THE EVOLUTION OF DBS AND ITS ECONOMIC VIABILITY
IN THE UNITED STATES
Michel G. Elasmar
College of Communication
640 Commonwealth Avenue
Boston, MA 02215
e-mail: [log in to unmask]
Paper presented to the Communication Technology division of the
Broadcast Education Association during the BEA's 1994 annual
convention, Las Vegas, Nevada.
THE EVOLUTION OF DBS AND ITS ECONOMIC VIABILITY
IN THE UNITED STATES
Recent announcements by DirecTV and USSB promise that the
materialization of DBS in the United States will occur as early
as Spring 1994. A new industry is about to emerge. This
industry is different from the traditional wire-based and
terrestrial broadcast means of television program delivery to
individual homes since DBS is space-based. DBS is also different
from the TVRO industry which is space-based since, unlike TVRO,
DBS services are specifically and solely designed and intended
for home reception. This paper first reviews the evolution of
American DBS in the 1980s and 1990s. Later an analysis explores
the economic determinants of success for American DBS ventures.
This paper concludes that the viability of the DBS industry is
enhanced by: 1) the presence of a large-enough subscriber base to
justify the investment of at least one DBS provider; 2) the
absence of excessive and predatory barriers to entry created by
the alternative media; 3) the absence of extreme and predatory
behavior among firms in the DBS industry; 4) the degree to which
at least one DBS enterprise can sustain preliminary losses.
THE EVOLUTION OF DBS AND ITS ECONOMIC VIABILITY
IN THE UNITED STATES
The emerging Direct Broadcast Satellites (DBS) industry is
the outcome of an evolutionary trend in satellites, reception
gear, video programming, and consumer demands for video
programming. DBS entails the usage of communication satellites
for the delivery of entertainment, information and other types of
audio-visual content to individual households. The
materialization of the DBS industry is closely tied to the rapid
evolution in communication satellites. This paper will first
briefly look at the evolution of communication satellites and the
possibility of home satellite reception. Later, the evolution of
DBS in the 1980s and 1990s is presented. An analysis of the
factors that maximize the viability of DBS in the United States
follows and a conclusion is drawn.
COMMUNICATION SATELLITES - FROM EXPERIMENTATION TO HOME
From an engineering perspective, the development of
communication satellites was the result of assiduous research and
continuous advancements in the field of rocketry and microwave
engineering (Bargellini, 1979). The technological ability to
bounce a television signal via satellite over an entire continent
and/or between continents materialized with the launching of
Telstar I in 1962 (see Witkin, 1962). The need for the satellite
to maintain a stationary position over a particular portion of
earth prompted the launch of the Syncom family of satellites.
Syncom I was launched in early 1963 but failed to survive the
launching procedure. Syncom II, also launched in 1963, was the
first among a generation of satellites classified as
geosynchronous due to their ability to maintain a continuous
signal over the segment of the earth to which they are dedicated
(for a detailed history see Podraczky & Pelton, 1984; Edelson,
1984). With geostationary satellites, a single satellite could
now be used to beam a continuous signal over a large geographical
During the 1960s and 1970s, theoretically anyone in the
United States, for example, with a satellite receiving antenna or
"dish" could receive signals beamed via a satellite serving the
U.S. continent. However, leaving the legality of such practice
aside, two related technological handicaps prevented the home
reception of satellite signals: 1) the satellites of the era
transmitted at very low power; 2) this necessitated a 15-18 meter
antenna to capture a signal of a moderate quality (see Rees,
1990). The cost and size of such antennas and the presence of
legal barriers confined their usage to governments and a few
large business organizations. Besides, no incentives existed for
the average consumer to desire access to satellite technology.
There were no television programs, for example, intended for home
reception via satellite.
