DBS Leaders Look Digital Cable in Eye

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Las Vegas -- Direct-broadcast satellite leaders vowed to
grow their business this year, despite the threat of increased competition from digital
cable.

Speaking at the Consumer Electronics Show here Jan. 8,
DirecTV Inc. president Eddy Hartenstein said new high-tech features and services will help
the company to exceed its 1998 acquisitions, which set a four-year record with 1.16
million new homes.

EchoStar Communications Corp. aims to add 1 million new
subscribers to its Dish Network service this year after adding 850,000 homes a year ago,
EchoStar chairman and CEO Charlie Ergen said.

"It will be tough for us to do that," Ergen
added, "but that's our goal."

U.S. Satellite Broadcasting president and CEO Stanley E.
Hubbard predicted that DBS would see breakaway sales in 1999, now that consumer awareness
of the category has reached saturation levels. He added that USSB's deal to sell the
company to DirecTV will allow consumers to make an "apples-to-apples comparison"
with cable.

In an emotional statement at a CES panel session, Hubbard
admitted, "In a perfect world, we'd like to stay a stand-alone company,"
but he added that USSB employees were committed to turning the company over to DirecTV in
better shape than it bargained for.

Hartenstein and PrimeStar Inc. chairman and CEO Carl Vogel
tried to deflect questions regarding DirecTV's attempts to buy out PrimeStar's
subscriber base.

Asked whether he expected PrimeStar to be a stand-alone
company a year from now, Vogel responded with a thinly veiled reference to
PrimeStar's sometimes-squabbling cable partners.

"I don't know if we're a stand-alone company
today. I'd rather be standing more alone in the future than I am today," he
said.

Some industry observers believe that bickering among
PrimeStar's cable owners hindered the company's plans to move to high-power DBS
last year. As a medium-power business, PrimeStar's growth potential is much lower
than that of DirecTV or EchoStar.

Still, several panelists said they believe that there is
room for three DBS players in the market.

"The impact of digital cable hasn't been seen on
the satellite business yet," Vogel said, "and it's tough to say when, or
even if, it will have an impact."

Ergen said the biggest factor determining how fast the DBS
market will grow in 1999 is the economy, "and we think that'll continue to be
good for us." Another factor to watch is legislation that could put DBS on a par with
cable by allowing it to deliver local or broadcast signals -- or at least distant-network
signals.

The DBS industry is closely watching the pending cutoff of
distant-network signals in February to make sure that it doesn't thwart growth.

"We have to handle it so that we, as an industry,
don't get egg on our face," Ergen said.

Hartenstein said he believes that DBS subscribers will
still want other programming that they can get via satellite, even if they can no longer
get distant-network signals.

While all DBS players are lobbying for an overhaul of the
Satellite Home Viewer Act, EchoStar is alone in fighting for the right to transmit
local-into-local broadcast signals. EchoStar has more bandwidth than its competitors, but
it also follows a different vision.

With the advent of digital-broadcast television,
Hartenstein said, "The number of local channels could quintuple" in a multicast
environment. "Because we don't quite know what broadcasters will do, we believe
that the best solution is off-air antennas," he added.

"I never listen to my competition," Ergen
countered. "I listen to my customers. We're not looking at this from the
position of the business model, but for the benefit of the customers and to do what's
right."

The standing-room-only crowd of DBS retailers applauded
when Ergen followed with, "Normally, when we do what's right for the customer --
like answer the phones and don't raise our rates -- we end up OK."

Vogel, who once worked for Ergen, said EchoStar's
additional bandwidth would probably be worth more if it were put to use for other
services. But if EchoStar can get incremental revenue from the additional market share
that offering local channels brings, "it may begin to make sense," Vogel
admitted.

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