Does anyone out there remember Ma Bell? That sprawling coast-to-coast telco company that once ruled every phone, and every phone line, in the land?
Judge Harold Greene slit Ma's throat more than 20 years ago, and then spent the next decade divvying up her empire. After some serious initial dislocations, we all thought the grand old monopoly was dead.
But lately, as we contemplate the changing media landscape, we keep hearing an odd ringing in the distance. It's not Santa coming to fill our stockings. In fact, the more we listen, the more we wonder if it isn't the clanking chains of Ma Bell, moving ever closer.
For the corduroy crew, the latest manifestation of Ma Bell's possible reincarnation is the pending marriage between Rupert Murdoch's News Corp. empire and Hughes Electronics with its DirecTV property. To be sure, Murdoch rules a mighty empire and by closing his global satellite circle with DirecTV, he'll hold more sway than ever before. But like Murdoch's other platforms, DirecTV is primarily a dedicated video service. According to our friends on the Street, such services are destined for a long-haul also-ran (albeit a very profitable also-ran) status in the U.S. As the cable guys gear up their mighty platforms, with cross-promoted, cross-subsidized, cross-discounted video, voice and data services they'll continue to hold the bulk of the nation. So says the Street.
And not just the bulk of the nation, but the bulk of the nation's communications. Consider, for example, Comcast with its 21 million basic video subscribers, its expanding holdings in programming, plus its 4.8 million high-speed data subscribers and its newly deployed voice over Internet services, with an estimated 1.3 million subscribers. Add on to Comcast the No. 2 cable company, Time Warner, with its near 11 million video subscribers, powerful programming services, more than 3 million residential high speed data subscribers and more than 8,000 brand new VoIP subscribers. Recently TWX's cable arm has been eyeing potential acquisitions. Maybe Adelphia. Maybe Cablevision. Says Time Warner's top dude, Richard Parsons, "Three or four years from now there will be two or three dominant players (in the U.S. cable biz) and we want to be one of them."
Just think about that. Two or three major cable players, likely with 30 to 40 million homes passed each and definitely with discounted package deals for voice, video and data. Does that mean the end of DBS? Nope, because the DBS product will continue to evolve and (in our view anyway) will continue to beat the quality of the cable video product. But to hold any ground on an earth shaken by the vestiges of Ma Bell, a DBS company will need substantial size of its own. Which goes a long way toward explaining the bullish outlook for Murdoch and DirecTV ... to say nothing of rising chatter about a bad case of nerves rattling the domain of Charles W. and leading to increased speculation about an EchoStar/SBC courtship.
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