BELLSOUTH SAMPLES SATELLITE WITH DIRECTV RESALE SETUP

At first glance, BellSouth's decision to follow SBC Communications and Qwest Communications into the direct broadcast satellite business looks like just another chapter in the company's long history of attempts to offer a video element in its residential service bundle. But the move differs in several significant ways that could benefit BellSouth.

The carrier's agreement to resell DirecTV service is simply that—a resale deal—and involves little investment from either company. SBC committed more in its own DBS partnership by taking an equity stake in EchoStar. BellSouth, which at one time had an agreement to resell EchoStar's DISH Network, is letting its new DirecTV relationship evolve by promising to develop what Bill Smith, chief product development and technology officer for BellSouth, is calling “the next phase of video delivery.” That phase likely will include an integrated package of satellite-based video and DSL services. Regardless, the company doesn't plan to even begin selling DirecTV until next year.

Such a relationship lets BellSouth test the waters of video service again with a known brand, and without the difficulty of integrating back office billing and customer relationship management systems. While BellSouth will market, sell and schedule the installation, DirecTV will use its own network of service technicians to install the equipment. Customers also will receive a single bill for DirecTV and BellSouth service, but the companies will not integrate billing software.

That's not to say that the two entities won't have any integration. “We will integrate DirecTV ordering software into our customer service centers,” Smith said.

SBC, by contrast, will effectively own its satellite customers by branding the service and integrating DISH's billing. While more effective in building a brand in the video business, many believe the actual integration work isn't worth the effort.

“From what we're seeing, a lot of OSS functions can be pipe-lined, and you can do this sort of loose integration that is a lot less expensive,” said Brian Washburn, senior analyst with Current Analysis' consumer network services group. “It's much easier from someone like BellSouth if they keep them at arm's length and just transfer things back and forth.”

Operationally, it also may be more beneficial to not integrate too much, particularly at the field technician level.

“There's a certain set of expectations that the cable operators have set,” said John Konczal, vice president of product marketing with OSS vendor Telution, noting that those expectations will remain regardless of the access technology. “If I'm offering video over DSL, that customer in the U.S. is going to want a cable-like experience—meaning there's going to be a truck roll.”

BellSouth may be using its own experience in video services to establish the parameters of the DirecTV relationship. Beginning with its americast joint venture in the mid-1990s—which included SBC, the former Ameritech and Disney—BellSouth has as much experience as any large telco in the video business. The company still has several americast systems in operation and has said any fiber-to-the-premises plan would require some type of video service.

The decision by BellSouth, SBC and Qwest to go with satellite first may be part of a larger trend for telcos of all sorts. In August, EchoStar signed a resale agreement with Alaska Communications Service, under which the telco will act as a resale agent for the DBS provider. Like BellSouth, ACS will not integrate any billing functions, though it does allow users to order DISH service from its Web site and is doing the installations.

“We're trying to make it as simple as possible,” said Ruth Sandstrom, vice president and general manager for ACS Wireless. “We'll be bundling it in with our products.”