EchoStar's New VIP

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In late September,
satellite-industry veteran
Vernon
Smith was named senior vice president of business development and head of
ViP-TV at EchoStar Satellite Services. Smith recently talked with HD Update contributor George Winslow
about his strategies for expanding EchoStar's relatively new ViP-TV service, which
was launched in May of 2009 to help telcos and smaller cable operators expand
their standard and high-definition video products, and some of the new business
opportunities he is pursuing. An edited transcript follows.

MCN: What kind of
potential customers are you targeting with the ViP-TV service?

VS: We offer a
MPEG-4 encoded stream of almost 300 channels of content into our customer headends,
so they can create packages that match the customer requirements, whether they
are individuals, regions or cities.

Vernon Smith

The customers we are targeting are smaller telcos, not the
tier-one companies like AT&T, and smaller cable operators. We are also targeting
universities, multiple dwelling units, hotels, private communities.

As operators have moved from the older technologies -- from
standard-definition analog to digital SD and now HD -- the expense for all the
equipment is growing exponentially. That means the smaller operators can either
spend $5 million for a headend to receive or transmit the digital signals in
high-definition, or they can come to us and spend a small faction of that and
receive the signals pre-encoded in the right format that they can then deliver seamlessly
over their network to their customers.

So it is a win win, because we already have a huge
infrastructure that we can offer them. We have already invested hundreds of
millions of dollars in broadcast centers.

MCN: You've announced
several deals since launching the ViP-TV product earlier this year. But what
makes you think you can succeed with ViP-TV even though SES shut down in July
of 2009 its IP Prime product, which was targeted to a similar set of clients?

VS: It sort of comes
back to the point about scale and our investments. I think they realized that
in order to be successful with IP Prime, they needed a lot more infrastructure.

But for us, we already have a multipurpose broadcast center.
It feeds direct-to-home satellite. It feeds IPTV subscribers. And we also have
a huge network that pulls in all the local signals from the broadcasters around
the country and sends those back to local areas.

But if you are a satellite operator and then try to get into
the broadcast business, it requires way too much scale and way too much
investment. It is way too long of a slog to get there.

I used to work for SES
Astra before it became SES Global, so I know
the mentality there. A lot of what they want to do is sell transponders and launch
satellites to sell transponders. Broadcast is a different business.

MCN: What range of
services are you providing? Is it just transport and equipment or does it also
include programming packages?

VS: For telcos
and cable companies, we provide a range of technical services that gives them
whatever they need for the video distribution chain.

So one product is a transport only service, where [we
deliver the channels] and they [handle] the digital rights management, the
security and also the set-top box technology and other network technology
distribution issues.

But we also work within our eco system to bring in other suppliers
that might provide encryption, set-top boxes, etc. As you know, we make our own
set-top boxes, but we can actually bring to the table a matrix of solutions for
the customer that deals with their needs and whatever legacy equipment they
have. It is kind of like check the box and here is the solution.

We also have guys that can provide tech support 24/7. Unlike
IP Prime, for instance, where they had to set up everything themselves, we have
a long history of customer service.

MCN: How many HD
channels do you have and do you have plans to expand those numbers?

VS: We have 49
now and are expanding it all the time. Customers can come to us and ask if we
can add such and such regional sports channel or more local services, and we
have the ability to add those channels. We can pull them from other satellites
in our network and we can also deliver them terrestrially to a headend. That
comes back to why we are in this business and why is IP Prime not in this
business. For us, adding channels is a lot of incremental costs versus a huge
upfront total cost.

The number of channels available at our broadcast center is
somewhere in the range of 2,000. So we can pick from those 2,000 channels and
tailor packages. We can offer a SD feed of a channel to start and then upgrade
it to HD if there is a need for it. So there is a lot of flexibility and the
costs of doing that are incremental.

MCN: Besides overseeing ViP-TV you also wear a
business development hat. What are some of the key areas you're exploring as
part of those duties?

VS: The areas
that I've been tasked to develop are within the broadband area and some other
entertainment platforms, one of which is mobile video.

The tagline is, "Entertainment, anywhere, anytime." So what
we are looking at is time-shifting, place-shifting, device-shifting and what we
have to do is develop different building blocks that will be able to deliver
signals in the appropriate format to those devices.

One of our sister companies is Sling Media, which is delivering
content from your home to your laptop when you are on the road, and we are
looking at ways to further develop that. We are looking at ways to deliver content
into mobile devices. We are looking at ways to connect world broadband
customers to our services. We think there is an increased stickiness to our
services if we can deliver broadband video and other services that they
require.

MCN: Are you seeing interest
among smaller telcos and cable systems in perhaps deploying Sling boxes or
other advanced services as a way of differentiating themselves?

VS: Absolutely. There
is a lot of interest in some of the Sling-enabled set-top boxes that we are deploying.
We got an award at CES for that technology, so there is a lot of interest.

A lot of the smaller operators are in a fight for their
lives. The cable companies are going triple-play. The telephone companies are
going triple-play. They are looking at satellite having at least a double or
triple play. So it is a matter of survival for those guys to have enhanced
services.

It is all about increased stickiness and lower churn. There
is a huge cost for churn. If you have a huge churn on your subscriber base, it
can kill it. We're trying to help them keep their subscribers around, keep them
happy and then try to enhance the revenue.

MCN: Looking forward,
are there some things that you're looking at to enhance the ViP-TV service?

VS: I think the
main driver for us is to be adaptive to our customers needs. There is a lot of
niche programming that could be useful to them -- different sports leagues,
channels for different language groups, different interest groups.

We have the ability to take channels from the 2,000 channels
we have at our broadcast centers and deliver them to different interest groups
that are residing in the telco subscriber base.

For them to do all that it would be a nightmare in
logistics. They might have to go and install the satellite link. They would
have to acquire the programming. Maybe they'd have to send an agent to Asia to
acquire the channels. It's a logistics nightmare, but for us it's easy. We turn
the router from A to B and they have the channels.

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