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In Direct-To-Home Satellite The Best Is Still To Come

1/06/2001 02:00:00 AM Eastern

For the past several years, the satellite television industry has been experiencing exponential growth. With the passage of the Satellite Home Viewer Improvement Act (SHVIA) into law late last year, consumers in rural, suburban and urban areas have been flocking to satellite as never before.

By the end of 2000, the direct broadcast satellite (DBS) industry will most likely surpass 15 million subscribers. And when looking at the largest multichannel video providers in the United States, the Yankee Group places DirecTV third, Dish Network eighth and Pegasus 10th.

Where is the growth coming from? According to the 2000 DBS Study conducted by The Yankee Group for the Satellite Broadcasting & Communications Association (SBCA), 70 percent of new DBS subscribers live in areas where cable is available, which demonstrates that DBS is becoming increasingly mainstream in its penetration.

During the past year the DBS platform providers added more than 8,400 new subscribers collectively each day-not existing subscribers upgrading to a new service, actual new subscribers. Analysts predict that if current trends hold up, the industry could easily surpass 18 million subscribers by the end of 2001.

There are several areas that are germane to the continued success of the DBS industry. They include the continued rollout of local-into-local service; the debut of satellite broadband and digital audio radio services (DARS); continued improvement and consumer acceptance of interactive services; and an industry revamp of education and certification programs.

The ability to offer consumers local-broadcast channels has been a major boon for the satellite television industry and has helped make DBS a stronger competitor to cable. Satellite must-carry is a major roadblock to the continued rollout of local channels in areas outside the largest markets, and because must-carry leads to duplicative signal carriage, it stands to deprive Americans in midsize and smaller markets of local television over their satellite systems.

The must-carry requirements in SHVIA go far beyond those applicable to cable in dictating the content of a substantial portion of a satellite carrier's programming menu. The marketplace should dictate what programming satellite companies carry, not a federal mandate.

In order to enlarge the number of consumers to whom we can offer local broadcast channels, the must-carry regime must be eliminated.

SBCA, DirecTV and EchoStar are going to diligently fight to remove this unconstitutional and anti-competitive provision from the SHVIA legislation. In fact, we have challenged the satellite must-carry provision of SHVIA in federal court.

As we have seen local-into-local service increase satellite television's penetration, satellite broadband is the next step in furthering our industry's growth. In 2001, we will begin to see the rollout of two-way, high-speed, broadband Internet services via satellite. There have been other satellite Internet systems in the marketplace, but these systems, while offering high-speed downlinks, necessitated the use of a terrestrial phone line for the user to uplink.

The next generation of broadband satellite systems will offer consumers true broadband speeds on both the uplink and the downlink.

When used in conjunction with the EchoStar or DirecTV multichannel video system, consumers will be able to simultaneously surf the Web and enjoy a 100 percent digital multichannel video and audio signal.

Though DSL and cable modems have received most of the exposure thus far, satellite will be a force to be reckoned with in the broadband marketplace.

We feel very comfortable with our position vis-a-vis our competitors in the market. Both digital subscriber lines (DSL) and cable modems have been very slow to roll out, and by their own account, their systems'ability to serve suburban and urban areas will be limited.

Much like our multichannel video offerings with Internet via satellite, if you have a line of sight to the satellite (the vast majority of consumers do), you instantly have broadband Internet access.

One of the most exciting new developments in the satellite industry this year has been the emergence of the digital audio radio services (DARS) planned for launch in early 2001. Both Sirius Satellite Radio, which has already launched its three-satellite constellation, and XM Satellite Radio, which is preparing to launch the first of its two birds early this year, will revolutionize the way people enjoy radio in this country.

Both Sirius and XM have negotiated agreements with the major automobile manufacturers, so in addition to consumers being able to purchase satellite radio systems in retail outlets, automobiles of the future will have satellite receivers included as standard equipment.

Interestingly, although the companies are competitors, the actual receivers will be interoperable, which provides consumers a greater level of flexibility.

According to J.D. Power & Associates' 2000 Cable/Satellite TV Customer Satisfaction Study, "both satellite TV providers clearly exceed their customers' expectations, and overall customer satisfaction differs significantly between satellite and cable providers."

However, the "satisfaction gap" is not as wide in areas where cable has launched digital service, so it is imperative that the satellite industry stay ahead of the curve with respect to education and training of its industry professionals.

Since DBS' inception, the satellite industry has experienced phenomenal growth, Wall Street analysts remain bullish about our future, and consumers have been overwhelmingly impressed with our products and customer service records.

Does this mean we can afford to rest on our laurels? Of course not. However, it is always easier to build on a solid foundation, and that is exactly what our industry has created.

With consumer demand soaring and the satellite industry providing new services, the best is yet to come.

Chuck Hewitt is the president of the Satellite Broadcasting & Communications Association (SBCA), the trade association representing all aspects of the direct-to-home satellite industry.

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