In an effort to eliminate one more consumer objection to switching from cable to direct-broadcast satellite, EchoStar Communications Corp. last week announced a new "Digital Home Plan," offering new subscribers the option of leasing a two-receiver Dish Network system.
"Certainly, one of the barriers to getting into satellite is the upfront costs," EchoStar vice president of marketing Mary Peterson said. "We're going head-to-head with cable."
The plan-which started last week and runs through Oct. 31-doesn't eliminate upfront costs completely. Subscribers must pay a one-time price of $99, which includes installation, the first month's programming and hardware rental.
Subscribers must commit to the offer for one year at $49.99 per month, which includes 150 video and audio channels, in-home service and a price guarantee good until May 2003.
The company's "America's Top 150" programming package typically costs $39.99 per month for consumers who purchase their own hardware. There is an additional fee of $4.99 per month to activate a second set-top box, but that fee is waived for Digital Home Plan subscribers.
Standard DBS installation can cost about $199, although recent promotions have offered installation for $99 or even free-of-charge. Peterson said customers who install multiple boxes typically pay $60 for each additional set-top.
The first receiver included in the promotion is a step-up model, "4922," which features interactive-television capabilities, Dolby Digital inputs, a VCR timer and a UHF remote control. The second, more basic receiver is model "2700."
EchoStar will cover the costs of in-home service calls unless the company determines that the customer was directly responsible for damaging the equipment.
In fine print at the bottom of its dealer ad slicks, EchoStar advises potential subscribers that they must return their equipment at the end of the year or continue to subscribe under the Digital Home Plan.
Those who cancel their service before the year is up will be billed for up to $398 in equipment charges unless they return the hardware within 30 days, and their credit cards will also be billed for any ongoing programming commitment.
The company is not concerned that its customers will churn away from the service after their year's commitment ends. "One of the reasons why churn is low in satellite to begin with is that it really is a better product," Peterson said. "We really don't lose people to cable."
The Digital Home Plan is not the first lease model in the DBS world. The former PrimeStar Inc.-which has since sold its subscriber base to DirecTV Inc.-relied primarily on a lease model. And some of DirecTV's telco partners, including BellAtlantic Corp., offer hardware-rental options that bundle the cost of the receivers and programming into a single monthly bill.
"There's nothing wrong with a lease model as a way to bring people in the door," Tellus Ventures Associates president Steve Blum said. But he added that customers who lease the hardware typically exhibit a higher percentage of churn than those who purchase the hardware.
Blum called the bundled second-set solution a great idea. "One by one, EchoStar is picking off cable's competitive advantages," he said. "Clearly, cable is still the competition. This isn't aimed at DirecTV. This is aimed square at the face of cable."
Retailer reaction to the lease program has been positive, Peterson said, adding that dealers will receive similar payments under this program as they have with other promotions in the past.
"People with children like to have two receivers," she said. "It's one of the things cable picks on us for."
As cable moves to digital technology, however, some operators are running into multiple-set-top-box issues of their own. With digital receivers in short supply, some systems limit the number of digital set-top boxes installed in each subscriber's home so that they can deploy more boxes to a wider base of customers.
"As a consumer and a recent digital-cable customer, I can't for the life of me understand why you wouldn't want to put this incredible product on every set in the house," Cable & Telecommunications Association for Marketing president Char Beales said.
Although Beales said she understands the capital expenses cable operators face, she added that going back to analog-only cable service on second or third TV sets is difficult for many customers. Once you get used to the interactive program guide, for example, it's next to impossible to go back to a scrolling TV listing, Beales said.
And as interactive-television services start to generate new revenues of their own, cable operators will have additional incentives for getting multiple boxes deployed into each home.
"There clearly is an incremental return to having other sets in the home enabled" for television commerce and other interactive services, Wink Communications Inc. executive vice president of sales and business development Allan Thygesen said.
EchoStar does have a limit to the number of Dish receivers each subscriber can activate, chairman Charlie Ergen admitted last Monday on his monthly "Charlie Chat" with subscribers.
In response to a caller who wanted to know why he couldn't hook up a seventh receiver, Ergen said the company limits each subscriber to six because that's as many as the billing system can handle. Those few customers who need more than six receivers in their homes must set up second accounts, Ergen added.