Rainbow DBS Rules Waves

7/18/2004 8:00 PM Eastern

Cablevision Systems Corp.’s Rainbow DBS subsidiary came out the winner last week in an FCC auction for additional satellite spectrum licenses, a move that should increase the reach of its Voom high-definition direct-broadcast satellite service.

Rainbow DBS, which is set to be split off from Cablevision in the fall, acquired two new DBS slots July 14 for about $6.4 million, or $3.2 million each, a bargain price according to a report by Merrill Lynch & Co. media analyst Jessica Reif Cohen.

At about $100,000 per channel, Reif Cohen called the purchase “a remarkable bargain,” given the price is “a mere fraction of the $24 million per frequency set in the January 1996 Federal Communications Commission auction for a full-CONUS [continental United States] license.”

She called the $6.4 million a modest increment to Rainbow DBS’s $482 million full-year 2004 capital-expenditure budget, although the development of the spectrum will likely add to the long-term operational costs of the venture.

EchoStar Communications Corp. was the winning bidder for a third license at 157 degrees west longitude with about 29 channels, for $5.8 million, according to the FCC.

The Rainbow DBS slots, located at 175 degrees west longitude and 166 degrees west longitude, each have about 32 channels. While the slots are not full-CONUS, they should give Rainbow DBS more capacity.

But the new slots do have their downside. According to Reif Cohen, Rainbow DBS currently has 11 channels at 61.5 degrees west longitude — another non-CONUS slot — which will not reach areas in the northwest, such as Seattle and Portland, Ore. The new licenses will have similarly poor coverage.

Want to read more stories like this?
Get our Free Newsletter Here!