DBS Ready to Roar

1/13/2002 7:00 PM Eastern

If cable operators expect a break from the competition while direct-broadcast satellite providers DirecTV Inc. and EchoStar Communications Corp. wait for approval of their proposed merger, they're in for a rude awakening.

The Consumer Electronics Show in Las Vegas last week brought news of better-than-projected 2001 subscriber growth and plans for 10 new local channel markets from DirecTV, as well as a look at advanced personal video recorders and interactive television from EchoStar.

EchoStar's DishPVR 408, available in February for $499, can store up to 80 hours of video programming. Pricing for the DishPVR 721 — which will feature dual tuners, offer up to 110 hours of storage and act as a portal for games, music downloads and other interactive services — has not been set.

DirecTV, too, showed new PVRs from its partners, TiVo Inc. and Microsoft Corp.'s UltimateTV division.

Ultimate TV came to the show with new additions to its PVR service, including a remote-access feature that allows customers to program their PVR box remotely, using a Web site.

"It's devices talking to each other," said UltimateTV director of Web services Mark Mullen. "It's a real consumer benefit. Here's where all those technologies start to mean something to me. It means I don't have to miss Monday Night Football."


Clearly, DirecTV and EchoStar plan to continue their aggressive push into the PVR category this year, whether ownership issues surrounding the companies are resolved quickly or not.

With an eye toward the possible merger, EchoStar said it would distribute a new satellite receiver capable of receiving signals from both EchoStar's Dish Network and DirecTV. Access to DirecTV programming would be activated via a software download to the set-top box once the merger goes through.

EchoStar apparently isn't waiting for the merger to bring its programming prices more in line with what DirecTV charges. EchoStar announced a $1 price increase on its 3 basic packages, America's Top 50, Top 100 and Top 150. Starting March 1, Dish's most popular package — America's Top 100 — will cost $31.99, the same price as DirecTV's comparable Total Choice package.

EchoStar blamed the price hikes, which average about 3 percent, on increased costs from programmers. Its cost-conscious chairman, Charlie Ergen, told reporters at a press conference last Wednesday that satellite broadband services would likely go away, unless the government approves the merger between EchoStar and DirecTV parent Hughes Electronics Corp.

Without the merger, he said, the companies can't economically justify the risk.

"We know that we don't make any money at $70 per month [for a two-way broadband satellite subscription]," Ergen said. "Quite frankly, if we didn't have the merger out there, we would just shut it down. We would just give up and say, 'Bad idea.' "

EchoStar's two-way broadband partner, StarBand Communications LLC, last week announced that it had tallied 40,000 consumer subscriptions by the end of last year. Hughes announced it had more than 100,000 DirecWay customers at year-end.

"The fact of the matter is, without question — and you can go to the bank on this — you are not going to see satellite broadband without the merger," Ergen said. "You just can't economically justify the risk."

By contrast, DirecTV added 405,000 net new subscribers to its DBS service in the fourth quarter of last year alone, bringing its total to more than 10.7 million by year-end. Dish Network, which started the fourth quarter with 6.4 million customers, has not yet announced its year-end subscriber count.


Meanwhile, the glitzy dance routines and wall-to-wall crowds at CES stood in marked contrast to recent cable-industry conventions.

Among the throngs that plugged into the annual electronics extravaganza were cable-system executives. Members of the Cable Television Laboratories Inc. board — including AT&T Broadband CEO Bill Schleyer, Time Warner Cable chairman and CEO Glenn Britt, Cox Communications president and CEO Jim Robbins, Comcast Corp. president Brian Roberts and Charter Communications Inc. president and CEO Carl Vogel — wandered about the 1.2 million net square feet of exhibit space, along with a contingent from the Cable & Telecommunications Association for Marketing.

One good reason for that attendance is the increasing presence of broadband in the consumer-electronics lexicon.

Sure, there were the usual displays of spinning disco balls and cars decked with the latest audio gear, but seeded throughout were ample evidence of devices and technology increasingly dependent on broadband networks. Electronics manufacturers, service providers and retailers were showing products that knit together home entertainment, home automation and the outside broadband link.

One apparent theme of the show: multifunction devices, highlighted by the anticipated unveiling of WebTV Networks Inc. founder Steve Perlman's Moxi Digital Inc. Moxi unveiled its software and hardware reference design for an all-in-one digital video, audio and data box able to play music CDs, tap cable television and video-on-demand and provide full personal video recording functions.

Its first customer is EchoStar, which will use the Moxi license to create advanced digital multimedia boxes later this year. The company is also in talks with cable operators, according to CEO Steve Perlman.

Though Moxi had a strong coming-out party, the press conference with EchoStar offered some reminders that the technology is still in its early stages. A link was lost in the demonstration, and a DVD function stubbornly refused to play.

"If it didn't crash once in a while, you wouldn't think it was real," Perlman joked to the crowd.

Microsoft unit eHome also made its debut, with a software package that can convert a computer with a Windows XP operating system into a combination television and audio system. Aimed at college students or those with limited space, the system is operated with a TV-like remote control that allows the user to play music, watch TV or convert to standard computer functions. It is set to debut later this year with marketing partners Hewlett-Packard Co., Samsung Electronics America Inc. and NEC USA Inc.

And Panasonic showed off a pending lineup of Internet-protocol addressable digital video cameras that can provide users an instant view of their home or office from remote locations.

Using a home network to provide home automation and security may not hit the mainstream until prices fall and systems become easier to use, but the development process is underway, said Panasonic product manager Mike Timar.

"There is a huge convergence in the industry between security; home networking; home automation and home control; and computer networking," he said.


Taking these networking schemes and making them work together is the focus of the Open Source Gateway Initiative.

With a lineup of backers including Cablevision Systems Corp., Sony Corp., Motorola Inc., automaker BMW, Whirlpool Corp. and BellSouth Corp., the initiative is looking to develop a platform that will act as a communications umbrella as broadband homes mix everything from wireless broadband's 802.11 and HomeRF to wireline Data Over Cable Service Interface Specification (DOCSIS) and digital subscriber line systems. The first version was released in October; some 1,500 users have already downloaded the open-source specification.

"They see the advantage of being able to configure and manage this with the framework," said John Barr, president of OSGI and a director of standards realization for Motorola Inc.

The increasing linkage between devices for audio, visual and data tasks was also front and center during a panel session on emerging technology for consumer devices. Much of the demand for systems that knit devices together will depend on what consumers really want and need, panelists agreed.

Rory Read, general manager for IBM Corp.'s global electronics-industry unit, said he bought into a broadband wireless home networking scheme because his kids drove him nuts with squabbles over who would use the broadband-connected computer.

"What we are going to see is that whole connection point of broadband explode, because that is the value proposition," Read said.

But for now, the array of products promising to connect devices is too confusing and chaotic, with no clear winner. Although the consumer world is becoming increasingly digital, interconnected and multifunctional, much still depends on whether a company sells its products effectively, panelists agreed.

"If what was easy to use, simple and elegantly integrated always won in the marketplace, the Justice Department would be breaking up Apple," quipped Liberate Technologies Inc. CEO Mitchell Kertzman.

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