1994: Year of the little dish

Memory Lane

Eleven years ago doesn’t seem like much in pure numbers, until you’re reminded of some seemingly ancient memories that marked a rather lamentable 1994: a white Ford Bronco, Tonya Harding, a compromised appendage from the husband of Lorena Bobbitt.

For cable, 1994 was the year a newcomer arrived on the scene that would change everything. After years of false starts, a powerful combination of digital video technology and a frequency known as the Ku-band gave real possibility to the category of DBS, or direct broadcast satellite television.

Or at least it did for true believers. The attitude of a near-monopolistic cable industry, though, was largely dismissive. In October of 1994, even as Time magazine pronounced that DBS satellites posed “a fresh challenge to cable TV,” cable industry participants could still be heard delighting over a mocking acronym, “Don’t Be Silly.”

Silly seems like the right word 11 years later to describe cable’s meandering march toward competitive enlightenment. In 1994, a consortium of companies including GM Hughes Electronics, RCA/Thomson and Hubbard Broadcasting were completing a national launch of their direct satellite service, which promised 150 channels to those willing to plop down $700 or more for a small receiving dish and a set-top receiver. Word was out that by the following year another entrant, EchoStar Communications, would launch a similar system featuring even more channels.

Cable’s flanks were supposed to be protected by an incumbent house DBS brand, PrimeStar, owned by six MSOs and General Electric. That, and a general sense that steep installation costs would limit satellite TV’s appeal, kept industry bigwigs sanguine.

“I’m not having sleepless nights,” the chief executive of Falcon Communications, Marc Nathanson, told Business Week in April of 1994. Easy for him to say. The affable Nathanson would sell his company in 1999 for $3.6 billion. By then, satellite television was flirting with the 10 million-subscriber mark. Ever since, cable seems to have been reduced to a game of catch-up it can’t quite seem to win.

Through the first three quarters of 2004, satellite TV providers added 2.5 million net new subscribers to bring the industry’s total to 24 million. More startling, though, is the number of “gross additions” racked up by EchoStar’s Dish Network and its rival, DirecTV. In the third quarter alone, new satellite receiving dishes were bolted to the sides of 1.8 million U.S. homes (the third quarter net gain of 835,000 is what’s left over after accounting for churn). The idea that more than 150,000 customers a week would make a conscious choice to elect a satellite alternative to cable television would likely have been unthinkable in 1994. But here we are.

Nobody in the cable business today needs to be reminded of the hand-to-hand combat that now characterizes the market. Regional marketing directors for many cable companies look forward to reviewing the latest month’s subscriber numbers with about the same enthusiasm level exhibited by the Kerry campaign once Ohio came in.

The retelling of the story of DBS’s origins is worth the pain only because it may help fuel a more effective competitive approach this time around. Yet even now, as telephone companies very publicly and methodically begin their assault on cable’s wireline video domain, there are vestiges of the past lurking in the comments of some industry seers. When Comcast’s CEO Brian Roberts points to failed telco-TV efforts of the past, as he did during an earnings conference call in October, or when analysts assure cable executives that telcos will stall out at 15 percent of a saturated market, there’s an eerie hint of 1994 in the air.

1994 was the year everything changed for a cable industry that had become too comfortable in its old familiar garb of analog signals and annual rate increases. A newcomer employing new technologies achieved more market share in a shorter time period than anybody imagined. Back then it was digital signal compression and a flood of multiplexed channels that changed the playing field. Today the newcomer technology is IP video over a switched network. Eleven years after DirecTV made its stunning national debut, the question cable has to answer is whether it’s learned to be quicker to innovate this time around. To that end, a quote from 1994’s finest U.S. movie, The Shawshank Redemption, may offer instructive wisdom. “Get busy living,” says the character of Ellis Boyd “Red” Redding, “or get busy dying.”

Latest Posts
Follow Me

Get new content delivered directly to your inbox.