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BellSouth Seeks to Lure Customers with Phone, Satellite TV Service Bundles

Posted on: Wednesday, 27 August 2003, 06:00 CDT

Aug. 28--When BellSouth starts offering package discounts on phone, DirecTV and Internet services next year, restaurant manager Alice Grady says she'll listen.

BellSouth is betting the farm that it can reclaim lost customers, like Grady, if it can bundle its current local and long distance telephone service and high-speed Internet access with high-quality television through DirecTV.

BellSouth announced a new marketing alliance with DirecTV Wednesday, and said it will start offering the discount packages early in 2004.

BellSouth already offers bundled local, long-distance, voice and e-mail services; high-speed Internet access; and wireless service to its 45 million customers in nine southeastern states and overseas.

DirecTV is the nation's leading digital multichannel TV provider, with more than 11.5 million customers.

For BellSouth, the idea is to reverse the gradual hemorrhage of retail customers who have switched to its telephone rivals.

"We have strong incentives to make this work," Bill Smith, BellSouth's chief product and technology officer, said in a news conference Wednesday. "This offers us a chance to provide integrated response in an extremely competitive marketplace."

BellSouth will market, sell and schedule the installation of DirecTV service. Customers will need a small satellite dish.

Smith said the bundled service will let subscribers write just one monthly check for telephone, Internet and satellite TV service.

For her part, Alice Grady said she'd listen to a BellSouth pitch. She's the general manager of Keg O' Nails restaurant on Rosewood Drive, which offers continuous sports coverage on seven screens.

Grady said the restaurant dropped BellSouth a year ago for another telephone provider, but subscribes to TimeWarner for cable TV and to DirecTV for televised sports packages.

She's satisfied with the service and the rates, but the idea of bundling television with telephone appeals to her.

"If BellSouth can show me a big discount, I'd consider switching back," she said.

Just how big the discounts could be, and exactly when service will start next year, remains unclear, as BellSouth's Smith declined to be more specific.

Smith also declined to predict how many new customers -- or how much new revenue -- BellSouth might take in from its alliance with DirecTV.

Not everyone is convinced the idea will work, however. Industry observer F. Drake Johnstone said Verizon, other regional Bells and Qwest have failed to recapture customers by combining satellite television with local and long-distance telephone service.

Johnstone said cable carriers have maintained their competitive edge in providing digital services for subscribers.

"I still foresee slow declines (in customer volume) for the regional Bells," said Johnstone, an analyst with Hilliard Lyons in Richmond, Va. "It remains to be seen whether BellSouth can pull it off."

For its part, TimeWarner, the dominant cable TV company in Columbia, is confident it can compete with the new alliance. The company already packages TV services with high-speed Internet access.

"TimeWarner is the leader in broadband innovation and technology," said Bud Tibshrany, TimeWarner vice president for public affairs in Columbia.

"We have the best video high-speed data services in the land." TimeWarner has about 340,000 customers in 71 South Carolina communities, Tibshrany said.

BellSouth is South Carolina's largest telephone company, with more than 3 million telephone customers statewide.

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(c) 2003, The State, Columbia, S.C. Distributed by Knight Ridder/Tribune Business News.

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