DirecTV Battles Cable Triple Play


Competition from cable’s low-priced bundle is impacting DirecTV Inc., but the direct-broadcast satellite provider claimed Thursday that it is fighting back via its partnerships with telcos, by ramping up local HDTV, by rolling out digital-video recorders and by offering exclusive sports packages.

DirecTV Group Inc. CEO Chase Carey addressed the issue of heightened competition from cable during the DBS provider’s first-quarter conference call, when he was asked about the record video-subscriber growth Comcast Corp., Cablevision Systems Corp. and Time Warner Cable recently reported.

“We recognize we’re in an increasingly competitive environment,” Carey told Wall Street analysts. “Broadband-bundle pricing continues to get more aggressive. Our RBOC [regional Bell operating company] relationships continue to be quite strong, and certainly continue to be a very strong part of our ability to compete with the broadband bundle, and we expect that to continue. While we see an impact -- again, I’d probably use the phrase I used before -- it’s an impact at the margin.”

DirecTV has deals with telcos, like BellSouth Corp., that permit the phone company to offer the satellite provider’s programming in a package with voice and data.

With its effort to improve the quality of its subscriber base and monthly churn falling to a low of 1.45%, DirecTV added 255,000 net subscribers in the first quarter. Gross subscriber additions were 919,000, down 19% compared with last year, due to stricter credit policies and revised dealer incentives, according to DirecTV.

DirecTV U.S. saw revenue growth of 14% to $3.19 billion, operating profit before depreciation and amortization more than doubling to $545 million and cash flow before interest and taxes of $211 million.

Cable’s low-priced triple play of video, voice and high-speed data has helped to spike its subscriber growth. Carey claimed that digital subscriber line continues to take market share from cable broadband.

“These DSL customers are a great place for us to be a part of a bundled offering,” he said.

Carey was asked whether DirecTV had any plans to create an offering similar to Homezone, where AT&T Inc. and EchoStar Communications Corp.’s Dish Network are integrating their video and Internet services into a single set-top.

“Our box at the end of the year will have the capability to integrate broadband into the experience, and I think that’s an ongoing conversation with the RBOCs of what are the opportunities to create an experience that takes advantage of -- whether it’s the cost, the efficiencies, the appeal -- of that,” Carey said.

But he added while it’s an area of opportunity for DirecTV, it’s too early to handicap what will happen with it.

Carey also said there was nothing new to report on DirecTV’s efforts to launch a wireless-broadband service.

“It continues to be an area we spend significant time on and, as we said, we will move forward and do something when and if we get to a place where we have an arrangement that makes sense for us,” he added. “We’re certainly on top of the opportunities, and we continue to work through those.”

Carey also conceded that the new DVRs DirecTV started to roll out had problems and had to be “debugged,” with those glitches resulting in a 10% return rate during the first couple of months the boxes were rolled out.