AT&T, Best Buy Expand Retail Link

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The nation's biggest MSO and largest consumer-electronics chain are taking their partnership to a new level.

AT&T Broadband and Best Buy Co. last week finalized a deal through which the consumer-electronics chain would begin marketing the MSO's services, including digital cable and high-speed Internet access, in 138 stores this month.

The news follows the launch of those services in Dallas late last October. Other key markets include Denver, Minneapolis, Boston, Atlanta, Chicago, New England and the San Francisco Bay area, according to Best Buy director of cable-services marketing Mark Guberman.

Dallas-area consumers were initially surprised to find cable products sold at retail, and consumer response was very favorable, Guberman said.

"Consumers find it a genuine convenience to be shopping for a TV or a computer and then be able to shop for a [cable] connection," he said.

Best Buy does not yet sell digital-cable boxes, but it does offer cable modems. Modems are also available for lease directly from AT&T. Best Buy sells Motorola Corp. and Toshiba America Consumer Products modems nationwide, and is also talking to other manufacturers.

The retail chain's customers pay $19.95 for either an AT&T Digital Cable or AT&T@Home activation kit. Both include special offers on installation and programming rebate coupons.

In the pilot program, AT&T offered free installation, $50 off the first month's cable bill and free pay-per-view movie coupons, said Guberman, who added that the offer has been modified over time. AT&T handles installation for Best Buy customers.

Best Buy displays AT&T's cable products "side by side" with direct-broadcast satellite equipment, "so customers are presented with options and can make the choice that's best for them," Guberman said.

When asked whether cable or satellite was faring better in the ongoing battle for retail market share, Guberman replied diplomatically: "Clearly, the customer is the winner."

At Best Buy, digital cable is sold in the television department and cable modems are displayed near the personal computers. But there are also signs directing customers back to the cable products from the appliance department, for example, because new homeowners coming in for a washer and dryer might also be in the market for cable.

"Certainly people remodeling or moving to a new home are interested in learning all their options," Guberman said. "The cross-merchandising opportunities are excellent."

But it's not just movers who are in the market for advanced cable products, he added. Consumers interested in home theater or MP3 audio are also likely to want better connectivity options for their TVs and computers, he said.

Retail helps AT&T Broadband by giving it "another source of customer feedback to help us create even more innovative products for the future," acting senior vice president of marketing Nancy McGee said in a press release.

Best Buy is talking with other MSOs about crafting similar arrangements, Guberman said. Other cable operators also sell their wares through chains such as Circuit City and RadioShack.

AT&T's deeper retail penetration comes as DirecTV Inc. tries to renegotiate its deals with national consumer-electronics chains.

DirecTV wants to pay retailers commissions based on customer activations rather than receiver sales. In some cases, consumers who buy DBS boxes locate illegal smart cards to pirate the programming, and never end up as paid subscribers.

There may be some legroom for negotiation with the retail chains. If DirecTV convinces retailers to move to a hardware-lease model, the stores could save on product-inventory costs.

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