Internet Video

Startup USDTV Is Close to Finance Deal

11/28/2004 7:00 PM Eastern

U.S. Digital Television Inc., a low-cost “best-of-television” wireless service, is completing a deal to get a round of funding from several major broadcasters, the company’s chief said last week.

“These leading broadcast groups are going to own and control the business of USDTV,” company CEO Steve Lindsley said. “This has been my primary objective from day one.”

USDTV’s strategy, which entails leasing spectrum from local TV stations in order to offer a limited digital lineup of cable networks and broadcasters, was recently cited by the Federal Communications Commission in its report panning a la carte.

Lindsley was buoyed by that report, which noted that “more choices in program selection,” like the $19.95-a-month offering from USDTV, are appearing through marketplace forces — not regulation.

“We’ve known for quite some time that the commission was favorable to the USDTV model,” Lindsley said. “Of course, this is the first time that they’ve publicly acknowledged/endorsed USDTV as a viable option.

“Obviously, we’re very pleased. … We believe that until there is a la carte, USDTV is the next best option.”

Since launching earlier this year, USDTV has tallied 10,000 subscribers in Salt Lake City, Las Vegas and Albuquerque, N.M. The company is providing an over-the-air package of 20 to 30 channels, including a dozen popular cable networks like ESPN and HDTV signals, for $19.95.

USDTV’s game plan is to lure both cable and satellite subscribers and — cable-nevers — who don’t want to pay $50 or more a month for a huge battery of cable networks. At a recent International Radio and Television Society Foundation panel in New York, Lindsley said that even though it sounds counterintuitive, some consumers don’t want a lot of choice and are actually “overserved” by cable.

“The only things consumers have heard forever from the incumbents is, 'You want more channels, we can get you more channels,’ ” Lindsley said at the panel. “Well, more channels of what? I can get the spore-and-pollen network. … It’s a little crazy.”

During the panel, executives from Hearst-Argyle Broadcasting and LIN TV Corp. said they were talking to USDTV so they could create an additional revenue stream for their stations.

“We do view this as the first tangible opportunity to monetize that lost capital that we invested in digital and high definition,” LIN TV president Paul Karpowicz said.

Hearst-Argyle president David Barrett added that one challenge was hammering out how much spectrum the Big Four broadcasters need from stations to transmit their signals, and how much is left for USDTV.

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