Sat partners thinking in the box
EchoStar, SBC will add video on demand
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Move reps an expansion of a partnership between the satcaster and the telco, which started in March when SBC began offering Dish Network TV service bundled with its broadband and phone offerings.
Venture has signed 120,000 additional customers for Dish so far, contributing to a boffo second quarter for parent EchoStar, which added 340,000 subscribers. SBC is driving the set-top project; in June the company announced plans to spend $4 billion-$6 billion over the next five years to run high-capacity fiber lines to neighborhood "nodes" that would allow it to pipe high-bandwidth media, such as films and television, directly into homes.
Satellite in the meantime
EchoStar topper Charlie Ergen said he could envision reselling Dish service to SBC and allowing the company to deliver it to homes over its fiber network. But an SBC spokesman said Thursday that the network will take time to build, so a box that receives satellite signals is a good interim solution.
"We do plan to do TV through the pipes, but the pipes won't reach everyone, and they will take five years to build," said SBC's Michael Coe.
SBC is one of several telcos pursuing video plans. Verizon is spending $2.5 billion to run fiber to 3 million homes by the end of next year. Bell South has laid a fiber network and has a reselling partnership with DirecTV.
The telcos' moves have taken a toll on cable stocks. "It's been hurting the sector for the whole year," said Thomas Eagan, analyst at Oppenheimer & Co.
SBC said the box would allow consumers to download movies from the Internet, giving consumers a video-on-demand option not available through satellite TV.
Company, which plans to offer the boxes in 2005, gave little detail on how the downloads would work and how the technical hurdles presented by a patchwork network would be overcome.
Different telco tacks
Now that the telcos are diving into video, diverging strategies are starting to emerge. SBC and Bell South are extending fiber to neighborhood "nodes" and then using existing telephone lines to get the signal to homes.
Verizon, with its more urban systems, is taking fiber all the way into homes -- a costly proposition, but one that will allow it to avoid the technical problems of patching different networks together.
In its last earnings call, EchoStar's Ergen warned that as good as the SBC partnership has been, the telco could decide in the future to compete with Dish and offer its own video service.
But Coe said SBC has no intention of becoming a cable operator and having to negotiate with the likes of ESPN and Viacom for content. "It's not part of our core competency," he said.
