10/12/2010 By REINHARDT KRAUSE ( Source: http://www.investors.com )

Verizon And DirecTV Test 4G Wireless In A Product Bundle

Verizon Wireless and DirecTV (DTV) are quietly testing an in-home broadband and entertainment service near Erie, Pa., that could roil the competition.

Verizon Communications (VZ), which owns 55% of Verizon Wireless, has touted fourth-generation LTE wireless services as a broadband rival of fixed-line broadband. By partnering its LTE with DirecTV, the nation's No. 1 satellite broadcaster, Verizon aims to create a powerful marketing bundle that would let it sell broadband services to homes outside its traditional landline and FiOS service area, which is centered on the East Coast.

Verizon is providing broadband Internet service to a small number of Erie homes via its 4G LTE network. The homes are equipped with a satellite dish to receive DirecTV's video services. A rooftop radio antenna connects to Verizon's LTE network. DirecTV installs wiring in homes to connect to TV set-top boxes, and the homes get LTE broadband via a wireless router.
Teamed Up Before

Verizon and DirecTV a few years ago teamed up to sell a package of telecom and TV in areas where the phone company doesn't offer its own TV services. Rumors of an LTE-based alliance between Verizon and DirecTV surfaced a couple of months ago on the Broadband Report blog.

The two companies are becoming more confident in the potential of jointly marketing wireless broadband and TV services, according to industry sources, and likely will expand the trial in 2011.

Verizon and DirecTV declined to comment for this story. The companies haven't announced the Erie test. But DirecTV disclosed the trial at an analyst meeting in New York City last week. There, the company cautioned that nationwide availability of Verizon's LTE is still a "couple of years away."

On Sunday, Verizon launched its LTE network in 38 cities. It says its LTE buildout will reach 85% of the U.S. within three years.

Even with the launch, the company has been cautious. But at a UBS conference on Tuesday, Verizon CEO Ivan Seidenberg — who has been careful not to raise expectations until the technology improves — went as far as to say "in time, 4G will be a modest substitute for cable Internet services."

Verizon has upgraded residential service in much of its home region to FiOS fiber-optic technology, but the wireline technology is far too expensive to ever be a nationwide option. Wireless is another story.

LTE gives Verizon a new weapon to compete nationwide not only against cable TV rivals but also phone companies such as AT&T (T) and CenturyTel (CTL). Other than in wireless services, phone companies historically have not encroached on the turf of other phone companies.
A DirecTV alliance also would give Verizon a marketing edge over 4G wireless provider Clearwire (CLWR), analysts say.

Positioning LTE as a rival to fixed-line broadband would be another gutsy move by Seidenberg, who has led the company's multibillion-dollar investments in FiOS and wireless networks, says Blair Levin. Now an analyst at the Aspen Institute, he developed the Federal Communications Commission's National Broadband Plan, released in March.

"This would be the next step in an extraordinary corporate transformation of Verizon," Levin said. "In the early 1990s, he was the head of a regional wireline voice monopoly. He's now the head of an international data and wireless competitive provider."
Levin says marketing national wireless broadband along with satellite video services "is a logical combination" that AT&T and others likely will do, if it works for Verizon.

Satellite TV has long been top-of-mind with phone companies. Both AT&T and Verizon have mulled acquiring DirecTV or its rival, Dish Network (DISH).