Copyright 2004 The Atlanta Journal-Constitution

The Atlanta Journal-Constitution

August 3, 2004 Tuesday Home Edition

BellSouth, taking direct aim at cable TV rivals, today will launch a multimedia marketing campaign to offer digital satellite-delivered television service to customers in nine Southeastern states.

New and existing DirecTV subscribers will get $2, $5 or $10 off their monthly satellite bill if they also subscribe to a bundle of BellSouth phone services. The size of the discount depends on the number of phone services purchased.

BellSouth and other phone companies have been losing customers to cable providers, which are prying them away with discounted bundles of video, phone and high-speed Internet service.

Now, the Bells are turning the tables, helping satellite companies such as DirecTV and DISH Network to market digital satellite service. One prime target: the roughly 60 percent of cable customers who subscribe only to analog video.

That's got Wall Street fretting that growth in cable revenue and profitability could slow.

Just last week, UBS analyst Aryeh Bourkoff lowered his rating on shares of Comcast and Cox Communications to "neutral," citing those concerns. Cox Communications is controlled by Cox Enterprises, which owns The Atlanta Journal-Constitution.

"Given their singular focus on the video-only product, and their sound financial flexibility, we believe the satellite operators will continue to be aggressive on promotional activity, putting pressure on cable's core video business," Bourkoff said.

Through BellSouth, DirecTV is offering equipment for a multi-room system at no charge for those signing up for 12 months with a satellite package of at least $39.99 a month.

Included is a dish, standard receivers for up to three rooms, and standard professional installation. A TiVo device that digitally records up to 35 hours of programming is available for a one-time fee of $99, plus $4.99 a month.

Last week, Cox Communications said it will offer digital video recorders in virtually all of its markets by year's end, up from about half currently.

BellSouth will get commissions from DirecTV. It then will use the money to promote DirecTV, it said.

Separately, DirecTV Group announced it will purchase the primary assets of Pegasus Communications Corp.'s satellite television unit for $875 million. The deal includes the rights to all DirecTV subscribers activated through Pegasus, a Bala Cynwyd, Pa.-based provider of satellite TV to rural parts of the United States.