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SBC To Offer IP-Based Advanced TV

By | November 15, 2004

      Telecom giant SBC Communications [SBC] announced bold investment plans Thursday that will have an impact on satellite-TV and cable-TV operators in the regional telephone company’s service area.

      SBC unveiled plans to build an advanced, Internet Protocol (IP)-based network capable of delivering an array of integrated next-generation television, data and voice services intended as a step beyond what currently is available from today’s telephone, cable or satellite-TV providers. The development could give the incumbent local exchange carrier a significant boost in its ability to compete in the TV arena.

      SBC is committing billions of dollars to the venture, and it expects that the three-year deployment cost for the project will be at the low end of a $4 billion-to-$6 billion range. In addition, SBC will spend roughly $1 billion in customer-activation capital expenses spread across 2006 and 2007.

      SBC expects its capital costs for this project will approach $5.5 billion in 2005 alone. The investment will allow SBC to “leap frog” existing telephone and cable TV networks, says Lea Ann Champion, senior executive vice president of IP operations and services.

      Network lab and field trials are underway, network construction is scheduled to begin in the first quarter of 2005, and SBC’s new IP-based network is supposed to be available to 18 million households by the end of 2007. The launch of IP-based TV services over the new network is planned for fourth-quarter 2005.

      Englewood, Colo.-based EchoStar Communications [DISH] has an existing partnership with SBC in which the companies bundle their services together in SBC territory. EchoStar provides its satellite-TV service for the video component, while SBC offers the voice and broadband service.

      Charlie Ergen, EchoStar’s CEO, told analysts in a conference call this week that when he entered into the partnership with SBC more than a year ago, both sides were fully aware of the fiber-optic rollout possibilities that telephone companies might be able to deploy. As a result, it was clear that the time would come when EchoStar and SBC would find themselves in a competitive situation. The plans for SBC to introduce a new fiber-optic-based video service should put more pressure on the cable industry than it would on satellite-TV service providers, Ergen said.

      “Lightspeed’s new data service with 6 Mbps down and 1 Mbps up should compare very favorably with cable modem service and enable SBC to increase its share of the broadband market in fibered areas to 50 percent from today’s 44 percent,” said Tom Watts, managing director of telecom, data and satellite services equity research at S.G. Cowen. “While Lightspeed will compete with DISH in about half of SBC’s homes, SBC remains committed to bundling DISH for the other half that will not be wired for Lightspeed.”

      (Steve Caulk, EchoStar, 303/723-2010; Tom Watts, SG Cowen, 212/278-4260)

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