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Southwestern Bell Set To Retail Digital Satellite System Receivers

While stating that it has no correlation to the status of future fiber-optic video services, Southwestern Bell announced it has reached an agreement with DirecTv to sell two Thomson-built hardware packages for the Direct Satellite System in the Little Rock, Ark. and Enid, Okla. markets.

Jeff Weber, SW Bell DSS director, said his company will sell the packages through manned kiosks positioned in malls in both areas and will evaluate performance before determining whether to extend the program to other parts of its five-state territory.

The equipment will initially include “unbranded” versions of original entry and step-up RCA receivers, he said. SW Bell will sell the units for $599 and $699, respectively, after a special $100 introductory rebate.

However, due to legal restrictions, DirecTv and USSB must sell programming service direct to purchasers through inter-active prompts. Eventually, branded SW Bell systems will be sold, Weber said.

In a move to compete more directly with the cable-TV-backed PrimeStar system — which has performed very well in rural markets — SW Bell plans to also lease DSS equipment for fees starting at $19.95 a month, not including programming.

SW Bell has a specially trained service team to perform installations and maintenance, Weber noted.

“This is a very natural fit for us,” he said. “Top-notch customer service, skilled installation, and maintenance are talent and skill sets that telephone companies can bring to this business. We have been working on it for about 100 years.”

SW Bell may one day offer video services over fiber-optic lines, Weber said. The agreement with DirecTv was “not an either/or decision. Our surveys show our customers want choice, and this is just another way to offer that. We can get in, do that today, and evaluate a number of alternatives.”

Meanwhile, a sister division to GM/ Hughes-owned DirecTv is preparing to launch its own DSS hardware sales operation.

However, Hughes Network Systems is not planning to take on Thomson and Sony head-to-head in consumer electronics channels. Instead, the company is preparing a direct distribution strategy for satellite dealers and a private label program for large retail chains.

As a first step toward the satellite dealer channels, Allen McCabe, formerly with General Instruments, recently signed on as marketing director for HNS consumer operations. HNS is a sister division of DirecTv, one of the two DSS programming providers.

McCabe intends to leverage relationships with TVRO dealers from his C-band days to give his new firm a foothold in the burgeoning direct broadcast satellite market.

Germantown, Md.-based HNS, he said, will also explore opportunities with custom home theater installers, as well as small regional CE, appliance and furniture dealers “who may be looking to expand their product line in markets where name brand is not as critical as a good sales force, service, financing and product quality.”

HNS will begin manufacturing products in January, said McCabe, and should be up to “pretty good volume levels by March” — putting it in position to be the third DSS hardware manufacturer, behind Thomson (RCA, GE and ProScan) and Sony. Toshiba and Uniden are expected to offer DSS products around mid-1996.

Although all of the other manufacturers plan to target TVRO dealers as well, McCabe said that HNS will capitalize on some of the ruffled feathers other manufacturers caused by giving CE retailers priority in initial rollouts.

“Recognizing that Hughes is not a household name for consumer electronics products, I could never go into a Circuit City, Best Buy or Sears and ask them to move their RCA kiosk out of the way to put a Hughes system in,” he explained. “So our emphasis will be on the TVRO dealers, who in many instances have told me that they felt slighted on the way because they didn’t get DSS product first.”

“When all is said and done, they all pick up USSB and DirecTv,” he added. “We will battle each other — as happens today with TVs, VCRs or CD players. It’s going to come down to who has the best sales team, the best marketing programs, and certainly, the best price points.”

Hughes “will be extremely price competitive” with the other players in the DSS camp, said McCabe, noting that the company will bypass two-step distribution and take product directly to dealers.

Meanwhile, HNS’s sister division, DirecTv, has said it plans to begin some direct-marketing initiatives of its own next year, but it has not revealed whose hardware, if any, would be involved in that effort.

“We have heard that DirecTv wants to do direct marketing,” said McCabe. “We will certainly want to talk with them, they are a sister division. But we also want to make sure we aren’t stepping on the toes of our own dealers.”

HNS plans to work with TVRO dealers on regionalized direct-marketing efforts, he continued. “There is no question that direct marketing works. It sold an awful lot of C-band systems — 500,000 to 600,000 in 1994, most of them done through direct-marketing in-home sales.”

The marketing director mentioned that HNS was approached by an unnamed privately owned East Coast department store chain about supplying DSS receivers for a private label program. And, he said, “private labeling is a tremendous opportunity. People don’t buy a brand, they buy the department store name.”

Although the Hughes brand may not hold much sway with consumers yet, McCabe said, it is a powerful name in commercial markets, and “I would think that commercial accounts would be very interested if they saw Hughes marketing a product for that area.”

Although CE chains are not the focus of initial efforts, HNS is not slamming any doors on the distribution channel, especially not on independent upscale goods operations, he said, pointing out that Hughes may play well as a distinctive brand against the many outlets carrying RCA, GE, ProScan or Sony systems.