The technological possibility of beaming a television signal
directly to individual households, via satellite, was publicly
examined as early as 1961. At the time, an article in the New
York Times reported that the development of equipment permitting
direct-broadcast-satellite reception was seriously being
considered (see Finney, 1961). Fifteen years later, a professor
of electrical engineering at Stanford University was the first to
construct a home earth station. In 1976, he became the first
American to receive a television signal direct to one's home (see
Committee on the Judiciary, 1988). Technologically, the first
generation of satellite home-reception gear had materialized.
The regulatory barrier restricting the ownership of home earth
stations, however, remained for a few more years. In 1979, the
Federal Communications Commission (FCC) abolished the mandatory
licensing of all domestic satellite dishes (see Committee on the
One year following these developments, in the Spring of
1980, home satellite systems were placed on the market for a
price tag of approximately $10,000 (see Committee on the
Judiciary, 1988). The beginnings of what was later termed the
television-receive-only (TVRO) industry had been established. A
TVRO dish refers to a backyard satellite receiver that enables
its owners to capture various satellite signals not necessarily
intended for their reception. For the purposes of this paper,
TVRO differs from DBS in that, in contrast to TVRO, the satellite
signals beamed via a DBS service are especially organized and
intended for home reception via a small antenna.
During 1980 as well, almost two decades after the launch of
Telstar I, the technological and regulatory frameworks now in
place prompted the interest of private companies to begin
designing satellite-delivered video programming services
AN ASSESSMENT OF UNFULFILLED DBS ASPIRATIONS: THE 1980s
In December 1980, Satellite Television Corporation (STC), a
wholly owned subsidiary of the Communications Satellite
Corporation (COMSAT) was the first to express to the Federal
Communications Commission (FCC) its wishes to launch a DBS system
for the United States. The system promised to deliver three
channels of advertising-free content to the contiguous United
States (CONUS) as well as to Alaska and Hawaii (see Keane, 1981).
Individual households were to receive the three channels by
subscribing to STC and purchasing the appropriate reception gear.
A total of four geostationary satellites were envisioned to serve
the U.S. -- one satellite for each time zone. All satellites
were anticipated to beam their signals into a home parabolic
antenna ranging from 0.6 to 0.9m in diameter depending upon the
geographical area of the U.S. where the antenna was to be
installed. Although the system promised to serve the entire
United States, STC envisioned its implementation in multiple
phases. It was expected that DBS service for the eastern time
zone would become operational in 1985-1986 (see Keane, 1981).
STC was not alone in its desire to enter this business. In
fact, in 1980, during the first phase of its regulatory process,
the FCC received a total of thirteen applications from interested
parties. Although STC was very precise about its plans for the
various facets of the DBS service it was proposing, the rest of
the applicants were less clear. The FCC approved eight of the
DBS applicants and rejected the rest for failure to submit
sufficient information (see Hudson, 1990; Gross, 1990).
In 1982, United Satellite Communications, Inc. (USCI), with
the backing of General Instruments and Prudential Insurance,
received the FCC's permission to begin an American DBS service.
USCI proposed to beam 5 channels of television programming to
U.S. television households via leased transponders on a Canadian
satellite. The economics of this service were similar to STC's.
In order to receive USCI's DBS signal, a customer needed to pay a
monthly subscription fee of $40. In addition, USCI charged $150-
300 for the installation of a 4 foot parabolic antenna on the
consumer's premises (see Hudson, 1990; Gross, 1990). The service
began in late 1983. At first, it was limited geographically to
Indianapolis, IN and Washington, D.C. Shortly thereafter, the
service expanded to cover all the northeastern states.
The materialization of USCI's service marked the birth of
direct-to-home satellite delivery for the United States. USCI,
however, had only been in business for eight months before
experiencing near bankruptcy. Out of the twenty six states that
it serviced, USCI had only a total of 15,000 subscribers. USCI
ended its services in 1984. By the end of 1984, after having
witnessed the failure of USCI at providing DBS, STC also withdrew
its plans for DBS service after investing $40 million dollars in
research, development and planning (see Hudson, 1990; Gross,
1990). The withdrawal of USCI and STC marked the end of the
first phase of this promising new technology for the United
The unfulfillment of the DBS aspiration of both STC and USCI
is due to various reasons. The following are some technological
and economic considerations which may have influenced the failure
of U.S. DBS service in 1984:
1) The paucity of channels offered in both enterprises.
