AT&T (News - Alert) has decided to end its distribution agreement with Dish Network and instead will market and sell a co-branded version of DirecTV’s satellite TV service after Jan. 31.

 

The switch leaves Dish Network without a major telecom reseller partner, as Verizon (News - Alert) and Qwest both resell DirecTV as well.

 

Two years ago, the switch seemed improbable to most observers. But lately, DirecTV arguably has surged in popularity, most likely on the strength of its HDTV offerings, while Dish Network is running to keep up in that area. AT&T seems to have concluded that DirecTV provides a stronger value proposition.

 

AT&T will market DirecTV services to households in areas where it doesn’t provide U-verse TV. As of June 30, the company had 549,000 U-verse TV customers and the telco has said it expects to top 1 million subscribers by year’s end. The service is available to more than 11 million living units in 53 markets.

 

The deal also cements DirecTV’s place in the broad “telecom” ecosystem, in much the same way that Sprint, Level 3 and Clearwire (News - Alert) are much more embedded into the “cable” ecosystem. AT&T, Verizon and Qwest all have existing customers that will not soon be offered a terrestrial video service. DirecTV therefore provides an essential element of triple play and quadruple play packages. Much the same role will be played by Sprint and Clearwire, providing cable operators with a mobility option they do not intend to create on their own. In each case, telcos and cable companies are finding they must rely on a partner operating a separate network to create a complete consumer package on an affordable and timely basis.

 

Earlier this year, AT&T said it would offer Dish service in all territories to customers where its U-verse TV service is not available, including the nine states where BellSouth (News - Alert) had resold DirecTV, as it considered whether it would offer Dish or DirecTV service in 2009 and beyond.

 

Left unresolved: whether it might be possible for Dish Network and DirecTV to merge and become one company. That was attempted before, only to run afoul of regulators who feared there would be anti-competitive implications. The approval of the Sirius-XM Satellite merger, though, leads some to think a new bid would receive different treatment. At least, that was the thinking until the recent mortgage and banking crisis, which many believe now will trigger much more regulatory oversight of a wide range of industries.