DBS RESULTS BOLSTERS TELCO VIDEO PLAY

In a second-quarter earnings season largely devoid of major surprises, one of the more interesting revelations came from SBC Communications when it announced that it has chalked up 121,000 DISH Network video subscribers in little more than four months with scant marketing effort. At the same time, the company said it is continuing a push toward a video trial this summer over one of its first fiber-to-the-node networks.

“We view the DISH Network product as complementary to a longer term fiber and network development strategy,” Richard Linder, CFO of SBC, said during the company's earnings call.

SBC in fact appears to be proving out a hybrid strategy for larger telcos that want to dip their toes into the video market as direct broadcast satellite (DBS) resellers while experimenting with various terrestrial business models. Both BellSouth and Verizon recently started reselling DirecTV's service while hinting they also will launch video over their fiber-to-the-premises networks early next year.

Among larger independent telcos, CenturyTel has been in discussions with DBS providers and plans to begin reselling service by the end of the year, CEO Glenn Post said during the company's earnings call. At the same, the company is testing a wireline video solution in LaCrosse, Wis., that uses ADSL2 Plus line cards.

“The real value there is that [ADSL2 Plus] provides three video streams, which is a very significant development,” Post said. “It's just a trial at this point. We believe it holds promise, but we're not ready to declare victory just yet.”

Citizens Communications, which several access vendors claim is mulling wireline video strategies, said it also is looking into resale opportunities.

“We're looking at an opportunity to increase the number of services we offer, to provide products that would improve overall retention, and we're looking for a solution to provide us with the greatest amount of profitability,” Jake Casey, president and COO of its ILEC operations, said during the company's earnings call.

That hybrid strategy may become more prevalent with larger telcos that have millions of potential customers, according to Michelle Abraham, a senior analyst with In-Stat/MDR. Ultimately, though, these same carriers have greater incentive to not team with a DBS provider, which can take a significant cut of the revenue from such ventures, she added.

“They're giving away a piece of the profits,” Abraham said. “It may be more comfortable for them to do this in the short-term, though.”