Satellite-TV companies may have finally solved their local problem.
Potential customers for direct broadcast satellite TV, or DBS, were stopped cold for years by a big drawback: Satellite service offered hundreds of channels, but not local ones. To get local stations, satellite customers either had to install old-fashioned "rabbit ears" on their TVs or keep up their cable subscriptions.But thanks to improvements in technology, and some help from big regional telephone companies, DBS operators are now in a position to offer local TV broadcasts. And now, the satellite-TV industry thinks it can finally become a more serious rival to cable.
DBS companies effectively have been shut out of the local-TV business by Congress. To keep satellite technology from steamrolling broadcast and cable companies, lawmakers decided that DBS companies in most places could transmit local TV signals -- but only if they transmitted every one in the country. Given the thousands of local TV stations in the U.S., the decision made offering local broadcasts by satellite a practical and technical impossibility.
Now, DBS services, working with telephone companies, are simply adding a separate advanced antenna to their satellite package. They give customers the local channels they want -- but not by satellite.
Earlier this year, two big DBS operators -- Hughes Electronics Corp.'s DirecTV unit, based in El Segundo, Calif., and U.S. Satellite Broadcasting Co., St. Paul, Minn. -- signed co-marketing deals with big regional phone companies, including Bell Atlantic Corp. and GTE Corp. The phone companies have started selling satellite TV as part of a package of phone, video and high-speed data services.
Armies of door-to-door sales representatives are singing DBS's praises and offering turnkey satellite services, including powerful new antennae capable of tapping local TV channels with the mere zap of a remote control. "All you do is sit in your easy chair, hit the button, and you're off to the races," says Richard Belville, president of Bell Atlantic's video unit.
The cable industry is fighting back with new technology of its own. "Any cable system with an upgraded technical platform can be fully competitive with any DBS company," asserts Julian A. Brodsky, vice chairman of Comcast Corp., which is based in Philadelphia. Comcast has been aggressively upgrading its old cable plant to handle an array of digital services, including phone, high-speed data and interactive video.
Gail Neumann, a retired bookkeeper in Hillsborough, N.J., dumped her longtime cable-TV company about a month ago after signing up with DirecTV through Bell Atlantic. She has ordered the works for around $55 a month -- about what she used to pay for her old cable service -- and says she hasn't looked back. "There are like a million things on," she says. "About the biggest decision I have is what to watch."
Mrs. Neumann says all the new channels give her more value for her money. Plus, she says, her TV reception, which had been hit-or-miss with cable, has improved substantially with satellite. "I'm crazy about it," she says.
Greg Lewis, a Falls Church, Va., automotive mechanic, is another convert. He signed up for DirecTV service about a month ago, after getting a good look at it while visiting his brother, who is a Bell Atlantic employee.
Mr. Lewis says local TV channels come in "just as good if not better" as they did before, and reception on other channels is a lot sharper. He is also paying about $15 a month less than he did for cable. "That's the icing on the cake," he says.
The local antennae are entirely legal. Deborah Lathen, head of the Federal Communications Commission's cable bureau, says the new DBS offerings benefit the consumer and promote competition.
The satellite-TV industry is pushing the new local services thanks to improved antenna technology. Most of the stainless-steel antennae used by Bell Atlantic -- shaped like arrows about half the length of a yardstick -- are mounted on roofs or the sides of chimneys. Sometimes Bell Atlantic can install them in attics.
Bell Atlantic's basic satellite package, priced at around $35 a month, includes 85 TV channels, 31 music channels, 55 pay-per-view movie choices (movies cost an additional $2.99 each) and an interactive on-screen movie guide. Bell charges $199 to install one DBS system for one TV, including an over-the-air antenna and a dish.
Buoyed by early results, Bell Atlantic plans to introduce the service throughout its territory, which extends from Maine to Virginia and includes such cable strongholds as New York City, served by cable giant Time Warner Inc. DirecTV and Bell Atlantic are discussing offering services such as interactive TV, telephone and high-speed data by satellite in the future. "We think this is a product that definitely has a market," says Bell Atlantic's Mr. Belville.
Other DBS players also are starting aggressive marketing, offering deep discounts on equipment and installation and operating 24-hour customer hot lines. EchoStar Communications Inc., Denver, recently began offering free gear and installation to customers who sign up for one year of its most expensive service, which costs $50 a month.
So far, the push seems to be paying off. The four main DBS players -- which also include PrimeStar Inc. of Denver -- are expected to see their combined subscriber base jump this year by more than 30 percent to almost nine million households, with similar gains expected next year. (Figures don't include customers of old-fashioned big-dish satellite service, which is being phased out.) The growth spurt could push the three-year-old DBS business well past the 10-million-subscriber mark by 2000.
"The numbers speak for themselves," says Jimmy Schaeffler, chairman of the Carmel Group, an industry consultant. DBS, he says, "is the fastest-growing consumer-electronics product in history." He says research indicates that many consumers who try satellite TV subsequently drop their cable hookups.
DBS operators think their advantage will only increase with the arrival of high-definition TV, which also is digital. DirecTV and U.S. Satellite Broadcasting have struck a deal to transmit Home Box Office in the new HDTV format starting next year. Local cable companies, by contrast, are adopting HDTV more slowly, with just a handful of cable-TV stations expected to be digital-ready by year end.
Most cable companies are betting it will take a few more years for the HDTV market to develop. Current high-definition televisions cost thousands of dollars, putting them beyond the reach of most price-sensitive consumers. Price is one reason programmers haven't been in a rush to put shows in that format. Still, most cable companies are pushing to offer upgraded digital services, which will eventually put them in a position to offer their own expanded packages of channels.