Rainbow DBS Adds Vital Capacity

Jericho, N.Y.-based Rainbow DBS, Cablevision System’s [CVC] capacity-constrained satellite TV division, increased its in-orbit capabilities last week by agreeing to lease 16 transponders during the next 10 years from Princeton, N.J.’s SES Americom, the U.S.-based satellite-operating unit of Luxembourg’s SES Global [SESG].

The agreement would enable the U.S.-based VOOM satellite TV service, which currently uses just one satellite owned by the company, to expand the number of high-definition and standard-definition television channels it provides to its subscribers. DirecTV and EchoStar Communications [DISH], the much bigger U.S. satellite TV competitors to Rainbow DBS, in contrast, have eight and nine in-orbit satellites, respectively.

Mickey Alpert, Rainbow DBS’ COO, said his company’s intent is to maintain its leadership in offering more exclusive HDTV programming than any other cable or satellite provider. The Ku-band transponders the company will lease aboard SES Americom’s AMC-6 satellite will be available to Rainbow DBS on Oct. 1, under terms of the agreement.

For SES Americom, the deal gives its AMERICOM2Home business a second customer — other than EchoStar — to provide in-orbit satellite television capacity. Bryan McGuirk, SES Americom’s senior vice president of domestic satellite services, said Rainbow DBS officials are clearly HD “visionaries.” He said the two companies are developing a “great relationship” at a time when HD appears to be turning into a “significant trend.”

“It is truly changing consumer behavior,” McGuirk said. “By aligning ourselves with the HD leader, we are in the position to learn and to grow as part of that trend.”

SES Americom gained the contract with Rainbow DBS because it had the capacity the fledgling satellite TV service needed at the desired orbital slot to provide additional services to VOOM customers, Alpert said.

“More importantly, we staked out the ground of providing more HD channels than anyone,” Alpert said in an exclusive interview with Satellite News Senior Analyst/Senior Editor Paul Dykewicz. A trend toward expanded HDTV programming and consumer interest in such services is emerging, Alpert said.

Rainbow DBS also has some options to secure yet further capacity from SES Americom, and it will consider other options to boost its capabilities, Alpert said. The satellite TV services provider also has “put down deposits” for additional Ka-band spectrum. “We are going to continue to increase our capacity,” Alpert said, adding the moves by Rainbow DBS are coming in response to direct feedback from its customers.

“They [customers] are seeking additional programming,” Alpert said. “They have gotten use to the fact that we are the source for HD programming.”

In-Orbit Redundancy

Prior to the deal with SES Americom, Rainbow DBS only used its own satellite, Rainbow-1, and it was vulnerable to a service interruption if that spacecraft incurred an in-orbit anomaly. Now if an outage occurs on either Rainbow-1 or AMC-6, Rainbow DBS would be protected with capacity on the other satellite.

However, the primary objective of last week’s transponder leasing agreement with SES Americom was capacity, not insurance, Alpert said.

Rainbow DBS also will gain additional standard definition (SD) television capacity by the end of this year when it migrates to next-generation MPEG-4 technology. The company currently uses MPEG-2 technology but will be able to almost double its SD capacity with MPEG-4, Alpert said.

By the end of 2005, Rainbow DBS would be able to convert its HD service to MPEG-4 as well, and it gain additional capacity but not quite on the same scale as the nearly 2:1 increase it will net in SD capacity by the end of this year. The service’s HD capacity from the technology switch likely would rise about 50 percent, Alpert explained.

Currently, Rainbow DBS is offering 36 HD channels and 84 SD channels in the 48 contiguous states. Among that programming lineup are 21 exclusive HD channels. The company also offers 12 movie channels, including 10 that will be re-designed to have “distinct personalities of their own,” said Bo Park, director of the company’s communications.

Rainbow DBS is focused on improving the quality and composition of its channel lineup. Its lowest-priced programming tier is $39.90 a month and its highest-end package, Va Va Voom, is priced at $79.90 a month.

Distribution Channels

Steve Blum, who heads the Marina, Calif.-based Tellus Venture Associates consulting firm, said Rainbow DBS is trying to address two of its key challenges by adding to its bandwidth and trying to distribute its product to consumers. The latter task needs to ensure that the company’s bandwidth is “easily accessible” to consumers with receiving equipment that is simple to use and to buy, he added.

To this end, Rainbow DBS helped itself on the distribution side of its business last week by forging an agreement with Crutchfield, reportedly the nation’s largest direct integrated marketer of consumer electronics products. Crutchfield reaches more than five million home-entertainment enthusiasts through its catalog, a call center and the Internet. Consumers interested in VOOM can learn more about HDTV through Crutchfield’s expert product advisors. In addition, Crutchfield customers have access to such services as free technical support for life and a 30-day money-back guarantee.

VOOM gained another distribution source when it announced an agreement May 20 with BrandsMart USA, South Florida’s Number One discount retailer of appliances, consumer electronics and housewares. The deal gives VOOM a strong presence at the mass-marketer’s five showrooms in the state.

In addition, the sales effort was aided May 4 when Rainbow DBS announced that O’Rourke Sales Co. had reached an agreement for national distribution rights for VOOM. The two will work together to identify and evaluate top-tier specialty retailers for VOOM. They also will collaborate to execute the dealer- application process, to provide equipment and start-up kits to retailers and to establish co-operative programs as well as to perform dealer sales and installation training.

“This national distributor partnership is significant for VOOM because it allows us to reach consumers who shop at high-end specialty retailers,” Bill Casamo, executive vice president of marketing and sales at Rainbow DBS, said at the time of the announcement.

–Paul Dykewicz

(Bryan McGuirk, SES Americom, 609/987-4222; Bo Park, Rainbow DBS, 516/803-6068; Bob Marsocci, DirecTV, 310/726-4656; Steve Blum, Tellus Venture Associates, 831/582-0700)