USD TV: Are They a Competitive Threat to Private Cable Operators? Experts Say No Way by Don Kent  Ecablevision Consulting

BEYOND ACCESS USD TV: Are They A Competitive Threat To Private Cable Operators? Experts Say No Way By Don Kent  eCablevision Consulting

en years ago, DirecTV USDTV hopes to capital- revolutionized the video ize on the feelings by con- Tplaying field when it sumers that cable television launched an all-digital video is too expensive and the service. It provided service to belief that some consumers residents in rural areas where are primarily interested in cable wasn’t available, and of- watching broadcast stations fered customers a choice where with only a few channels cable was the incumbent opera- of satellite programming. tor. During these last ten years, While USDTV has launched DBS has profoundly impacted in only a handful of markets, the level of service that many does their wireless video Private Cable Operators (PCOs) service have the potential to provide to their customers. In change the television land- fact, some PCOs have partnered scape as DBS did? with DirecTV and EchoStar to Matt Oristano, former offer their customers a hybrid CEO of People’s Choice TV, analog and digital video product, while 11 channels of satellite programming. is viewed by many as being one of the others have expanded their lineups by Included in this package are the broad- wireless industry’s savviest video and purchasing additional headend equip- caster’s local HDTV services. broadband strategic thinkers. Under ment themselves. But no matter how Popular satellite channels, including his leadership, People’s Choice TV PCOs have responded, DBS offered a ESPN, Starz!, Discovery, The Disney launched a thirty-channel low cost service that changed consumer expec- Channel, TLC, and Lifetime. At US- “wireless cable” product in 1991, even- tations and required a competitive re- DTV’s Salt Lake City system, the com- tually serving tens of thousands of cus- sponse from the private cable industry. pany provides a total of 30 channels of tomers in Chicago, Houston, St. Louis, In 2004, USDTV launched a wire- programming, of which many are the Phoenix, Detroit, and Tucson. Mr. Oristano exited the industry in 2000 “USDTV hopes to capitalize on the feelings by after successfully selling to Sprint for more than $500 million. consumers that cable television is too expensive Matt Oristano said, “When we launched People’s Choice TV in 1991 and the belief that some consumers are primarily with a 30 channel service, we were com- peting with a cable operator that had interested in watching broadcast stations with about 55-60 channels in its total service and about 45 channels in basic. For only a few channels of satellite programming.” $19.95, [People’s Choice TV] customers got the channels they really watched, less video product designed to offer broadcasters’ duplicated analog and which included CNN, ESPN, TBS, consumers additional choice. The com- HDTV signals. This lineup includes a TNT, USA, Discovery, Fox Sports, and pany offers customers a low-cost alter- video program guide, ten satellite chan- Nickelodeon.” native for those interested in receiving nels, and 19 local radio and broadcast “Things have changed since then,” the broadcast television channels and television services. Oristano continued, “and basic pack-

ages are 70-80 channels today. The Dish has 74 channels in its basic programming for $24.99. USDTV charges $19.95 a month and is missing many of the most important services, including CNN, TNN, and USA. USDTV’s cost per [non-duplicated] channel is over $1.00, while Dish’s is just $.34.” “USDTV will indeed realize some subscribers, but their numbers will be minimal,” Oristano predicted. “Today’s consumer culture is hooked on having it all; whatever it wants, whenever it wants. The small segments of people who don’t buy pay television now are either too poor, or just not interested in our consumption-oriented culture. cluded HBO. While USDTV offers routinely offering free installations and There will be precious few people who Starz! in their basic package, it excludes up to four rooms of free equipment. aren’t served by today’s pay TV opera- Encore, a movie service that is some- These types of promotions will make it tors, and who would make good sales times used as a companion product to more difficult for USDTV to maintain prospects. Sorry,” Oristano concludes, Starz! its “price leader” positioning. As an “I just don’t get it.” In the mid-1990’s as DBS began to example, with EchoStar’s current sales In 1991, People’s Choice TV offered penetrate the market, Oristano discon- promotion, those Salt Lake City cus- twice the number of satellite services as tinued marketing his low cost video tomers interested in receiving service on are in USDTV’s current lineup, during product and deployed a digital video more than one television could actually a time when the other video providers product that was competitive with DBS save money by subscribing to EchoStar. Besides that, they’d receive over forty “One impact of Murdock’s purchase of DirecTV more basic channels of services as part of the bargain. is that both DBS providers have become increas- USDTV will appeal to a niche of television watchers, but probably a ingly aggressive…” small one. Matt Oristano, the man that coined the slogan “no excuses TV” were not nearly as competitive as they together with a high speed Internet when he launched People’s Choice TV’s are today. And while People’s Choice service. SpeedChoice, People’s Choice low cost alternative to cable television, TV typically provided their customers TV’s broadband product, proved the is not a man to bet against. While with twenty of the most popular satel- viability of wireless broadband and some price conscious or moderate to lite channels on basic, USDTV carries caught the eye of Sprint. Sprint later infrequent television watchers will find only eight of the mostly highly popular purchased People’s Choice TV at almost USDTV appealing, it will not become services. As Oristano suggested, their twenty times what its stock was trading a competitive threat to PCOs’ primarily lineup is notable for what is missing. for at the time. young demographics, many of which The People Choice TV product also One impact of Murdock’s purchase are heavier television watchers and sub- offered pay-per-view and a choice of of DirecTV is that both DBS provid- scribe to broadband, pay television, and optional premium services, which in- ers have become increasingly aggressive, pay-per-view.  TABLE: Current USD TV pricing model About the Author Monthly Cost $19.95 includes all local HDTV channels Don Kent has spent over 25 years HDTV $99.95 working with video operators, broadband Equipment Cost service providers, and with early phase Installation Free companies specializing in the delivery of All local HD channels, plus HDTV for all the best programs broadband and digital content services. HD Content & big TV events on the broadcast networks Please address questions or topics that you’d like to see discussed in subsequent Price Guarantee Two Years. No monthly fee change until 2006 columns to [email protected].