Brace for a Bloody Bundle Battle

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San Francisco— The battle between cable, satellite and telephone firms to sell bundled services to customers will get bloody over the next few years, as telcos Verizon Communications Inc. and SBC Communications Inc. penetrate at least 20% of the video market and Rupert Murdoch and DirecTV Inc. likely team up with Craig McCaw’s WiMAX service to secure a high-speed Internet data play.

Those were among the predictions offered Monday morning at a National Show session by Deb Mielke, managing director of Treillage Network Strategies Inc.

The good news for cable operators, according to Mielke, is that back-office infrastructure, provisioning and billing problems may slow telcos’ entry to the video business.

“You’ve got a big mess, but their mess is bigger,” Mielke told an audience of cable operators attending a panel session on the competitive threat posed by telephone companies sponsored by Cisco Systems Inc.

Mielke warned that SBC — which has already picked up 320,000 video customers through its co-marketing deal with EchoStar Communications Corp. — poses a serious threat. She noted that the company makes 9 million customer-telemarketing calls per month.

“Cable has about 3 million [voice-over-Internet protocol] customers today. SBC alone believes it can have that many TV customers by the end of 2007 or earlier,” Mielke said.

SBC plans to charge $10 more per month for its IPTV video-programming package than EchoStar does, as it “will add stuff that people will pay for,” she added.

Among the challenges for both SBC and Verizon are network-infrastructure issues, a lack of brands associated with television and union issues, Mielke said, pointing out the power of the 700,000-member Communications Workers of America.

Cable’s weaknesses include a lack of skill sets for delivering voice products and a back-office setup that was not designed to handle more complex data services, Mielke said.

Opportunities for cable as it competes head-to-head with telcos in video include its installed base of video customers and its ability to provide interactivity and leverage content brands, Mielke said. “Folks are used to seeing you — that’s important,” she added.

Mielke also predicted that DirecTV will continue to dominate EchoStar’s Dish Network in the satellite sector, and that DirecTV boss Murdoch will eventually team up with McCaw’s WiMAX company to add broadband wireless.

“I don’t think [EchoStar] is a viable long-run company,” she added.