Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: SUNDAY, March 7, 1993 TAG: 9303050324
SECTION: BUSINESS PAGE: F-1 EDITION: METRO
SOURCE: JOHN GIBBONS STAFF WRITER
DATELINE: LENGTH: Long
A SIGNAL OF COMPETITION
"WE'VE got a little war going on," says Matt Whitcomb, president of ACS Satellite Systems in Vinton.His primary opponent, David Burk, is a little more relaxed about it.
"There's always been a little bit of a war going on between cable companies and satellite companies," said Burk, who is project manager for Primestar, Cox Cable Roanoke's satellite dish sideline. "I just see it as healthy competition."
The two are fighting over more than just market share in the booming satellite dish market, which by Feb. 1 had cracked the 4 million mark counting units in distribution nationally.
Their more serious battle is between two very different marketing and technological approaches.
In Whitcomb's corner, which he shares with many other dish dealers, is the multichannel C-band satellite technology, drawing broadcast signals with dishes ranging from 5 to 10 feet across.
In Burk's corner, where his Primestar partnership stands alone - at least for the moment - is the Direct Broadcast Satellite, or DBS, Ku-band technology, with 3-foot-wide dishes. He says, "The small dishes are the technology of the future, and Primestar is the first DBS out of the gate."
Burk may not be alone for much longer, though. A new 18-inch DBS dish being developed by Hughes Corp. is tentatively scheduled to debut in 1994, and Citizens Communications Corp., a subsidiary of the rural Citizens Telephone Cooperative in Floyd, is planning to be a part of it.
What C-band offers, Whitcomb says, is "lots and lots of couch potato time. In terms of programming variety, it's just unlimited technology." He says the technology will provide viewers about 150 channels. That's a conservative estimate "because at any given time it may vary if you went through them all. There's actually many more than that."
"Out of those 150 channels, about 100 of them are in the clear," he explained. "They're free, just turn them on and watch them."
Subscription channels are available as well at a wholesale rate, $10 to $20 for a fairly basic level of service.
Jim Wilkinson, owner of M&W Satellite Systems, says the price is not a primary reason for people to turn to C-band, though.
"The third or fourth reason we find people buying satellite TV is the cost-saving advantage," he said. "If we look at the purchase price of an average system, it being, let's say, $2,000; it takes several years of cable payments to reach that figure."
Wilkinson said the economic reason "is secondary to the thirst for more variety."
C-band's low cost of programming and tremendous variety requires a hefty initial outlay - $2,000 to $3,000, and that has put some people off.
On the other hand, Primestar - a partnership of the six largest U.S. cable companies - offers a low price, $350, but provides only seven "superstations," or local stations from major markets such as WGN in Chicago; a couple of pay-per-view movie channels; and a video text newspaper service. Customers must also pay $10 a month for the decoder box and $19.95 a month for the service.
"If you like sports and very, very old syndicated reruns, you're OK," Whitcomb said of his competition. But if you are looking for the popular cable channels, HBO, CNN or Discover, "you better forget it."
"That's made their product not so popular, as you would see if you looked in my inventory out back," he said. "I've got several dozen of them that I've taken in on trade because they don't deliver the variety. . . . They're easy to buy, there's a low down payment, but they get bored quite quickly."
But Burk says the partnership is looking to increase the number of channels to 40 through compression of video signals. That's expected to happen around the fourth quarter of this year. "When we do this, there will be new tiers of channels that customers will have as an optional thing."
He also pointed out that Primestar has a number of selling points besides variety and cost. "People like the smaller dish as well, and we also rent the receiver to the customer, which in the long run saves them a lot of money because they don't have to pay for service repairs. They don't have to upgrade the receiver every time there's a change in the technology."
The Primestar dish is "just a piece of Fiberglas on a cast-iron mount," Burk said. "It's different from C-band dishes. C-band dishes have motors, so the dish can turn from one satellite to another; a motor; the rotator; the actuator arms; there's a lot of things there that can break. Here, this is just a very simplistic piece of equipment. We've had very, very few repairs."