2) In the case of STC the lack of convergence between its
planned reception antennas and the technological reality of
3) In the case of USCI, the size handicap of its reception
4) The inadequacy of STC's satellite design -- 4 main
satellites + 2 standby's where fewer may be sufficient.
5) The non-existence of high-power satellites beaming a strong-
enough signal to be received by inconspicuous antennas that
accommodate residents of both houses and apartments.
1) The lack of solid financial backing for the ventures.
2) The backers' inexperience in the field of TV programming and
their attempt to create new and exclusive channels.
3) The existence of active competition from the off-air
television networks and cable systems.
4) The massive fixed costs involved in launching a DBS service.
5) The high cost of receiving equipment for individual
6) In the case of STC, the sole reliance on subscription fees
(the exclusion of advertising) for the support of its
The collapse of the American DBS ventures of the 1980s
discouraged other enthusiasts from attempting to provide such a
service in the U.S. during the remainder of the 1980s.
A RENEWED AMERICAN INTEREST IN DBS: THE 1990s
Despite a discouraging DBS episode in the early 1980s, a
decade later, a number of new DBS plans began surfacing.
In the United States, a venture originally called K Prime
Partners, now known as Primestar, announced a quasi-DBS service
in 1990. The primestar partners consist of 9 cable multiple
system operators (MSOs) and GE Americom (Primestar, 1990). The 9
American Television and Communications (ATC)
Cox Cable Communications
TeleCommunications Inc. (TCI)
United Artists Entertainment
Primestar characterized its service as being "experimental
and intended to provide a transition to a true direct broadcast
satellite service" (quoted in HAJ, 1990a). Primestar's service
is of the quasi-DBS type due mainly to two characteristics:
antenna size and channel capacity. Its package included seven
superstations and three pay-per-view channels via a Ku-band
medium powered satellite. The superstations are: WWOR-TV and
WPIX-TV New York, WGN-TV Chicago, WTBS-TV Atlanta, WSKB-TV
Boston, KTVT-TV Fort Worth, and KTLA-TV Los Angeles (HAJ, 1990b).
Each home reception system consists of a three foot parabolic
dish with a low-noise block converter and an indoor integrated
receiver-descrambler (HAJ, 1990b). In 1991, Primestar began to
offer its package of programs to consumers. Primestar hoped to
shift into high powered DBS service in the mid-1990s when it
planned to beam programming into dishes approximately one foot in
diameter (Primestar, 1990). In the latter part of 1993, two
years after it launched its service, Primestar claimed 60,000
subscribers. It is still a quasi-DBS service not only due to the
medium-powered satellite it uses but also due to the fact that it
is not one of the official DBS permittees. It is currently
negotiating with one of those FCC permittees, Tempo owned by one
of the Primestar partners TCI, to make a transition to true DBS
later in the decade (Howes, 1993b).
In February 1990, another set of partners announced a true
DBS service called Sky Cable. The partnership consisted of NBC,
Rupert Murdoch's News Corporation, Hughes Communications Inc.,
and Cablevision Systems Corporation (Lewin, 1990). The service
was described as involving high powered DBS satellites beaming
108 channels into flat-plate antennas approximately 12 inches by
18 inches (SM & PDL, 1990). The partners announced that the
launch of their service would occur in 1993. The Sky Cable
venture required several components in order to become
technically operational: video compression, 240-watt satellites,
very small antennas, and increased signal security. Video
compression was required to enable four video signals via each of
27 transponders thus realizing the 108 channels goal. Sky Cable
was received with a lot of enthusiasm by the business community
and was closely detailed by the trade press (see for example,
SM & PDL, 1990; Walley, 1990; Broadcasting, 1990). However,
despite the excitement exhibited by the Sky Cable partners, by
1991 the partnership was becoming severely shaken and was
The dissolution of the Sky Cable project, however, led to
other ventures. The ones currently receiving the most media
coverage are DirecTV and USSB, both of which expect to be
operational in 1994.
