August 27, 2003 11:23 AM PDT

BellSouth tunes in to DirecTV

BellSouth on Wednesday became the latest phone company to embrace satellite television as a weapon to defend itself against cable.

The Baby Bell announced a joint venture to sell and market DirecTV's satellite service to its residential customers. The agreement follows similar telecom-satellite deals forged this summer between Qwest Communications and DirecTV and between SBC Communications and EchoStar's Dish Network. SBC invested $500 million in EchoStar as part of its agreement.

Under this deal, BellSouth will use DirecTV exclusively as its satellite partner and offer discounts when the satellite TV service is bundled with its voice and Internet services. BellSouth will market DirecTV to its customers, schedule times for DirecTV representatives to install the hardware and handle all billing.

These agreements highlight efforts by the Baby Bells to compete against cable companies, which are offering service packages that include video, high-speed Internet and voice calling under one bill. The Bells have watched cable companies dominate the residential broadband market and have responded by offering promotional discounts for their digital subscriber line services.

The Bells are trying to defend against cable's encroachment into voice services. Cable companies have witnessed strong gains in their voice services, and some of them are testing ways to sell voice services that are transmitted digitally through the Internet, a cheaper option than traditional analog delivery. To preserve their phone kingdoms, the Bells are scrambling to match cable's "triple threat" of video, Internet and voice.

"They're actually losing lines in terms of basic local voice service, so they have to look at other (offerings) to make up for that decrease," Jim Penhune, an analyst at Strategy Analytics, said about the Bells.

BellSouth will begin offering DirecTV early next year.

 

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