Wall Street Analysis

By Paul Dykewicz

Cable TV operators that add such new services as VoIP to their existing bundles will be able to differentiate themselves effectively from satellite TV service providers partnering with regional holding companies, such as Bell South [BLS]. That is the theme of a report Friday by Thomas Eagan, a satellite and cable analyst at Oppenheimer. His view is that cable operators are better off today with the growth potential they can tap from high-speed data services and telephony than they were seven to eight years ago when their only real business was video. For that reason, Eagan is maintaining a “buy” rating on Cox [COX], Comcast [CMCSA] and Cablevision [CVC].

The fiber laying plans of telcos bring into question the long-term success of myriad satellite-telco marketing agreements, including the existing SBC [SBC] partnership with EchoStar Communications [DISH] to bundle SBC’s voice and data service with the video offering of Dish Network, Eagan wrote in his report. Although that arrangement has achieved short-term success, other telco-satellite TV partnerships like the limited launch of an alliance between DirecTV and BellSouth in April are not expected to change the dynamics of the competitive landscape, Eagan explained.

The long-term telco strategy may be not to rely on a single video distribution system but to have many video distribution platforms. Indeed, SBC last Tuesday announ-ced plans to test a new fiber-optic network this summer to deliver advanced digital video, ultra-high-speed broadband and VoIP services to residential and business customers. A successful test could spur the company to invest $6 billion to upgrade a majority of its wireline networks to fiber during the next five years.

Last month, Eagan noted Verizon [VZ] unveiled its blueprint to invest $1 billion to build a fiber network to the home in nine states, with plans to launch a video service next year. He added that BellSouth bears watching because it plans to deliver the triple play of video-data-voice services through fiber to roughly 100,000 to 150,000 homes annually. The company has fiber-to-the-curb deployed to 1 million homes within its footprint, and 200,000 homes currently receive video over fiber.

Satellite TV operators need to watch out for the video offerings of both their cable rivals and their telco partners.

Paul Dykewicz is senior editor and senior analyst of Satellite News. He can be reached at 301/354-1769 or at [email protected].