DirecTV is the venture that specifically replaces Sky Cable.
It was conceived by one of the Sky Cable partners, Hughes
Communications, as a service that will beam more than 150
channels of programming to an 18 inch satellite dish. The launch
date of this service is set for April 1994. Hughes will be
building, launching and operating the service (DirecTV, 1992).
In order to demonstrate its solid commitment to this project and
its long-term planning ability, Hughes communications has already
contracted with several business entities to enable the timely
and successful launch of this service. The companies involved
Thomson Consumer Electronics: to design, manufacture and
distribute the reception gear.
News Datacom: to design and manage the conditional access
and encryption system.
Digital Equipment Corp.: to operate the national billing
Network Computing Corp.: to design and provide the billing
Matrixx Marketing Inc.: to operate the marketing and
Sony: to provide all of the broadcast TV gear (DirecTV,
The first high powered satellite required to make DirecTV
possible was launched Friday December 17, 1993 (Broadcasting &
Cable, 1993b). The second is planned for sometime in 1994.
DirecTV has already begun to contract with cable networks and
other program providers to ensure its ability to provide
appealing content to its future customers (see Table I).
Along with DirecTV, another venture has surfaced: United
States Satellite Broadcasting (USSB). USSB's involvement in DBS
dates from 1982. It was one of the original companies to obtain
a DBS permit from the FCC. Its newest effort is in conjunction
with that of DirecTV. The two services will be separate but will
utilize the same satellites. USSB plans to initially provide
more than 20 channels of programming to subscribers via the same
18 inch satellite dish that DirecTV will be using (see Table I).
In late 1993, USSB completed the building of its uplink center
located in Oakdale, MN (Via Satellite, 1993a). USSB expects to
launch its full scale operations in March 1994 (Via Satellite,
DBS CHANNEL LINEUP - JANUARY 1994USSBDirecTVCABLE NETWORKSThe
Cartoon NetworkFlixCNNMTVCNN InternationalVH-1Country Music
TelevisionNickelodeonC-SpanHBOC-Span2CinemaxThe Discovery ChannelAll News
ChannelThe Disney ChannelShowtimeE!Comedy CentralEntertainment
TelevisionLifetimeThe Family ChannelHeadline NewsThe Nashville NetworkThe
Learning ChannelThe Sci-Fi ChannelTBS SuperstationTurner Classic MoviesTurner
Network TelevisionUSA Network Newsworld InternationalGolf Channel
Weather ChannelTravel ChannelNorthstarEncore's six thematic channelsPAY PER
VIEWColumbia/TriStar Universal StudiosSony Pictures EntertainmentParamount
PicturesTurner MGMPlayboy TVSpiceSPECIALTY
CHANNELSPhysicians Television Network
Source: Compiled by the author from various sources including: Broadcasting &
Cable, 1993a; Broadcasting & Cable, 1993b; Hartshorn,
1993; Howes, 1993a; Satellite Communications, 1993; Scully, 1993a; Scully,
1993b; Via Satellite, 1993b.
The cost of home reception gear for both USSB and DirecTV
will be approximately $700. The price is expected to drop to
about $300 after two years assuming a continuous growth in the
total subscriber-base (Brown, 1993).
DBS is back in the limelight in early 1994. DirecTV and
USSB are only two of a total of 9 DBS permittees (see Table II).
Table I shows that despite the fact that both current DBS
ventures will be sharing a satellite, they have attempted to keep
their program offerings distinct. Table I also shows that as of
January 1994, DirecTV had a distinct advantage over USSB in that
DirecTV is capable of offering many more channels of programming.
