. SBC intends to add branded EchoStar DISH Network TV services into its product bundle starting early next year. The two companies have begun joint development work on integrated order entry and billing tools. SBC affiliates will manage customer relationships including ordering, provisioning, customer care and billing, and will provide customers will a single monthly bill for bundled services. EchoStar will continue to offer DISH Network satellite TV service, which today reaches more than 8.5 million customers nationwide, in SBC areas through its established retail channels.
SBC has also had a long-standing relationship with EchoStar, in which SBC has agreed to make a $500 million investment in the form of convertible debt. The companies in April of 2002 announced a deal to bundle SBC’s DSL and EchoStar DISH on a standalone basis in select markets. But the companies have been reticent to provide information on availability or success of their combined offerings under that deal. This new deal is a broad expansion of that effort – including a wider palette of services targeting SBC’s entire territory, the companies explain.
With Murdoch’s purchase of DirecTV, EchoStar is the only other major DBS player in the market.
SBC says its relationship with Yahoo! will serve as a model for this new alliance with EchoStar. In November of 2001 SBC inked a comarketing agreement with Yahoo! Inc. to provide DSL and dial-up Internet services within the telco’s 13-state territory. The cobranded offer, called SBC Yahoo! DSL Internet, also includes a suite of customized products and services, many of which are optimized for broadband connections.
Over time SBC and EchoStar also plan to develop cobranded set-top boxes to support DISH, DSL and possibly home networking.
Study after study has shown that most residential customers prefer a bundle of services from a single provider. Offering a broad range of services has also been shown to decrease customer churn. Steve Kirkeby, senior director of telecommunications studies at J.D. Power, says: “We see that a lot of consumers are appreciating fact they have a choice and more and more are wanting to have a single source for multiple services.” He says local and long distance services are the two most frequently requested services for a bundle. Internet is the third most desired service. Next is cable TV services, then cellular, and then satellite TV, he says.
