July 21, 2003 12:17 PM PDT

Baby Bells look to skies for video

SBC Communications and Qwest Communications separately announced deals to sell EchoStar's Dish Network satellite TV programming to homes, in maneuvers aimed at matching cable rivals.

SBC said Monday it will offer a co-branded service called the "SBC Dish Network" to homes in its 13-state geographical region by the beginning of 2004. The Baby Bell plans to market the TV programming as part of a package of local, long-distance, wireless and digital subscriber line (DSL) services. It will also handle all consumer relationships, such as orders, installation and activation, to subscribers looking to upgrade.

Qwest's deal with EchoStar is not a deep as SBC's, but entails a similar arrangement to sell Dish Network service to its subscribers in Colorado and Nebraska and possibly in more markets by 2004.

As part of its deal, SBC said it will invest $500 million in EchoStar.

The deal puts SBC in "a great strategic position to compete with any provider--telecom or cable company--in the years ahead," SBC's chief executive, Edward Whitacre Jr., said in a statement.

SBC, Qwest and EchoStar said their deals would put them in a better competitive position against cable.

The moves highlight a growing urgency among telephone giants to offer video programming in the face of competition from the cable industry. Cable companies are taking away market share in households by offering TV, broadband and telephone services bundled in one package.

More households are upgrading to broadband through their cable providers than are upgrading through DSL service from carriers, analysts say. In addition, households are buying digital cable services, and more are buying phone services bundled into their cable offerings.

Though phone companies were first to develop broadband technology, they have watched that advantage slip away. In response, the Baby Bells are pushing DSL more aggressively, offering discounts and promotions aimed at increasing the number of subscribers.

But competing against cable's "triple threat" of video, voice and data has put Baby Bells in a bind. Creating a video service over copper telephone wire is expensive and time-consuming, leaving marketing partnerships with companies like EchoStar the only worthwhile solution.

"It seems like the (phone) industry consensus is, 'Yes, we can do it--but it will take a lot of time and cost a lot of money,'" said Mike Paxton, an analyst at In-Stat/MDR.

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Until now, and probably still true, ATT has been unable to provide an adequate broadband speed to my area. Until then, my only choice is cable broadband coupled with either cable or satellite TV. The phone company has promised for almost a decade to deliver broadband equivalent to cable broadband. 3 months ago, I gave up my decade long battle with an increasingly unreliable DSL and switched to cable.
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