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AT&T Taps Best Buy as Retail Partner

The nation's largest consumer-electronics chain, Best Buy Co. Inc., gave a nod to cable last week when it forged a strategic partnership with AT&T Broadband to promote digital cable and high-speed Internet access.

Financial terms were not disclosed, but retailers have long sought ongoing residuals from monthly fees in deals with other communications platforms, such as direct-broadcast satellite, wireless phones, pagers or dial-up Internet services.

"We're very excited to be aligned with the biggest name in telecommunications," Best Buy senior vice president of digital technology solutions Phil Schoonover said.

The arrangement is not exclusive to either the cable operator or the retailer.

"It's important for us to be in the [sales] channels where our customers want us to be," AT&T Broadband vice president of sales and distribution Dan Hillen said of the retail partnership.

Best Buy plans to set up AT&T-branded interactive kiosks in markets where the operator offers the services, although neither company would disclose the markets where they intend to start. The retailer will place the AT&T Broadband kiosks in the accessory section of its personal-computer departments, Schnoover said.

In its television sections, Best Buy will promote AT&T Digital Cable.

"We're the No.1 seller of personal computers to the home," Schoonover noted. He would not say if Best Buy plans to bundle cable modems or high-speed Internet access with new PC sales.

AT&T Cable Services will initially handle any installation for services sold through Best Buy, though a self-provisioning option may be added later. The retailer will sell Data Over Cable Service Interface Specification-compliant, high-speed cable modems, Hillen said.

Best Buy will eventually sell digital-cable boxes as well, but for now the stores will lease AT&T-owned set-tops.

"In the future, our goal and objective is to allow customers to have a choice," Hillen said.

Consumer choice is one reason Best Buy decided to forge the alliance with AT&T. The two companies have conducted joint marketing trials of high-speed cable modems and digital cable.

The retailer also markets direct-broadcast satellite systems from DirecTV Inc., as well as the DirecPC high-speed-data product of DirecTV sibling Hughes Network Systems. Schoonover sees no contradiction in adding cable to the broadband mix.

"Best Buy has always been about customer choice," Schoonover said. There are 65 million cable households in the country, and many will want to upgrade to digital service, he said.

"Our DBS business continues to grow," Schoonover added. "We don't intend for digital cable to cannibalize our DBS position."

Although Hillen said it's healthy for AT & T to be in the same channels as its competitors, that's not the main reason to partner with Best Buy.

"It's more for our customers," Hillen said. As consumers become busier, he said, it's important for operators to make it easier to test or purchase new cable services.

Best Buy will be required to customize its newspaper circulars and other promotional efforts for the regions where the cable company operates-something it already does for wireless telephony.

It will be interesting to see how digital cable fares against DBS head-to-head, said B.G. Marketing Inc. president Barbara Sullivan Roehrig.

"Supposedly when you see DBS and cable side-by-side, DBS still wins out," Sullivan Roehrig said. "The proof will be in the pudding."

The provider that gives retail salespeople the highest commissions and the retailer the longest-term service residuals will ultimately win out, Sullivan Roehrig predicted.

"Unfortunately, that will skew what they sell," she added.

AT&T will train Best Buy's sales staff in how to sell its products, Hillen said. The MSO will also seek Best Buy's input in positioning its broadband fare.

As part of its partnership, AT&T Broadband and Best Buy will collaborate, along with manufacturers, on new digital appliances that exploit broadband.

Retail is steadily becoming more important to cable operators. Several weeks ago, RadioShack Corp. chairman Leonard Roberts said the national electronics chain plans to announce its first cable partnerships before the end of the year.

The company wants to make cable modems one of several high-speed options available to its customers. It plans to launch a satellite-based system from StarBand Communications next month, and is already selling telco-based digital subscriber line service in some markets.

Other national retailers, including Circuit City and CompUSA Inc., have worked with Excite@Home Corp. to sell high-speed Internet-over-cable service.

And Cablevision Systems Corp. launched its cable-modem service in the metropolitan New York area exclusively through retail, with the help of its own chain of electronics stores, The Wiz.