Broadcasting Trends Show Competition Ahead

By Richard DalBello, Satellite Broadcasting and Communications Association

As the new president of Satellite Broadcasting and Communications Association (SBCA), it is my great pleasure to write about some of the industries recent accomplishments and important challenges of the fast-growing satellite television and radio sectors.

The satellite entertainment industries are making substantial progress on Wall Street, and they are performing well in the marketplace. Ten years ago, cable operators controlled nearly 100 percent of multi-channel video subscribers, and now satellite TV companies provide service to nearly 22 percent of multi-channel households. The Federal Communications Commission (FCC), in its recently released 2003 study on competition in the multi-channel marketplace, recognized Direct Broadcast Satellite (DBS) as “the most significant national competitor to cable.” Littleton. Colo.-based EchoStar Communications [DISH] announced last week it added approximately 360,000 net new subscribers during the first quarter of this year, and El Segundo, Calif.-based DirecTV chalked up 460,000 net new owned and operated subscribers – an all time record for the largest U.S. satellite TV operator. DirecTV’s total of 12.6 million subscribers, combined with EchoStar’s 9.7 million subscribers, totals more than 20 million total subscriptions in just 10 years of satellite TV’s existence.

Radio Waves

Satellite radio also is making significant progress. There are now more than two million U.S. satellite radio customers, and the sector is responsible for creating the fastest- growing consumer-electronic product in history. In three short years, New York City-based Sirius Satellite Radio [SIRI] and Washington, D.C.-based XM Satellite Radio [XMSR] have changed the way many people think about mobile audio entertainment. With the average commute times in the United States increasing, satellite radio provides a much-needed audio oasis for the tired and frustrated commuter.

Although we as an industry are doing well in the marketplace, we are facing a number of critical challenges on the policy scene. It is SBCA’s job to represent the satellite business world in the world of Washington, D.C., politics. We are making every effort to inform policymakers about the great success and benefits of satellite-delivered products, especially the positive impact that competition from these services has on American consumers. Continued enforce- ment of policies that foster a competitive marketplace will help ensure consumers are able to experience the superior quality and customer service of satellite-delivered technology.

As many of you know, Congress is working on the Satellite Home Viewer Extension and Reauthorization Act (SHVERA). Changes to this legislation could have a substantial impact on how we conduct our business and on our bottom lines. SHVERA is moving rapidly through the House and Senate, and SBCA is encouraged by the support expressed by members of Congress for several of our key industry initiatives.

One area where we are most optimistic is in the role satellites could play in providing High Definition (HD) and digital services to consumers who live in unserved “digital white areas.” By allowing DBS to provide these digital services, we can supply a HD signal to consumers who might otherwise remain unserved for a decade.

Such an initiative also would move the country closer to the 85-percent digital threshold – a number set in the 1996 Telecom Act. This number will be reached when 85 percent of U.S. homes are capable of receiving digital broadcast service. At that point, broadcasters will be required to return an extremely valuable block of analog spectrum to the government. The government then may auction this spectrum to wireless companies eager to offer next-generation phone and Internet services or for use in improved public-safety services.

Rising Royalties

Also under SHVERA, Congress is considering raising the royalty rates satellite providers pay for distant network signals and superstations. Before Congress raises those rates, we hope lawmakers carefully consider whether this action will hurt consumers and how it will change the competitive landscape. The cable industry’s royalty rate prices are subject only to increases with inflation, whereas the satellite industry must go before Congress every five years to have its royalty rates evaluated. If Congress does choose to raise royalty rates, we encourage lawmakers to come up with a reasonable, uniform standard that puts the satellite and cable industries on equal footing. Satellite television is the only viable competitor to cable. We want to make sure satellite providers are in a position to continue offering competitive, and often lower-priced, packages to consumers.

The satellite radio industry is also facing several political challenges in Washington, D.C. Recently introduced legislation seeks to slow the growth of satellite radio by banning certain local services — such as weather and traffic reporting — that are much in demand by consumers and well-within the current licenses granted to satellite radio companies by the FCC.

SBCA soon will file formal comments with the FCC on behalf of satellite radio providers Sirius and XM Satellite Radio. This filing will respond to criticism from the National Association of Broadcasters (NAB) alleging the satellite radio providers violated FCC regulations by delivering local weather and traffic reports to their subscribers. The claim is just plain wrong. Our FCC filing will demonstrate Sirius and XM are providing local weather and traffic reports, and all other service in full compliance with FCC rules and regulations. We believe recent NAB efforts to alter the licenses held by these two carriers are the NAB’s response to satellite radio’s success in the marketplace.

Listening Alternative

Satellite radio is offering listeners a choice. It provides commercial-free music along with multi-channel entertainment and news radio to consumers willing to pay for that option. It will not alter free-to-air terrestrial broadcasting as a news source for the community.

With the advances in technology and a satisfactory passing of the SHVERA, the satellite industry will continue to grow. I look forward to working hard to meet the challenges of SHVERA and to continue our strong defense of the satellite radio industry. By meeting these challenges head on, we can help ensure the best possible environment for our industry’s continued expansion along with a broad range of choices for the consumer.

Richard DalBello is president of the Satellite Broadcasting and Communications Association (SBCA), the trade association that represents all segments of the satellite television, radio and broadband industry – with a focus on consumer issues and business. DalBello has more than 20 years of experience in the satellite and communications industries.