• DBS companies prepare aggressive HDTV build-out plans in 2005.
• 25 million-plus U.S. homes now take DBS TV service.
• DirecTV, EchoStar slate whole-home home media gateway products.
• Voom threatened with closure in 2005.

Despite the aggressive expansion of digital cable services across the country, the direct-to-home satellite TV industry continues to tally subscriber gains, and despite a scare, managed to hold on to a third service provider that narrowly dodged closure.

To counter the efforts of cable operators to regain lost customers, all three direct broadcast satellite (DBS) operators – DirecTV, EchoStar and Voom – made pledges to expand services dramatically with more high-definition channels in coming years. In each case, this will be accomplished through the launch of additional satellites and switch over in compression systems from MPEG 2 to MPEG 4 schemes.

Satellite TV Today:
The satellite TV industry once relied on large movable circular C-band dishes that could be aimed at different satellites to pick up the analog signal feeds of network broadcasters and cable program providers for free. As the industry began to grow, program providers added scrambling systems to their signals to protect their pay subscription services. With the introduction of small dish systems powered by digital compression technologies, called direct broadcast satellite (DBS) systems, the digital direct-to-home pay satellite industry arrived in the mid-1990s, building mass-market acceptance in record time.

DBS Brings Better Pictures and Sound:
Most DBS TV services deliver more than 200 channels of sharp, clear images and sound comparable to that of DVD players. Additionally, satellite providers now deliver standard definition broadcasts with special 5.1-channel Dolby Digital audio surround sound, comparable to that offered by DVD players, on both HDTV and some standard definition TV channels.

The systems each require small dishes, either 18-inches or 24-inches in diameter to collect digitally compressed signals carrying more than 200 channels of video and audio programming. Services pushed subscriber registrations with promotional incentives, including free installation and virtual hardware giveaways in exchange for minimum service commitments of a year or more. The systems also offer similar programming packages that comprise basic and premium cable networks, pay-per-view movies, news, information and sports networks. The larger capacity available to satellite operators offers a greater selection of premium and special interest programming than most analog cable systems. However, the arrival of new digital cable services reduces that advantage.

Source: CEA Market Research

Subscriber Growth Continues:
According to company reports at the end of 2004, DBS providers combined accounted for more than 25 million subscribers. DirecTV ended 2004 with just over 14.1 million subscribers, while EchoStar reported 11 million subs in early 2005. Voom, the HD-centric newcomer to DBS, launched service late in 2003, and claimed to have 46,000 subs in early 2005.

Although CEA had predicted sales of DBS set-top equipment to decline for the last two years, the numbers have risen steadily. In 2004, CEA said the DBS industry sold 16.8 million satellite set-top boxes to new and existing subscribers. That number is expected to rise to 17 million in 2005. The average price of a satellite set-top box was estimated at $104 for 2005, but typically satellite providers offer equipment at substantially reduced prices as incentives to sign on new subscribers. Today, satellite TV companies provide service to 25 percent of multi-channel house-holds.

Satellite Defends HD Leadership Role:
Together, the nation’s three DBS providers lead the nation in the selection of HDTV services. DirecTV, EchoStar and Voom offered combined assortments of broadcast HDTV channels and HD versions of some premium cable channels. In 2004, EchoStar and DirecTV offered more than seven channels of HD-content; Voom offered more than 30 channels. DirecTV and EchoStar planned to make major channel expansions in 2005. Because the companies sometimes place HD channels on satellites in secondary orbital positions, larger dishes or dual-dishes are required to receive a signal, in addition to a special HD-compatible decoder box.  

DirecTV Makes Channel Expansion Steps:
Under the new management of News Corp., DirecTV wasted little time in announcing plans to launch four next-generation satellites that will provide the satellite service with a massive expansion in local and national HD channels over several years. To date, local HD channels have been the biggest advantage cable operators have wielded over their satellite competitors. DirecTV’s new satellites will begin transmitting signals using the MPEG 4/A/VC digital compression format, instead of the less bandwidth efficient MPEG 2 system it continues to use on its existing satellites. This will give DirecTV enough capacity to deliver local HD channels U.S. households in most markets eventually, the company said.

The first two satellites will launch in 2005 and will let DirecTV deliver more than 500 local HD channels, covering a good portion of the U.S. with local HD service. The new satellites also will expand standard-definition local channels and add other enhancements. Starting in the second half of 2005, DirecTV will begin offering local HD broadcast channels to 12 major markets from the first two of five planned satellites. This will require subscribers to add slightly larger dishes and new MPEG 4-enabled HD satellite decoding equipment.