The offerings the two ventures have so far announced, however,
are virtually identical to those available via cable. How likely
are consumers to choose one of these DBS services or even both
over cable? How viable is the emerging DBS industry with 9
possible DBS competitors and a plethora of other non-DBS
competitors? The next section addresses the various factors that
can affect the fate of this emerging industry.
THE DBS PLAYERS:
Several parties can influence the materialization and
viability of the DBS industry. Among these parties are: the DBS
permittees, the video programming industry, the cable industry,
the telephone industry, the TVRO industry, the DBS space segment
manufacturers, the DBS reception dish/antenna manufacturers and
the DBS receiver manufacturers. The role that each of these
parties plays can be a critical determinant for the viability of
the DBS firm and of DBS as an industry. Before looking at the
influence of some of these parties, let's look at the economic
characteristics of DBS.
NATURAL ADVANTAGE OF DBS:
In view of the inherent nature of satellite broadcasting,
and assuming that the subscriber would buy one's own reception
apparatus, the marginal cost of DBS for the service provider,
from a pragmatic point of view, is equal to the variable costs
incurred (administrative, maintenance, and billing costs). Once
the system is in place, whether there is one subscriber or
50,000,000, the fixed cost of beaming a satellite signal over the
entire United States is the same.
Since the same fixed costs are incurred whether 1 or
50,000,000 subscribers receive DBS service, increasing the number
of subscribers would result in decreasing average costs for the
DBS firm. In order to maximize its opportunities of subscriber
reach, a DBS system would need to beam its signals over a vast
territory. The larger the satellites' footprints, the greater
would be a DBS firm's ability to reach additional subscribers.
Therefore, a DBS system with a large satellite footprint would
have more opportunities to achieve scale economies in terms of
subscriber costs. DBS service does not only exhibit economies of
scale with an increasing subscriber base. Economies of scale are
also associated with the number of channels that can be
accommodated on the space segment of the DBS system. Past
research on satellites has demonstrated that, in general, the
larger the number of channels that the space segment can
accommodate, the greater the economies of scale as related to the
costs/per channel (see Rainger et al., 1985; Snow, 1977). One
can argue here that for DBS, not only would the number of
channels influence the venture's cost/per channel, it also will
affect the size of its subscriber base. To the extent that each
additional channel represents an additional utility for the
consumer, then according to the model of consumer behavior, a
potential subscriber is likely to favor the DBS system offering
the most channels (see Mansfield, 1983). In addition to the
above, the small size of the DBS dish enables both rural and
urban households to subscribe to the service unlike the TVRO
ASSUMPTIONS ABOUT DBS FIRMS:
The characteristics of DBS given above positively influence
the viability of DBS in general. Before discussing the other
determinants of viability, the following two assumptions need to
1) Companies involved in DBS are out to make a profit.
Companies that are out to make a profit will invest in a
promising business. If the business does not generate a
return on the investment, then those companies will stop
investing in that business.
2) DBS companies do incur significant fixed costs for
launching a DBS service. These costs are incurred in order
to produce an output. For a firm in the DBS business the
unit of output is the service to a consumer for a particular
period of time (see Ohls, 1970).
DETERMINANTS OF INDUSTRY VIABILITY:
The most basic determinant of viability, then, is the total
units of output. For a DBS firm, the total units of output
1) the initial subscriber base; and
2) the continuous growth in the subscriber base.
The diffusion of DBS among US households is similar to the
diffusion of other new technologies. Of relevance here is the
relationship between hardware and software. Let's take, for
example, the diffusion of the vcr: a) the initial costs of vcr
hardware for the consumer were a hurdle in the face of hardware
sales; b) with limited hardware sales, no incentives existed to
produce a big variety of software or video tapes; c) with a
limited choice of video tapes, consumers hesitated before
investing in the vcr hardware; d) with limited hardware sales,
vcr prices remained high; e) with high vcr prices... we go back
to 'a)'. This pattern remained cyclical over several years until
a critical mass of vcr owners progressively came about to spur
growth in vcr software availability and subsequent vcr hardware
sales, etc (see Hanson, 1994). The same can be expected with
DBS. The challenge is to reach a critical mass before the
patience of the DBS investors runs out. For DBS, the hardware is
the reception gear, while the software is the number of channels
that can be made available. Following this reasoning, the most
basic unit of viability is the subscribing household. Potential
households can be categorized into:
1) no-contest households;
2) inter-industry competitive households; and
3) intra-industry competitive households.