Whitcomb, in defense of the C-band technology, said, "If you give the customer a quality installation, his maintenance should be minimal. . . . At one time it was an expensive device to maintain because they didn't have all the glitches out of the electronics. It wasn't like buying a television set which had been researched and developed.
"We're a new industry, so we didn't have the expert manufacturers that were making TV sets making our equipment. We had little small operations, but we've gotten over that hump," Whitcomb said.
Burk says all these factors, plus the mountainous geography, have made Southwest Virginia Primestar's ninth largest of 400 markets. This is "a real bellwether area" for Primestar. He also said in its approximately year and a half in operation, it has cracked the 1,000 mark of Primestar units sold.
Citizens Communications Corp., a subsidiary of Citizens Telephone Cooperative in Floyd, is looking to give Primestar a run for its money with the 18-inch dish being developed by Hughes Corp.
General manager Jim Newell says, "I think in 1994, and everything is on schedule, we will be very competitive with them. We will have programming packages and pricing which is very competitive."
He said he expects the systems to cost about $700, and basic 17-channel service to run about $17 per month - though he cautioned that pricing has not been established.
Whitcomb also is expecting to get in on the Hughes project when it comes on line.
Regarding his competitive position with Primestar, Newell said, "Primestar is available today, and that's to their advantage. If [his product] were available today, we'd have a superior product. . . . [Primestar customers] are not pleased, the programming is limited."
Regarding C-band, Newell said it has not caught on as much as might be expected in rural areas "because the cost of that initial investment has been a little bit high. . . . The monthly fee I don't think is going to be a concern with people. I think they've been concerned with this one-time expense. I think they're also concerned with the beauty of it."
Other people also are concerned with the beauty of satellite dishes, or the perceived lack thereof.
M&W's Wilkinson said, "The biggest limitation we've got, believe it or not, the biggest gripe we've got, is whether a subdivision that either does have or doesn't have cable will `permit' the installation of a satellite dish."
Wilkinson believes property covenants that place restrictions on what owners build are "just shortsightedness on the part of some old mossback that doesn't know the difference between the remote control and the channel selector knob on the television."
Steven L. Lemon, a lawyer specializing in real estate matters at Martin Hopkins and Lemon in Roanoke, had a different view of restrictive covenants. "The goal of the things is to provide a minimum standard for each lot to maintain the value of every other lot. . . . Satellite dishes may be prohibited because people feel they are unsightly and diminish from the value of the lots."
Wilkinson said he believes that the restriction "is highly discriminatory, because, I presume, the cable industry has gotten into bed with the real estate developers. What else can you say."
Lemon said, "I don't think that's it at all. The real estate developers are as profit-minded a group as you'll find. . . . The only way you could get some sort of profit motive to the restriction would be if . . . developments in more rural areas [have] . . . kind of a mini-cable company. . . . In that case the prohibition might be to encourage use of the developer-run mini-cable company. But I think that's the vast minority of the cases."
Lemon pointed out, however, that "to my mind, a restrictive covenant on satellite dishes in fairly far out Botetourt County might be silly if there's not cable-company access available."
He went on, though, to say that "if you're in town, or you're in the reach of a commercial cable company, then you can get the service and I would think [a restrictive covenant] would be more prevalent."
Wilkinson did say that "it is the responsibility of the selling dealer to put . . . these devices where they are least obtrusive, and we certainly try to conform to that in all respects."
Whitcomb, however, took a different tack, saying, "I don't know where in the world the idea came from that satellite dishes were aesthetically distasteful, because to me it's space age, with very clean lines.
"Maybe there should be some restrictions on dish size, so nobody goes out there and puts up a monster, but when you start talking esthetics or health reasons, it gets totally ridiculous."
Regardless of the arguments for or against the beauty of a satellite dish, the industry has responded in some innovative ways. There are now available satellite dishes disguised as lawn umbrellas. "It even includes a circular table around the pole and matching chairs," Wilkinson said.
Whitcomb described a dish disguised as a boulder that can be painted to match the local rock formations. "It even moves" to align itself with satellite signals, he said.
