While EchoStar Communications Corp. chairman Charlie Ergen made some
characteristically tongue-in-cheek comments in a conference call discussing its
co-branding alliance with SBC Communications Inc., the seriousness of what is at
stake was not lost on either company.
Both know the alliance could be the missing piece in their respective
bundling strategies -- low-cost video for SBC and high-speed data and telephony
But Ergen first used fast-food analogies to describe the deal, likening
EchoStar to The Coca-Cola Co.
"If you can imagine that we’re Coca-Cola and we’ve been selling Cokes in cans
and bottles in grocery stores," Ergen said on a conference call with reporters,
"we’re now strategically taking a step beyond that and saying we’re willing to
sell the syrup. And [SBC has] a lot of flexibility in how they sell that syrup
in their value meals, whether they sell it in a small-, medium- or large-sized
But the EchoStar chairman quickly got serious, adding that the SBC deal is a
crucial part of its strategy.
"We want to continue to improve our product,
particularly as it relates to our cable competitors because they have done a
great job in the past two or three years improving their product," Ergen said on
the call. "We can’t stand still."
Cable’s high-speed-data offering has been winning hands down against its
telephony counterpart -- digital-subscriber-line service. Ergen said that while
the agreement calls for a co-branded video service starting early next year,
future offerings could provide wireless-telephone and home-networking functions
in the set-top box.
Ergen said he was especially excited about the SBC deal because the RBOC’s
13-state territory includes a "disproportionate" number of EchoStar
Although neither company would comment on how revenue would be split or what
discounts would be offered to customers, Ergen said the intention is to make
money and grow subscribers.
"From an economic point of view, obviously, both of us believe this is going
to make us money," Ergen said "From EchoStar’s perspective, it has to do two
things: get us incremental subs we normally wouldn’t have gotten and second, for
this to make sense for us, we have to both hold onto customers longer."
Ergen added that by offering one-stop shopping and better economics, it
should grow customers and reduce churn.
SBC has had its churn problems, too. On the conference call, chairman Edward
Whitacre addressed a question concerning Cox Communications Inc.’s success with
its telephony product in San Diego, one of SBC’s markets.
Whitacre would not specify how many telephone customers SBC lost to Cox --
"It was more than we would like," he said -- but he added that gaining a video
product makes the playing field more level.
"This puts us on equal footing with Cox," Whitacre said. "We’ll be able to offer
a video product and be a strong competitor with them."