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DBS competition and the great smokescreen

Thu, 07/31/1997 - 8:00pm
Roger Brown
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The article suggested that, despite seemingly insurmountable odds, huge capital start-up costs and a quick divorce from Rupert Murdoch's News Corp., that EchoStar eagerly awaits the launch of two new satellites.

Get real, Charlie.

Yes, it's true EchoStar did manage to coax another $375 million out of its investors money that will be used to build and launch those two satellites. "The first technology to deliver 500 channels will be Echostar's," Ergen reportedly boasted to reporters, mocking John Malone's famous 1992 promise that has gone unfulfilled by TCI.

Surely Ergen has done an impressive sales job. He has managed to put the most positive spin on an industry that is, frankly, rapidly driving itself into the ground. I offer as evidence:

  • Competition has driven prices to the floor much faster than anyone anticipated. Remember when DirecTV hardware cost $700? Now, it's around $100. In fact, EchoStar loses $200 to $300 every time it sells a dish.
  • DBS providers can't offer local broadcast signals, which causes potential buyers to pause. Why buy a dish when you need a broadcast antenna, too? The only way around this is a government OK which takes time, money, and still isn't a sure thing.
  • Even in the midst of a huge economic boom, with prices hovering around $100, dish sales have fallen off significantly. In fact, forecasts by Tom Kerver at Cablevision magazine suggest that by the end of the year, there will be just six million DBS subscribers, and two million of those will be PrimeStar subscribers.

But perhaps there was no single more telling event than Bill Gates' bet on cable TV technology. His decision to cut Comcast a $1 billion check speaks volumes about his view of a need for a broadband, wired world. He wants to sell more software, offer high-speed data and provide content we all turn to on a daily basis. He didn't choose a satellite provider to do that.

EchoStar needed the cash that Rupert Murdoch promised to bring. Malone's ability to quash that deal and plow the cash into PrimeStar instead could be a stroke of genius, because it's doubtful that the market can support three major players. Look for EchoStar's assets and satellite slots to be acquired by DirecTV, especially if Ergen continues to pull off his magic act and make EchoStar appear larger than life.

One billion dollars is a big bet. But don't think for a minute Gates made the gamble without a good deal of scrutiny. For all the noise DBS has made, I think it shall remain stuck in geosynchronous orbit.

Contact Roger Brown at: RBrowner@aol.com

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