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Looking to lure customers away from cable companies, DirecTV recently rolled out its own brand of DSL broadband to compliment its satellite-based television service. Under the plan, users who order both services will eventually get a single bill, with more free features or a discounted price.

DirecTV DSL became possible when the company's parent acquired broadband ISP Telocity early this year. While DirecTV's sister company offers a satellite-based broadband service called DirecWay for users outside typical broadband coverage areas, the new service offers standard DSL.

Why delve into DSL? Because people want a single source they can trust for both television and broadband, says Ned Hayes, president and chief executive officer of DirecTV Broadband, which offers the service. While an increasing number of cable companies have begun to offer these multiple services their customer service often leaves much to be desired, he says.

DirecTV, on the other hand, has a good track record with customers, he says. The company currently has more than 10 million television subscribers.

"People are delighted that we're there. They see DirecTV as customer savvy, and tech savvy, and there has been an overwhelming response," he says.

One of DirecTV's biggest competitors is cable giant AT&T Broadband. The company already offers digital cable television, broadband Internet, and digital voice services to a growing percentage of its customers, says Sarah Eder, a spokesperson.

Since AT&T Broadband was born from the combination of several companies it can't yet bring all of its services together on one bill, but that will happen in the years to come, she says. In the meantime, customers in some areas can get discounts of $5 for subscribing to two services, and $10 for subscribing to three. The company plans to offer more deals in the future, she says.

One Bill, Many Services

DirecTV hopes to beat AT&T Broadband and other cable companies to the punch, winning them over by offering bundled services that make life easier and less expensive, Hayes says. The company is still working out details, but hopes to begin offering its first bundles early next year.

"We're in the process of doing some focus group work," Hayes says. "We're finding out what are the things that people think are important--Do they want free HBO, or $5 off their DSL?"

By the time it launches its new bundles, the company plans to have new billing procedures in place, so that a single bill will reflect both television and broadband services. Customers should also be able to call a single number for customer service and technical support for both services, he says.

DirecTV hopes to add additional services down the road, too. First up: voice over IP by mid-2002, which will allow customers to have multiple phone lines through their DSL service.

"That's the killer app. You don't have to be an early adopter to appreciate low-cost long distance," he says.

DirecTV should be able to roll out new DSL-based services more painlessly than other broadband providers because of its proprietary gateway product, Hayes says. The gateway's design is supposed to make installation simple, without the user having to open the PC case and add a network card. You connect it via a USB, Ethernet, or parallel port. And its design means the company can send software upgrades to the machine without user intervention.

"We forward engineered that dog," Hayes says, which lets the company add services like a firewall, home networking, spam control, and eventually voice, without sending out new hardware or a service person.

'A Real Player'

DirecTV offering DSL makes a lot of sense, says Adam Needles, director of research for DVG Research.

"In my mind this fits very comfortably. They've done an excellent job with DirectTV and DirecPC--and they have excellent customer service." (DirecPC became DirecWay.)

Bundling services enables a service provider to cut customers a break, he says. Lower costs and simpler billing helps both the customer and the service provider, he says.

"So if 'Customer A' likes the DirecTV guys, he's likely to try them for their other services," he says.

Needles says he expects the company's future bundles to stack up well against offerings from national cable companies like AT&T Broadband and Comcast, as well as other companies offering multiple-service bundles like RCN.

With the DirecTV brand behind it, Needles says he expects the DSL service to grow into a national broadband presence. "The fact that they are continuing to grow their position in this market, is proof their value proposition makes sense," he says. "It's a real player."

No Easy Road

While Needles is optimistic about DirecTV's chances in the broadband market, he cautions that the company--like others in the same business--will face some technology hurdles.

Among them: Voice over IP is hard. And if people begin to depend on you for voice services, they're going to expect the same level of reliability that today's telephone companies provide. They won't stand for network outages that leave them without phone service for hours or days at a time, he says.

Another hurdle is the fact that DirecTV DSL, just like other national providers, is dependent on regional telephone companies for at least part of its network infrastructure. That means the quality of their service is left partially in the hands of the competition.

DirecTV DSL's Hayes acknowledges the awkward position.

"Regionally we compete with and partner with the Baby Bells," he says. "We also compete against the Earthlinks and MSNs of the world, and maybe even AOLs."

The company's advantage over these other companies, particularly AOL, is that it's been a broadband provider from day one, meaning it's not trying to switch over from narrow-band roots, he says.

"As the AOLs of the world try to transition their narrow-band customers to broadband, it is going to be painful," he says. "It is going to take some time and they have tons of money wrapped up in modem banks."

With more than two years of broadband experience under its belt, the company is well positioned to take on its much-larger rivals, he says. Right now DirecTV DSL has 74,000 customers--it hopes to have 100,000 before the end of the year, he says.

To win over potential customers, the company is currently offering its DSL service for $20 a month for the first three months with a one-year contract and no activation fee. After three months it costs $50 a month. The gateway is free, although shipping of the unit will run you $25.

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