Tag Archives: dbs

Internet TV eclipsing satellite services, says Ergen

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When one of satellite television’s great visionaries says that over-the-top (OTT) Internet delivery is the future of video, it’s worth taking him at his word. Charlie Ergen is the chairman and CEO of DISH Network, and the founder of EchoStar, a pioneering satellite TV manufacturer and distributor during the big dish days of the 1980s. According to a story by Daniel Frankel in FierceCable, Ergen believes that traditional linear television, the kind that DISH, DirecTv and cable companies sell, needs an overhaul if it’s going to remain a viable product…

Speaking to investment analysts and reporters during Dish’s fourth-quarter earnings call…Ergen said Dish had been “dragged into” this brand positioning by competitors such as AT&T’s DirecTV Now and Sony PlayStation Vue.

“Obviously, the DirecTV Now product is a direct replacement for cable and satellite,” he said. “So is the Sony product. We’ve gotten dragged into that, and maybe that’s not my first preference”…

“The decline of linear TV will be driven by how programmers react,” Ergen said. “If programmers continue to raise prices, if they continue to put 16-18 minutes of advertising into a show, it’s going to continue to decline. … You’ve got to make linear TV look more like an OTT product.”

For the next few years though, cable companies will be more vulnerable than satellite broadcasters like Ergen. Although small dish satellite platforms were never intended to be a purely rural product, they have a large, natural constituency outside of the mostly urban and suburban areas where cable companies offer Internet service that’s usually quite capable of delivering OTT programming.

It’s different in rural areas, where Internet service is a patchwork of expensive and poorly performing fixed wireless systems and generally slow DSL from telcos. And where AT&T intends to rip out copper networks, limit its customers to its own brand of slow wireless Internet service, and force them to rely on DirecTv – which it owns – or Ergen’s DISH for television.

Is it crazy to hope a broadband merger could increase competition?

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For the umpteenth time, AT&T is said to be in talks to buy a major U.S. direct broadband satellite (DBS) company, in this case DirecTv. The first time I heard this rumor was in 1995, when DirecTv and the company I was working for, U.S. Satellite Broadband (later merged together), did a joint marketing deal with what is now AT&T (but was SBC back then).

In fact, SBC’s later acquisition of the business and brand was partly due to the failed cable ambitions of the old AT&T. CEO Michael Armstrong – who had been the CEO of Hughes, DirecTv’s then-corporate parent – bought TCI, the original mega-MSO. The attempt to merge cultures and networks was a disaster. AT&T was a relentlessly politically correct organisation with exquisitely gold-plated engineering. TCI, on the other hand, embraced a Colorado cowboy ethic, in its dealings with staff, industry and consumers, and in its upkeep of a largely ad hoc and, even then, decaying coaxial cable plant.

Armstrong skated away, the cable systems went to Comcast and SBC got the name and the phone network. And like clockwork, every couple of years AT&T is said to be in hot pursuit of either DirecTv or DISH.

The original argument in favor of a DBS purchase was that AT&T had millions upon millions of existing subscriber relationships and limitless marketing resources. My counter argument back then was, yes, AT&T is huge, but that’s not enough. It would be like slotting a sumo wrestler into the San Francisco 49ers offensive line: big is good, but the sport demands different skills, endurance and attitudes.

Today’s AT&T is no longer a lumbering rikishi. Over the years, the PC sensitivity has dulled and its competitive appetite has gained a bit of an edge. So a DBS play seems less unlikely. If it happens, it’ll be a decisive step away from the traditional deference incumbents show towards each other’s territory. Both DirecTv and AT&T Wireless have a national footprint and together can start attacking Verizon’s and CenturyLink’s wireline revenue. That would make it a more competitive market in much of the U.S. Perhaps we can hope that Verizon and Century – or a now-small independent telco – will return the favor in California.