The final nails in the Rainbow DBS coffin were hammered in quietly and with little fanfare as Cablevision suspended work on new satellites being manufactured for Rainbow, a Cablevision unit that offered direct-to-home (DTH) satellite television service under the Voom name.

In a June 6 filing with the U.S. Securities and Exchange Commission (SEC), Cablevision said it halted the work for Lockheed Martin, which was in the process of building the first of five satellites for high-definition (HD) television service.

The SEC filing was in stark contrast to the very public battle waged by Cablevision Chairman Charles Dolan and Thomas Dolan, executive vice president of Cablevision Systems, to try to save the struggling DTH television provider in the early days of this saga (SN, March 7). The Dolans tried to acquire Voom and block a deal between Cablevision and Echostar to prevent the sale of Vooms’ only in-orbit asset, Rainbow 1. But the Dolans were unsuccessful in their attempts to strike a deal with Cablevision to save the DTH service provider.

So what does the death of Voom mean to the satellite DTH industry going forward? The most immediate lessons learned likely will be applied by telcos as they begin to roll out Internet protocol television (IPTV), which stands to be a competitive threat not only to the DTH providers but to cable operators as well.

A Flawed Concept?

Voom’s original business plan of offering only HD services may have simply been ahead of its time, Jimmy Schaeffler, chairman and senior research analyst for The Carmel Group, told Satellite News. The idea came at a time when high-definition programming was just starting to gain some traction in the broadcasting industry.

“The problem with Voom was that it was a novel idea, but it would really cost your average consumer to get into it and your average consumer just wasn’t quite pounding on the table demanding high-definition TV services,” Schaeffler said. “Five years from now, HDTV will become the standard and most people won’t want to watch TV in other formats. But right now, there aren’t enough consumers in the marketplace who appreciate HD service.”

Schaeffler added that certain regulatory factors may have contributed to Voom being out on the market ahead of the demand for HD programming.

“They were working under the Federal Communications Commission‘s due diligence guidelines, which said they had to get a satellite built and operational within a given timeframe,” Schaeffler said. “That was one of those big snowballs that was rolling down the hill and it was really hard to say, ‘The market is just not there yet so we will wait a couple of years and launch this later.'”

Patrick French, senior analyst at Northern Sky Research, said that it was not necessarily a matter of being ahead of its time, but rather the realities of the market itself that hindered Voom.

“I personally do not believe Voom was ahead of its time,” French told Satellite News. “I believe the fight they chose to fight was too big of one to win against DirecTV and Echostar. If you look at just about any other country level market around the world, it is very rare to find markets where more than one DTH service provider has succeeded. The United States and France are the only markets I can think of where you actually have two competing players. Other countries started with two or three players, and within a couple of years they consolidated down to one.”

“Do I think another DTH service provider will emerge in the U.S. market in the future?” French added. “I don’t think so. Is that a bad thing? No. Mainly because, and this is a line I take from EchoStar’s philosophy, one has to look at at pay TV market as consisting of both cable and satellite. This is key because at the end of the day, the consumer does not care how they get their content as long as they get a choice of content they want at a price they think is fair.”

Voom Impact On IPTV

While a new satellite competitor to the DTH market may never surface, the lessons learned from Voom likely will be seen as telcos roll out IPTV services.

“What I am convinced of is if a company delivers an IPTV service with an inferior selection of channels at an equivalent price to cable or satellite, like Voom did, they are going to lose,” French said “You either need to go with superior or equivalent offering at a better price or go down the road of a smaller offering at a much cheaper price.”

–Gregory Twachtman (Jimmy Schaeffler, The Carmel Group, 831/643-2222; Patrick French, Northern Sky Research, pfrench@northernskyresearch.com)