Policy

Voom Zooms to Top of Spectrum Auction

7/14/2004 9:00 AM Eastern

Cablevision Systems Corp.’s Rainbow DBS subsidiary has come out the winner in a Federal Communications Commission 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 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 that the price is “a mere fraction of the $24 million per frequency set in the January 1996 FCC auction for a full-CONUS [Continental United States] license.”

She added that the $6.4 million is a modest increment to Rainbow DBS’ $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.

According to Reif Cohen’s report, EchoStar bid on the 166-degree license but opted out of the second round of bidding -- a move she interpreted as both a sign of its commitment to its leased strategy with satellite manufacturer SES Americom Inc. and comfort with its 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 -- that will not reach areas in the northwest such as Seattle and Portland, Ore. The new licenses will have similarly poor coverage.

“With the addition of the new licenses, then, Rainbow DBS spectrum will be concentrated in the easternmost and westernmost of the U.S. DBS orbital slots with compromised look angles,” Reif Cohen wrote.