Despite all the whiz-bang technology involved with satellite dishes, will they replace cable in Roanoke as a must-have utility? Or will they be a specialty item for people, as Wilkinson says, "with a thirst for more variety"?
Whitcomb said, "If you go into a city now where the cable company is not such a good guy and expensive, 70 percent of a dealer's volume is done in the cable company's backyard. That's not the case here. We have a better cable company here in Roanoke than most."
Wilkinson said, "Economics, of course is a concern to the citizen who sees an ever-increasing cable bill; but really, freedom of choice in what to entertain your family with is what I find is the biggest advantage to owning a system."
But for rural areas, Burk said, "TV reception in this area isn't real good and there's a lot of people out there looking for an inexpensive dish."
And, as Newel explains it, "as we look into places like Floyd where if you don't have access to cable TV, which is only available in the town, we don't have quality reception up here. Therefore I think the future of satellite transmission into rural areas is going to be very good."
\ HOW IT ALL GETS TO YOUR SCREEN\ \ Programming: It starts with lots of it, from HBO's Multiplex to Superior Livestock, being beamed up to the satellites. Most channels are meant for home use, with several scrambled for subscribers' use only. Some are used by various networks for transmitting news feeds and syndicated entertainment programs to affiliates, but home users usually can pick those up as well.
\ Signals: These are transmitted to 22 C-band satellites and 12 Ku-band satellites - with futuristic names like Telstar 303 and Spacenet 1 - in orbit 2,300 miles above the equator. They orbit, with many other satellites, in the Clark Belt - named for Arthur Clark, who discovered that something placed there would appear stationary to observers on earth.
\ Picking it up: With the exception of the Primestar Ku-band broadcasts, only C-band transmissions are generally available to home users due to the nature of the technology. Most C-band dishes are designed to rotate from satellite to satellite to pick up the channels, although some models point at just one satellite, like Galaxy 5, with the greatest concentration of popular stations. The Ku-band dishes, both those in use and in development, point at just one satellite for programming.
\ Power and size: The difference in the sizes of satellite dishes is due to the different amounts of power, or watts, that the satellites transmit. C-band satellites are low power, averaging around 15 watts. A larger dish circumference is required to pick up the signal. Even within C-band there are differences in the amount of power in the transmissions. To get all 22 satellite stations clearly, a dish size of 7 1/2 feet is required - at a cost of $2,000 to $3,000 for a complete system installed.
\ Smaller is cheaper: To pick up the programming on just Galaxy 5, for example, dish size can be as small as 5 feet, at a cost of about $1,200. Ku-band is medium power, at about 45 watts. Its dish size can be smaller yet - 3 feet - as can its price tag, at $300 plus monthly charges for decoders and programming. Designs in development that call for a dish size of 18 inches would require a signal with even more power. With all technologies, a direct line of sight to the satellite is required for reception.
\ The scramble is on: After the signal touches down on the dish, with C-band it is processed by a device called an integrated receiver descrambler. It's an all-in-one unit that does everything from controling the movement of the satellite dish to descrambling pay-per-view channels - and more. It is the brains of the whole operation. Generally, all viewers have to do is punch in the satellite and the station on a hand-held remote control and the box does the rest. The remote control does not even have to be in the same room as the receiver. Security codes also are available to prevent a child from watching the Playboy Channel, for example, or to deter a member of the family who runs up pay-per-view bills.
\ Order out of chaos: The descrambling, once a source of major problems in the industry, now is handled by a device built into the receiver called the VideoCipher II Plus. It comes with a card slot on the back, so if the scrambling technology changes, customers would have only to slip a new card in the slot, not have their boxes replaced or upgraded.
\ Who pays for it: But how does a viewer get charged for all the fancy programming? The receiver handles that as well. There is a modem built into the box which logs the pay-per-view program with a central-billing service run by a consortium of programming providers. No matter what the source of the programming, whether a one-time pay-per-view or a subscription to a particular channel, monthly bills all come from the Satellite Video Service Center. -