The following will discuss how each type of household
relates to DBS viability.
INITIAL SUBSCRIBER BASE AND NO-CONTEST HOUSEHOLDS
No-contest households are non-cable and non-TVRO households
willing to incur the costs associated with DBS service. A DBS
firm can expect the no-contest households to be its initial
No-contest households profiles:
a) those that desire to receive additional programming
channels and can afford cable not TVRO but have no access to
cable due to the household's geographical location.
b) those that can afford to have cable or TVRO but find the
available cable and TVRO offerings or quality of customer
c) those that desire to receive additional programming
channels but cannot afford cable or TVRO regardless of their
Among the factors that would maximize the size of the no-
contest household base are:
1) Similarity of service: the extent to which the services
offered by the DBS firm are quantitatively and qualitatively
different from those available to these households.
2) Cost of service: the extent to which the pricing of the
DBS service is competitive with existing services or
affordable enough even for those who cannot afford cable or
TVRO when these are available.
With a single DBS firm, no-contest households will
constitute a significant portion of the firm's initial subscriber
base. The portion would become smaller as the number of DBS
firms sharing the no-contest households increases.
INITIAL SUBSCRIBER BASE AND INTER-INDUSTRY COMPETITIVE
The focus here is on a DBS firm vs. a non-DBS firm offering
an alternative mode of program delivery to the individual
Inter-Industry Competitive Households Profiles:
a. cable (and soon telco) households willing to switch from
wire-based to satellite-based subscription
b. TVRO households willing to switch from TVRO satellite
service (e.g. Showtime Satellite Networks) to a DBS service
without buying a new dish.
c. TVRO households willing to switch from one type of
satellite service to a DBS service and willing to buy a DBS
Among the factors that would maximize the size of inter-
industry competitive households base are:
1) Access to programming: This was an issue specific to
cable systems. Since cable program distributors and local
cable systems are often owned by a common parent company,
the concern was that program distributors will refuse to
give DBS firms access to their programming for fear of
competition. The Cable Act of 1992, however, eliminated
this concern by making cable program access to DBS and other
cable competitors as part of the law.
2) Similarity of service: Similarly to the case with no-
contest households, the extent to which the services of the
DBS firm differ quantitatively and qualitatively from those
offered by terrestrial systems (i.e., cable and soon telcos)
and other space-borne systems (i.e., TVRO).
3) Similarity of customer service quality: With the
publicized dissatisfaction of cable customers with the
quality of cable customer service, DBS firms can gain a
competitive advantage by offering and promoting a much
higher customer service quality.
4) Compatibility of equipment: There are more than
4,000,000 TVRO dishes installed today (see Figure 1). The
compatibility factor is of relevance to those who already
own TVRO dishes and wish to switch to DBS. The extent to
which DBS services would be compatible with the TVRO
reception gear already owned by these households would
increase the probability that TVRO households will switch to
DBS services. Compatibility here is a tradeoff. By making
its system compatible with the TVRO reception gear, a DBS
firm may be encouraging TVRO households to switch to DBS,
however, the firm would also be discouraging these
households from buying new DBS dishes and receivers. By not
buying DBS dishes and receivers, TVRO households would not
be contributing to the critical mass necessary to reduce the
price of DBS reception gear and subsequently spur dish and
receiver sales and subscription growth.
