SBC, EchoStar bundle up

SBC Communications and EchoStar today announced a partnership to jointly market satellite television and telco services in an effort to challenge cable companies on their own turf. SBC plans to use the new programming resources to launch a “quadruple play” bundle in early 2004, offering customers in its 13-state territory multichannel programming, local and long-distance voice, wireless and broadband services.

The deal will link EchoStar’s DISH satellite TV service with a SBC’s voice and data offering, giving customers one bill and a single point of contact and eventually leading to enhanced services coming out of a single set-top box. In exchange for exclusivity inside its own territory, SBC has invested $500 million in EchoStar in the form of convertible subordinated notes.

“We’ve made no secret as to the importance we’ve placed on putting video into our services bundle,” SBC CEO Ed Whitacre at a news conference. “This strategic partnership allows us to get to market a fully integrated video offering quickly.”

SBC and EchoStar entered into a resale agreement last year, in which SBC would market DISH services, but billing and customer care for the two were kept entirely separate. The new deal effectively integrates the two components, co-branding the satellite service itself and making video a component of SBC’s consumer service portfolio, much the same way Yahoo’s content is now a component of SBC’s broadband offering.

Both companies said the partnership is targeted at gaining new customers and securing their loyalty as no other telco or DBS provider has such a broad range of services. SBC has found that many of its customers are taking an “entertainment-centric approach to their telecom and TV services. With MSOs offering telephony as well as broadband Internet access, the threat of bundled video has grown greater, said Ray Wilkins, president of sales and marketing for SBC. When SBC bundled Yahoo content with its DSL services, customer take-up skyrocketed, Wilkins said. “We expect the same type of success with this partnership as we’ve had with Yahoo,” he said.

Not to be outdone, Qwest Communications also announced partnerships with both DirecTV and EchoStar today. Qwest will resell DirecTV services in Phoenix and Tuscon, Arizona, and in Seattle while it will resell DISH services in Colorado and Nebraska. While Qwest will be bundling the satellite programming with its telecom services, EchoStar was quick to point that its partnership with Qwest was non-exclusive and the two companies will keep their billing, customer service and branding entirely separate.

SBC and EchoStar’s partnership calls into question the future of SBC’s own terrestrial video plans. Earlier this year, SBC announced a major commitment to building out its broadband networks including the launch of its first fiber-to-the-premises systems next year. A major incentive for pushing fiber deep into the access network, however, is the multichannel programming that capacity would allow. SBC, however, said it hasn’t abandoned its own video-over-fiber plans. The new agreement with EchoStar is structured to allow EchoStar to be the primary content provider over any fiber network SBC builds.