Video Hasn't Been Kind to Telcos

At SBC Communications (SBC), hope springs eternal.

If history is any guide, a potential purchase of satellite TV operator Hughes Electronics (GMH) by the big telco would be as likely to succeed as the Trix rabbit's latest scheme to score free breakfast cereal.

Yes, the idea of the television business converging with multichannel video is as perpetually alluring as raspberry reds and lemon yellows. But in practice, telco/video convergence hasn't worked in the past. And this time around, there's even less reason to be hopeful.

The report of SBC's interest in Hughes, if accurate, represents yet another hurdle for Rupert Murdoch's News Corp. (NWS), the loyal Hughes suitor that has never managed to coax a firm "I do" out of the object of its affections. Murdoch was first in line to acquire Hughes in 2001, but got bumped out of the way by a counteroffer from EchoStar Communications (DISH). That match fell apart, however, after the pair encountered strenuous antitrust objections from regulators, giving News Corp. the opportunity to renew its courtship.

But beyond News Corp.'s jockeying, the purported SBC interest also represents yet another golden opportunity for a phone company -- think of the Baby Bells and TeleTV in the 1990s, or AT&T's more recent foray into cable -- to learn that telephones and TVs don't mix. At least not with the cookbook that phone companies are consulting.

Shares in SBC Communications fell $1.06 to $24.12 Monday on reports, originally in The New York Times, that SBC was in serious discussions to acquire Hughes, the operator of the DirecTV direct broadcast satellite service. Shares in Hughes rose 48 cents to $10.23.

Spanning the Globe

By one analysis, SBC's alleged interest in gaining control of the 11 million-subscriber DirecTV is a sensible strategy. In the telecom business, it's understood that the greater the number of services that a company can offer, the greater the revenue per customer and the less likely that subscriber is to switch to another provider. That's why, for example, Verizon (VZ) offers local, national, wireless telephone service and Internet connections in various plans.