5) Price of service and equipment: This factor is of
relevance to all inter-industry competitive households. For
cable subscribers, the extent to which the initial costs in
reception gear will not inhibit them from subscribing to DBS
predicts their likelihood to adopt DBS. Cable service does
not require such an investment in equipment. Therefore, the
monthly subscription for DBS should take into consideration
the initial equipment costs incurred by the consumer in
order not to scare the consumer away. The costs of
equipment can also be a factor for TVRO subscribers who wish
to switch to DBS. If the DBS system is compatible with the
household's existing gear but if the cost of DBS equipment
is low, then a TVRO household will be more likely to
consider replacing its several year old large dish with a
smaller one offered by the DBS firm.
In general, the larger the number of alternatives available
to the consumer, the tougher the inter-industry competition will
be for all. With more than a single DBS firm, the firms would
not only have to compete across industries but also compete
within their own industry.
INITIAL SUBSCRIBER BASE AND INTRA-INDUSTRY COMPETITIVE
The focus is on a DBS firm vs. another DBS firm. The
relationship among DBS firms not only influences the survival of
one firm vs. another but can also impact the fate of the entire
Among the factors that would maximize the share of the
intra-industry competitive households for the individual DBS firm
1) Size of total initial subscriber base: This size is
determined by the no-contest household base and the inter-
industry competitive household base. The size of the total
initial subscriber base, in turn, determines the size of
each firm's subscriber base and ultimately the number of DBS
firms that can compete and survive in the industry.
2) Similarity of service: Assuming a total initial
subscriber base big enough to sustain more than one DBS
firm, the extent to which the scope and content of each
firm's DBS service differs from all other DBS firms
determines the viability of all these services. The
capability of a firm with a nationwide service scope to find
specific niches unserved by other firms and cater to many of
those niches would maximize the firm's intra-industry
3) Firm behavior: Lessons can be learned from the
experiences of the British DBS ventures in 1990. In their
study of the main players in British DBS in 1990, Elasmar &
Straubhaar (1991) found that: a. Sky TV's initial program
offering did not correspond with the promises made in its
promotional campaign, therefore, discouraging and deceiving
the audience; b. The negative marketing campaign that BSB
engaged against Sky TV was detrimental to the introduction
of DBS altogether as it obscured Sky TV's message and the
DBS concept; c. The vicious bidding over programming between
the two DBS providers resulted in skyrocketing prices and
hurt both companies' program acquisition budgets; d. The
adoption of different DBS standards by each company further
confused the audience and contributed to a slow rate of
receiver sales. After a fierce battle, the two firms ended
up by merging.
4) Deep pockets: As is the case with any new technologies
being introduced to the consumer market, the extent to which
a firm's parent companies can sustain initial losses and be
patient enough to remain in the industry until weaker firms
have withdrawn will determine the viability of that firm and
ultimately the DBS industry.
This paper began by presenting a brief look at the evolution
of communication satellites and the possibility of home satellite
reception. Later, the evolution of DBS in the 1980s and 1990s
was chronicled. An analysis of the factors that maximize the
viability of DBS in the United States later followed. What can
be concluded concerning the viability of DBS in the United
States? Assuming no problems in technology, the viability of the
DBS industry is enhanced by:
1) the presence of a large-enough subscriber base to justify
the investment of at least one DBS provider;
2) the absence of excessive and predatory barriers to entry
created by the alternative media;
3) the absence of extreme and predatory behavior among firms
in the DBS industry;
4) the degree to which at least one DBS enterprise can
sustain preliminary losses.
With sketchy information available about only two of the 9
DBS permittees, it is impossible to predict how well the
different DBS firms would adjust in an environment characterized
by severe competition. With the presence of both inter-industry
and intra-industry competition, however, the initial behavior of
DBS firms can be critical to their survival and the viability of
the entire industry. While this paper does not suggest that DBS
firms ought to engage in collusive behavior, it nevertheless
recommends that intra-industry clashes be minimized and attention
be focused on inter-industry competition.
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