News

DirecTV’s Carey: Broadband’s Overrated

9/21/2007 8:00 PM Eastern

DirecTV CEO Chase Carey said last week that while high-speed Internet access is important to media consumers and their computer screens, investors may be underestimating the true value of a compelling video experience on TV screens.

Carey, speaking at the Goldman Sachs Communacopia conference here Sept. 18, said DirecTV’s lack of a satellite broadband play might be curtailing subscriber growth a bit. But the satellite-TV provider’s agreements with telephone companies to bundle phone and digital subscriber line service with DirecTV video have managed to stem any mass exodus.

“I think it [broadband] is still a factor in the marketplace that we have to deal with,” Carey said. “I think there is a reality that broadband is certainly maturing, in terms of homes to get it are moving to a place where the number of homes that don’t have it today and will be getting it becomes smaller and smaller.

SUBS HAVE OPTIONS

“We continue to believe it’s important that a customer is able to access broadband and telephony in a way that is compatible with us. I think our numbers prove that we’ve been pretty successful to date making sure customers have that choice.”

Carey said DirecTV is working closely with next-generation broadband providers — its soon-to-be parent Liberty Media owns a position in WildBlue Communications, which offers wireless broadband service, and it has relationships with other providers.

“Today, our focus is more on aligning with an array of existing and emerging broadband players to ensure those choices are there and probably from an execution perspective, getting better about selling and promoting those choices,” Carey said. “But I’ve always thought that broadband is about price. There continues to be this perception that we’ll struggle short or long to compete with broadband, but we’re competing well against broadband and the bundle. The bundle is mostly about price. Today we’re providing consumers an option to access broadband and telephony in a way that aligns with our video service. I think it underestimates the value customers place on a quality video experience.”

“I think you will have emerging players that will continue to redefine broadband,” Carey continued. “I think mobility — wireless broadband — will be in some ways a challenge for the existing guys. I don’t think broadband broadly defined is going to be static.”

A further differentiator to cable, Carey said, will be DirecTV’s video-on-demand offering — scheduled for launch before the end of the year — which he said will be more user-friendly than similar offerings from cable, and the satellite giant’s plans for an expanded HDTV offering.

DirecTV has said it plans to offer as many as 150 HDTV channels next year.

Carey said the main difference between cable and satellite VOD will be the programming guide. Cable VOD guides, he said, basically list what is available and force the user to look for the content they want to watch. DirecTV’s VOD guide will be geared toward helping consumers find what they’re looking for.

“We’re going to have a really uniquely attractive proposal,” Carey said.

Carey said he expected the Liberty/News Corp. deal — under which News Corp. agreed to exchange its 39% interest in DirecTV and three regional sports networks with Liberty for News Corp. voting shares and cash — to be completed in about a month.

“There really haven’t been issues, he said. “Most of the issues relate to Liberty and News Corp., not DirecTV. It seems Washington will get tired of batting that issue around and move on. In a month or two, give or take, we hope to get on with the business and move on.”

OCTOBER CLOSING?

In a later presentation, Maffei said the close could happen in October.

“I’ve talked with John [Malone] and Greg [Maffei] at Liberty both, going back a year-plus ago when they were starting to contemplate it, and they have been very supportive of our plans and strategies,” Carey said. “From a strategic perspective and a directional perspective, I think we will pretty much be doing what we’ve been doing. How we compete in the marketplace, our plans as an operating company, I don’t think that will change.”

Carey said DirecTV’s new controlling shareholders will likely be more willing to invest in the direct broadcast satellite giant than News Corp. was.

“In theory, with News Corp., there was obviously a bit more of a major shareholder that had an array of other businesses, therefore what we did had to fit within a configuration of what they had,” Carey said. “With Liberty, it’ll be much more of a wide open slate.”

October