| The bundled-services partnerships between telephone companies and satellite TV companies are facing an uncertain future. Although the two industries continue to market bundles of satellite TV, high-speed Internet and voice services, the telcos are deploying their own video-capable networks in large segments of their territories. And the satellite TV industry is pursuing its own broadband initiatives, including a partnership with WiMAX pioneer Clearwire But given the sheer logistical challenges of deploying the telcos’ new networks and successfully capturing a significant subscriber base, and the unproven real world capabilities and business model for a near-ubiquitous available WiMAX network, the question is how long will it be before the partners’ strategies irreparably diverge? In this report, we discuss the current state of the telco-DBS partnerships, examine their historic and forecasted impact on subscriber growth for both industries, and analyze the likely long-term strategic moves that DBS providers will make to offset a declining contribution from the telco partnerships moving forward. Five charts and tables are included.
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TABLE OF CONTENTS
INTRODUCTION
BACKGROUND – DBS PERFORMANCE 2005 – 2Q 2007
CURRENT PARTNERSHIPS
- AT&T, EchoStar and DirecTV
- AT&T and WildBlue
- Verizon and DirecTV
- Qwest and DirecTV
- Other Telco Partnerships
CONCLUSIONS
TABLE OF FIGURES
Fig. 1: Total DBS Subscribers Reported by Telcos, 2Q05-2Q07
Fig. 2: DISH Telco Subscribers as Reported by Telcos
Fig. 3: DirecTV Subscribers as Reported by Telcos
Fig. 4: Telco Contribution to DBS Subscriber Growth 2Q05 – 2Q07
Fig. 5: Forecasted Telco Contribution to DBS Subscriber Growth through 2012
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DIRECTV, EchoStar May See Declining Subscriber Growth in Next Five Years, Pike & Fischer Study Predicts
SILVER SPRING, MD, October 2, 2007—Satellite TV providers DIRECTV and EchoStar have been building customer loyalty with services such as high-definition channels and upgraded digital video recorders. But they are likely to see their customer growth fall significantly over the next five years, a new report from Pike & Fischer suggests.
The direct broadcast satellite providers, which together have more than 30 million subscribers, may be relying too heavily on their partnerships with telephone companies to gain new customers, P&F says in a new report, DBS-Telco Partnerships: Strategic Forecast. The phone companies and the DBS companies sell a co-branded bundle of phone, high-speed Internet and satellite TV service.
Over the last year, telephone company partners have been responsible for about 25 percent of the new subscribers that the satellite TV companies have secured, P&F says. In fact, as much as half of the new subscribers to DIRECTV and EchoStar’s DISH Network came from telephone companies in the second quarter.
But these partnerships are likely to scale back over time, which will suppress the ability of DIRECTV and EchoStar to capture new customers. That’s because their telephone company partners – primarily AT&T and Verizon – are developing their own video services over fiber-optic lines, according to Tim McElgunn, Pike & Fischer’s chief analyst and author of the report.
“The satellite TV vendors will see customer growth rates decline by an average of 13.5 percent per year as digital cable and telco on-net TV services, both typically delivered as part of a “multiplay” service, expand,” McElgunn says. ”By 2012, telcos will account for no more than about 100,000 annual additions to the DBS subscriber rolls.”
Pike & Fischer, a BNA company, offers a host of legal and business products covering the telecommunications industry. This new report, DBS-Telco Partnerships: Strategic Forecast, is priced at $499 and can be purchased at www.broadbandadvisoryservices.com. For analyst commentary or to request a briefing, contact 856-751-6723 / tmcelgunn@pf.com.
For information about Pike & Fischer’s Broadband Advisory Services, visit www.broadbandadvisoryservices.com or contact Jonathan Wentworth Ping at 212-576-8741 / jping@pf.com.
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Tim McElgunn
Tim McElgunn, our Chief Analyst, has more than 20 years of experience and expertise in market sizing, forecasting, segmentation and share analysis in emerging and legacy segments of the telecommunications industry. He focuses on the business strategies and competitive status of U.S. cable companies, telephone companies, satellite TV providers and broadband-enabled application providers such as Google, Yahoo and Microsoft. Before joining BAS in November 2006, Tim headed up U.S. consumer broadband analysis for eight years at Stratecast, a division of Frost & Sullivan. He also held senior analyst positions at both Datapro/NBI and Gartner Dataquest. Contact Tim at 856-751-6723 / tmcelgunn@pf.com.
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