EchoStar sees DSL relationship as key to beating cable

Although not showing up in earnings or subscriber acquisition figures, EchoStar Communications’ DSL relationships are an important factor in leveling the playing field against cable and will begin to reap rewards later this year or early next, said Charlie Ergen, EchoStar’s chairman and CEO.

Ergen made his comments during a conference call in which EchoStar reported a slimmer first-quarter loss, helped by subscriber growth at its Dish Network satellite service. EchoStar reported a $97 million loss compared with $170 million in the year-earlier quarter. Revenues rose 28% to $1.104 billion from $8611.9 million as the company added 335,000 net subscribers to end with 7.16 million customers.

Ergen said he was “disappointed” with an EBITDA of $178.5 million, which was more than triple last year’s $51.1 million, but that the number was reflective of the company’s long-range custom acquisition plans.

“There is some strategy behind those numbers,” he said, pointing to multi-room subscriber acquisition deals EchoStar is running.

The strategy behind EchoStar’s relationships with DSL providers EarthLink and SBC Communications is to combat cable’s growth in the bundled video and high-speed data services space. Satellite broadband, he said, is too expensive.

“We see a strategic advantage to being able to partner with some of the folks who already have plant equipment for DSL, who are already experts in broadband and who cover people in a more economical position other than the $70-a-month we had via satellite,” Ergen said.

“[While] we don’t really have much of a revenue opportunity there, [it is an] “opportunity to even better compete in the short run with the cable industry, which has been very successful with their broadband video bundling,” Ergen said.

The long-term focus will return to broadband satellite – especially if Ergen’s No. 2 Dish Network is allowed to merge with Hughes Network Systems’ DirecTV service.

That situation, which Ergen labeled “the future of our industry,” should not be resolved with all government agencies until at least October. In the nearer term, he said, EchoStar will start to learn the intricacies of the high-speed data business through its DSL relationships.

“We don’t think there’s going to be a lot with the DSL relationships at least for the next three to six months as we test market these things and find ways to make those bundlings more attractive to people,” Ergen said. “That’s certainly going to be an impact for us next year and maybe perhaps in the fourth quarter.”