Last week, several analysts were questioning whether or not DirecTV Inc.’s apparent plans to enter the wireless high-speed Internet market, in order to compete with cable’s bundled services, was a good strategy.
“There are more problems than solutions with a wireless-broadband venture,” Craig Moffett, an analyst at Sanford C. Bernstein & Co., wrote last week. “We view DirecTV’s desire to enter the broadband market as a purely defensive — and ill-timed — measure.”
News Corp. chairman Rupert Murdoch told investors last week that DirecTV has been studying wireless technology and will likely unveil its game plan in the next few months. The direct-broadcast satellite provider is controlled by News Corp.
“We are looking — from the Direct point of view — at various alternatives: partnerships, going it alone and, of course, the different technologies,” Murdoch said at a Citigroup-sponsored investors’ conference in Phoenix.
“You’ll be hearing from us, within probably two months, a very clear plan of what will happen,” he said.
Right now, DirecTV and EchoStar Communications Corp. don’t provide high-speed Internet to households. But wireless technology could be an avenue for them to sell such a service.
Without Internet service, DirecTV and EchoStar can’t offer the three-product bundle of video, voice and data that has been so successful for cable operators.
“News Corp., in the form of DirecTV, has to create competition to the cable and telco bundle,” said Jimmy Schaeffler, senior multichannel analyst for The Carmel Group. “But to me, I can’t see how you can avoid price wars in this stuff.”
Moffett raised the same issue. “The broadband market in the U.S. is already viewed as extremely price-competitive, with two strong players in cable and telco,” he wrote. “An entry into this market by DirecTV would further pressure industry pricing levels, making returns uncertain.”
Bruce Leichtman, principal analyst for Leichtman Research Group Inc., predicted any triple-play bundle or Internet service DirecTV might launch would face an uphill battle in areas where cable and digital subscriber line broadband services are available.
But close to 30% of all DBS subscribers are in areas where cable isn’t available, Leichtman said. That could be a ripe market for any bundle or Internet service DirecTV has to offer.
DirecTV would only have to invest $1 billion or so to enter the high-speed wireless market, according to Murdoch. “But first we have to be certain of the technology and its ability to be expanded,” he said.
Mike Farrell contributed to this story.