The next two satellites are scheduled for early 2007 launch and will have the capacity for more than 1,000 additional local HD channels, more than 150 national HD channels, and other new program offerings.

DirecTV Slates Home Media Center:
In support of its move to the MPEG 4 A/VC compression system for new high-definition channels, DirecTV said it will introduce late in 2005 a “Home Media Center” that will combine MPEG 2 and MPEG 4 reception with a hard-drive-based digital video recorder and home networking system. Designed to be a whole-house entertainment solution, the product will allow DirecTV customers to access content including digitally-recorded video, digital photos and digital music seamlessly from all TV sets in a home. It will include four tuners and will relay programming from the dish or from the hard drive to thin client receivers attached to TVs in other rooms. The system will support additional functions via its broadband connection.

DirecTV Adds National HD Channels:
In 2004, DirecTV expanded its HDTV portfolio by adding the NBC, FOX and ABC national HD feeds (joining the CBS national HD feeds it added a year earlier) for subscribers living in markets with owned-and-operated network affiliate stations, or where over-the-air signals are not receivable according to FCC-approved measuring systems. The satellite provider also added national cable channel Bravo HD+ (the name was later changed to Universal HD). To bolster its strength as a provider of key sporting events, DirecTV added more than 125 NFL games in HD via its exclusive NFL Sunday Ticket package.

EchoStar Plans Multi­room Receiver:
Not to be outdone by DirecTV’s media center, EchoStar said it would introduce in 2005 a multi-room satellite receiver that records HDTV. The unit features two tuners that allow consumers to view independent programs, one in HD and the other in SD, on two TVs at the same time. The unit will include a 250-GB hard drive for 25 hours or HD recordings or 180 hours of standard definition recordings.

EchoStar Slates Video-on-demand:
EchoStar said it would take on its cable TV competitors by offering a video-on-demand (VOD) service in March 2005. The service is available to owners of a particular DISH Network DVR models and offers as many as 100 first-run movies at a time, with new movies premiering every week.

EchoStar Announces Portable Satellite DVR:
Also in 2005, EchoStar will offer what it calls the first portable satellite DVR. The unit connects via USB to standard-size DISH DVRs to download a recorded movie in five minutes. The unit will be equipped with built-in 7-inch, 4-inch or 2.2-inch LCD screens, and 20 GB or 40 GB hard disk drives.

Voom not Vanquished:
Voom, an HD-centric direct-to-home satellite service which launched in late 2003, was fighting for survival as Digital America went to publish. By early 2005, the service garnered only 46,000 subscribers and faced huge increases in operational costs through a series of planned expansions. As a result, Voom’s parent company Cablevision Systems announced it was pulling the plug on the operation. Cablevision had sold off key assets, including Voom’s only satellite to rival EchoStar. Fighting the move, the chairman of Cablevision sought to purchase Voom’s subscribers and remaining assets for a new private venture, called Voom HD, LLC. As this was written, Voom is still soliciting new subscribers, with the promise of more than 30 high-definition channels (many already available on Voom) to complement a line-up of popular cable networks. The service also was planning a major expansion that would one day enable the delivery of local DTV broadcast channels in many markets.

DBS Continues to Add Local Channels:
Both EchoStar and DirecTV continued to add local broadcast stations for retransmission into local markets. In 2005 DirecTV said it would serve local stations in more than 130 markets, while EchoStar extends its local service reach to more than 154 markets. With limited satellite capacity, Voom had elected not to offer local channel services on its platform, but it has announced plans to include local HDTV broadcast channels and other HDTV stations as it expands its satellite capacity.

Under a 2001 federal must-carry mandate the satellite providers were required to carry all of the local over-the-air channels in any market they chose to serve with local TV services. Previously, the providers only offered major network stations in the most populated markets. The two satellite TV carriers argued the must-carry mandate was a driving factor for the proposed merger. They say they would be hard pressed to expand services to all cities in the country without sharing their satellite spectrum.

The addition of local TV stations to the DBS programming lineups sparked new subscriber growth levels in the cities that received the local TV signals via satellite, when those services were first offered in 1999. The DTH satellite industry and CE industry won a major legislative decision that year when the Satellite Home Viewing Improvement Act (SHVIA) made it legally possible for satellite companies to carry local network TV broadcasts via satellite for local viewers.

Congress Passes Extension to Satellite Viewer Act:
In November 2004, Congress passed a five-year extension of the Satellite Home Viewer Act, which allows DBS operators to retransmit distant broadcast TV signals to underserved areas. The act also spelled out new rules for carriage of distant digital broadcast channels.