USDTV Emerges for Another Try - Multichannel

USDTV Emerges for Another Try

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Coming out of liquidation bankruptcy, U.S. Digital Television plans to make another go at offering a no-frills, over-the-air digital TV service to penny-conscious consumers.

The assets of USDTV, which filed for Chapter 7 bankruptcy protection last July, have been sold to NexGen Telecom. Nexgen chairman Charles McNeil was one of USDTV's original investors and he is keeping Steve Lindsley in place as CEO.

Lindsley said he is working on putting the wireless-TV subscription service back on its feet.

“What we're really focused on is getting our legs back underneath us, getting our service improved, getting our call center up and running again and really walking before we can run,” Lindsley said last week.

He declined to say how much NexGen paid for the bankrupt company's assets. But the Deseret Morning News in Salt Lake City, Utah, reported that NexGen forked over $1 million in cash.

Lindsley said that he still believes in USDTV's strategy despite his failure to rally the entire broadcast industry behind the wireless venture.

“We believe that a low-cost alternative to cable, satellite and telcos is a good business for consumers, and that's why we continue the course,” he said.

The service, which continued operating during the bankruptcy, now has between 9,000 and 10,000 subscribers in Salt Lake City, Dallas, Las Vegas and Albuquerque, N.M., according to Lindsley.

When it launched in 2004, USDTV's game plan was to target “cable-nevers” and other consumers who don't want to pay high cable and satellite bills, by offering them a package of local TV stations and a selection of popular cable networks, such as ESPN and Disney Channel, for $19.95 a month.

“As we get closer to 2009, we think a low-cost value offering will be very important,” Lindsley said, referring to the deadline for conversion of all TV signals to digital.

“There will be millions of customers that will be confused, that will be looking to a solution to their digital problem. Analog is going away and we can be their low-cost solution.”

USDTV leases digital spectrum from local TV stations in order to broadcast its over-the-air service.

Last year it secured $25.8 million in financing from a group of TV-station owners, including Fox Television Stations, Hearst-Argyle Television, LIN TV, McGraw-Hill Broadcasting and Morgan-Murphy Stations.

USDTV's pitch to broadcasters: a second revenue stream. In exchange for use of their spectrum, TV stations get paid monthly per-subscriber fees.

When asked what led to USDTV's Chapter 7 filing, Lindsley declined to provide great detail.

“My take on it is the broadcasters, when it comes to competing with cable, have always felt strength in numbers is very important to them,” he said. “I don't think, at the end of the day, that they felt that there was enough critical mass, broadcasters stepping up with them, to go ahead and take on cable.”

USDTV had made “great strides in proving the business model,” according to Lindsley.

“I don't want to get into all the reasons why the broadcasters chose not to fund it,” he said. “What's important is clearly there is demand for this product. The vast majority of our customers — even though for weeks, we had no way of reaching out to them, of talking to them, of letting them know what was going on — the vast majority of our customers have remained on the service.”

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