DBS Summer Growth Spurt Continues

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Direct-broadcast satellite continues to encroach on
cable's business, as DirecTV Inc. and EchoStar Communications Corp. each pursue their
drive to add more than 100,000 subscribers per month.

EchoStar announced last week that its Dish Network added
117,000 net new customers in May, a 105 percent increase over last May's figures.

The previous week, market-leader DirecTV said it added
110,000 subscribers in May, plus 145,000 former U.S. Satellite Broadcasting customers who
had not previously taken DirecTV packages.

At the rate they're going, including a pending
acquisition, the two companies are poised to hit a collective 10 million subscribers
before summer's end.

EchoStar's count reached 2.492 million by the end of
May. Five-year-old DirecTV had 5.159 million customers for its high-power service by the
end of May, plus another 2 million former PrimeStar Inc. customers still receiving
medium-power PrimeStar service through DirecTV.

While cable systems across the country continue plant
upgrades in order to increase channel capacity, DirecTV and EchoStar plan to launch
satellites that will allow them to add hundreds of new channels, including interactive
services and high-definition television.

The Federal Communications Commission last week gave
EchoStar permission to move a satellite to a more centrally located position at 110
degrees west longitude late this month.

The move coincides with the expected closing of
EchoStar's purchase of News Corp.'s American Sky Broadcasting Inc.

EchoStar spokesman Marc Lumpkin said the satellite would be
used to offer new channels, including pay-per-view and multiplexed-premium feeds. EchoStar
plans to launch a permanent satellite, EchoStar V, to the 110 orbital slot later this
summer.

Eventually, 110 will replace 119 as the primary location
for EchoStar's core Dish Network programming, although the company wants to convince
as many customers as possible to install slightly larger dishes that can see satellites at
both 119 and 110.

Customers who don't choose the new dishes will need to
repoint their current 18-inch dishes.

"This is the start of our push for 500 channels,"
Lumpkin said.

EchoStar will launch a consumer campaign this summer
telling consumers how to repoint their dishes and swap out the LNBs (low-noise-block
downconverters) at the ends of their dishes for LNBs that can see two satellites.

The company has not yet determined who will pay for the
upgrades. Current Dish Network receivers are able to process signals from multiple orbital
locations, and they will not need to be swapped.

DirecTV was awaiting court intervention late last week over
recent contract squabbles with its partner, the National Rural Telecommunications
Cooperative. The dispute could threaten sales in rural markets -- traditionally a
stronghold for DBS.

According to a recent study by The Yankee Group, an
increasing number of new DBS customers come from cable-passed areas. Of those, fewer keep
cable once they have DBS. Of new DBS customers who keep cable, 28 percent receive
broadcast-only service -- an 87 percent increase from last year.

If DirecTV and EchoStar are successful with their
local-to-local broadcast plans, the number of DBS customers who keep any cable video
programming at all could drop.

That's bad news for operators, which want to at least
retain low-paying customers to pitch them new services like cable modems, video-on-demand
and digital telephone.

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