Unfazed by rival AT&T's as-yet-unprofitable adventure in the direct-broadcast satellite business, MCI Communications Corp. has told the Federal Communications Commission that it's considering packaging Primestar's satellite TV service alongside its telephone offerings.
Buried deep within a 64-page satellite-license transfer pact with Primestar Partners L.P. filed with the agency earlier this month is a clause that gives MCI the nonexclusive right "to bundle the Primestar DBS service with MCI's telephony service offering, on mutually agreeable terms."
MCI's play is a complex one that looks to the presumed future of telecommunications - that for firms to be competitive, they will have to offer packages of voice, video, and data services. Already spending heavily to get into the local phone business, the deal with Primestar would add a key ingredient to its package.
Of course, that was AT&T's thinking, too, when it bought its 2.5 percent stake DirecTV last year. To date, the results of that US$137.5 million purchase haven't wowed anyone. AT&T has failed to come close to reaching triggers that would allow it to increase its stake to 30 percent. And DirecTV officials have expressed frustration at their partner's performance in marketing the service.
Considering such unpromising history, MCI hasn't said anything public about bundling video with consumers' phone service. Spokesman Michael Lewis confirmed that the company may package Primestar programming, but said nothing is definite. "We have no big plans right now," he said. "That was just put in there to keep our options open."
MCI is transferring its satellite rights to Primestar as part of the service's link-up with Rupert Murdoch's ASkyB enterprise, in which the phone company held a 50 percent interest.
One reason MCI may be downplaying the idea is the black eye it just suffered because of an unanticipated $800 million expense it incurred in its so-far-fruitless effort to start up local phone service. That cost was double earlier estimates and was a major reason that merger partner British Telecom lowered its bid for the company by 20 percent.
As cable companies and local telephone companies begin offering comprehensive packages of voice, video, and data services, it will become increasingly hard for the AT&Ts and MCIs of the world to get by without a video service option. Or so the theory goes. In reality, no one knows how competition will hash out - or whether the Internet will make many of the current "bundling" philosophies irrelevant.
In the short run, MCI has shown it knows how to hedge a bet.
